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Who should decide how much a CEO is paid? The shareholders, of course!

France 24

Swiss voters decide on Sunday whether to approve a referendum giving shareholders real power over the boards where their money is invested. If voters say "Yes", it would be nothing short of a revolution in business-friendly Switzerland.


At the UBS general meeting of 2008, one outraged shareholder jumped onto the stage, and tried to give then-CEO Marcel Ospel a copy of Swiss company law. Millionaire Thomas Minder was outraged that the bank's management had lost so much money from risky investment in the subprime crash. "You are responsible for the biggest write-offs in Swiss corporate history!"

UBS had to write off 60 billion Swiss francs in assets, and ask the Swiss government for a bailout. On that day in 2008 in Basel, Thomas Minder was frogmarched out of the UBS meeting by security guards. But two months later, he handed in the 100,000 signatures needed to force a vote and impose some of the tightest controls on managerial compensation in the world.

What, exactly, would the vote change?

If it passes, the referendum would

  • give shareholders a binding vote on total pay to the board;
  • force annual elections to the board;
  • oblige pension funds to vote "in the interest of their members" and make their vote public;
  • prevent golden goodbyes or "parachutes"
  • infringement of these rules could be punished by three years in jail or a fine equivalent to six years of compensation.

But this change in the constitution doesn't specify a limit - there's no question of say, stopping salaries or bonuses at the 5 or 10 million franc mark. Swiss people are pragmatic, and overall, happy for business to be left alone, as long as it brings value to Switzerland. UBS broke that pact when it risked the house on the sub-prime crisis.

It has taken five years of campaigning to get to Sunday's vote. In that time, the economic crisis that has hit the world has also come to Switzerland - albeit here it's more of a gentle slap, pushing unemployment up by one point to 5%.

Still, it's made Swiss people more open to Minder's argument of reining in excessive executive pay. Fifty-seven percent of people think they will vote for the change, according to the last survey before the poll.

Support across the board

"You could have the same quality of people, probably an even better quality of people, if money and greed were not so much of an issue in the top ranks." The former Vice-President of UBS, Hans Zuberbuehler, has come around to the Minder way of thinking. He wrinkles his nose in disgust when he thinks about recent pay packages and bonuses awarded to Swiss CEOs. "You have a pool of high-level managers who give big salaries to themselves. They cross each other as chairman and in boards, and so everyone is interested in giving each other high salaries because they get it back too."

Would Mr Zuberbuehler have been happy to let other people vote on his salary? After all, that is what a “Yes” vote would amount to, albeit for the company's top layer of management. "Well, my money always had a link with the work I was doing. I had 300 people and good results."

UBS awarded 242 million francs to its board in 2006, just before the financial crisis hit. Opposition was muted at the time, but got much louder two years later when the bank had to write off so many assets.

Even Swiss pharma giant Novartis was hit with hefty criticism just this year, when it announced that former CEO and chairman Daniel Vasella would get a 72 million franc severance package. In Switzerland, they don't mind people being rich - after all, one in ten households have more than a million francs. But that wealth has to be discreet - and deserved.

Last month in Zurich, France 24 attended the quarterly results presentation of Credit Suisse, another banking giant. CEO Brady Dougan got 70 million Swiss francs in a bonus at the start of 2010, even though the economic crisis was already biting. His compensation has varied with the bank's performance, going from 19 million francs in 2009 to 6 million in 2011.

France 24 asked Mr Dougan: would Credit Suisse still be an appealing place to work if the referendum went through? "Whether the Minder initiative gets through is something for the Swiss people to decide on." A sort of hedge your bets, no comment then.

Dougan did point out "We have already adopted, voluntarily, a shareholder vote, a consultative vote, on compensation. That is something we have been doing for a number of years." Consultative votes on pay may be useful, but they are not binding. Forty-nine out of Switzerland's top 100 companies already offer them.

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