Swiss OK system to rein in CEO pay

GENEVA — Swiss residents voted on Sunday to impose some of the world’s most severe restrictions on executive compensation, ignoring a warning from the business lobby that such curbs would undermine the country’s investor-friendly image.

The vote gives shareholders of companies listed in Switzerland a binding say on the overall pay packages for executives and directors. Pension funds holding shares in a company would be obligated to take part in votes on compensation packages.

In addition, companies will no longer be allowed to give bonuses to executives joining or leaving the business, or to executives when their company is taken over. Violations could result in fines equal to up to six years of salary and a prison sentence of up to three years.


The vote was a triumph for Thomas Minder, an entrepreneur and member of Parliament who turned a personal fight against the management of Swissair, the flagship airline that collapsed in 2001, into a nationwide referendum against ‘‘rip-off merchants.’’

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Almost 68 percent of Swiss voters backed Minder’s proposals, according to exit polls released Sunday night by Swiss national television.

“I am very proud of the Swiss people, who have sent a very strong signal to the establishment,’’ Minder told Swiss television.

Despite the fact his referendum had been opposed by Switzerland’s main political parties, Minder, an independent, called on all lawmakers to cooperate in swiftly enacting the law.

Nonbinding shareholding votes on executive pay have also been introduced in countries like the United States and Germany, in response to Occupy Wall Street and other movements that have attacked the corporate excesses and abuses that fueled the world financial crisis. On Wednesday, the European Parliament agreed to limit bonuses of bankers to two times their salaries.


Minder called for a much broader and tougher clampdown, striking a chord among citizens following the onset of the world financial crisis, which exposed major management failures at the financial giant UBS and other Swiss institutions.

Minder got an unexpected boost last month when Novartis, the pharmaceutical company — it has major operations in Cambridge, Mass. — agreed to a $78 million severance payout for its departing chairman, Daniel Vasella. That triggered a political storm and intense criticism from some investors, forcing Vasella to tell shareholders last week that his payout had been a mistake.

Cristina Gaggini, an official from EconomieSuisse, the Swiss business federation, said on Sunday that the business lobby had made some ‘‘major errors’’ in its efforts to stop Minder’s decadelong crusade, adding that the Novartis payout plan had amounted to a turning point.

After that controversy, ‘‘it became impossible to return to a reasonable debate,’’ she said on Swiss national television.

Ahead of the vote, EconomieSuisse and Minder’s other opponents warned of dire consequences if the referendum was successful.