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The Boston Globe

Business

Swiss reject measure to curb executive pay

The referendum was defeated, but opinion polls showed widespread dismay about huge executive paychecks.

Peter Klaunzer/EPA

The referendum was defeated, but opinion polls showed widespread dismay about huge executive paychecks.

FRANKFURT — Swiss voters rejected severe limits on executive pay Sunday in balloting that nonetheless illustrated rising popular resentment of corporate excess in one of Europe’s most business-friendly countries.

The measure, known as the 1:12 initiative because it would have barred executives from earning more than 12 times as much as the lowest-paid employees at their companies, was rejected decisively by 65 percent of voters, according to estimates Sunday by Gfs.bern, a Swiss polling firm.

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Although opinion polls showed widespread dismay about huge executive paychecks, many Swiss were uncomfortable with a rigid, government-imposed salary cap. Switzerland traditionally imposes light regulation on business, compared with the rest of Europe, as well as relatively low income taxes.

Partly as a result, the country is a popular base not only for banks and hedge funds, which have congregated in Geneva, but for major chemical, pharmaceutical, and machinery companies.

An outright salary cap was considered too extreme for most voters, said Daniel Kübler, an associate professor of political science at Zurich University.

“People have concerns about the way modern capitalism works, but they still prefer a free-market economy,” Kübler said.

Parliament voted not to recommend the measure, as did the Federal Council, the eight-member panel that governs the country. The council said it sympathized with the sentiments behind the initiative but feared it would drive away business and be difficult to enforce.

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“The people don’t want the state intervening in salaries,” Valentin Vogt, president of the Swiss Employers Association, told Swiss television Sunday.

Although the referendum was defeated, voter dismay at the behavior of some Swiss corporations and executives is widespread. Proponents of the initiative complained that companies like the Swiss banking giant UBS, which received a government bailout because of the financial crisis, continued to pay huge executive bonuses even when they performed poorly.

Supporters of the 1:12 initiative conceded defeat Sunday but said they had succeeded in raising public awareness about the issue.

Kübler said he doubted that there would be further referendums on executive pay, but he predicted there would continue to be public pressure on corporations that were perceived to be acting irresponsibly. There is also a continuing debate in Parliament about how to implement the measure approved in March that expands shareholder powers.

“I don’t think the debate about what corporations do and shouldn’t do is off the agenda,” Kübler said.

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