Swiss look set to tighten corporate pay

BERLIN — Foreign executives who moved their company headquarters to Switzerland to get better tax deals for their firms may find themselves paying the price for it this weekend. Voters Sunday are expected to pass a referendum proposal to crack down on excessive corporate pay packages .

If the ‘‘Rip-off Initiative’’ succeeds, shareholders will be given the right to hold a binding vote on a company’s compensation of executives and directors. This includes both base salary and bonuses.


It would also ban ‘‘golden hellos’’ and ‘‘golden goodbyes’’ — one-time bonuses that senior managers often receive when joining or leaving a company that can run into millions of dollars.

Finally, the proposal pushes greater corporate transparency; for example, by requiring that all loans to executives be declared to shareholders.

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Breaching the rules could lead to a fine of up to six annual salaries and up to three years in prison.

The measure targets all Swiss-based companies — homegrown and offshore alike — as long as their shares are publicly traded. International companies like oil rig owner Transocean Ltd., fire and safety company Tyco International Ltd., and bakery conglomerate Aryzta would be treated just like Swiss banks UBS and Credit Suisse, food and drinks company Nestle, or watchmaker Swatch.

In Europe, some other countries such as the Netherlands and Denmark have similar legislation allowing shareholders at least a binding vote on executive compensation. In the United States and Britain, however, such ‘‘say-on-pay’’ votes are nonbinding.


The proposal is the brainchild of independent lawmaker and businessman Thomas Minder. It has divided Swiss business groups, political parties, and labor unions. But public opinion in Switzerland — traditionally a haven for light-touch regulation and probusiness sentiment — has been overwhelmingly in favor of the Rip-off Initiative.

A survey conducted mid-February by the respected polling group gfs.bern found 64 percent of voters in favor of the proposal, 27 percent against, and 9 percent undecided, with anger at perceived corporate greed the driving force for voters backing the initiative.

As in the United States, public opinion toward executive pay is still shaped by the outrage at “fat cat” bank bosses who received million-dollar bonuses during the 2008 financial crisis, when ordinary investors were seeing their dividends slashed and the value of their shares fall sharply.

The campaign for a ‘‘Yes’’ vote recently got an unexpected boost when it emerged that the outgoing board chairman of Swiss drug maker Novartis AG, Daniel Vasella, was due to receive $77 million over five years as part of a deal to prevent him from going to a rival firm.

When Vasella — facing public outrage — dropped the deal, attention shifted to Edward Breen, the American chairman of Tyco, for reportedly earning 30 million francs last year.

Opponents of the initiative warn that approving it would damage Switzerland’s competitiveness in the global economy and endanger jobs.

No companies have publicly declared they would leave Switzerland if the referendum passes, said Brigitta Moser-Harder, a shareholder activist and backer of the proposal.

Breaching the rules of the initiative could lead to a fine of up to six annual salaries and up to three years in prison.

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But Tyco is keeping its options open. ‘‘We await the outcome of the vote in Switzerland on Sunday and we will assess the impact at that time,’’ company spokesman Brett Ludwig said Friday. The Swiss proposal comes on the heels of a European Union decision this week to cap bankers’ bonuses at one year’s base salary except in the case of overwhelming shareholder approval.

The idea that shareholders should have a strong say in their company’s affairs chimes with Switzerland’s tradition of direct democracy. Voters in the country who collect 100,000 signatures can force a binding referendum on any issue.

Two other possible Swiss referendums are looming, both linked to salary issues. One concerns setting a minimum wage and the other is a ‘‘1 for 12’’ initiative, to ensure that the top salary in a company does not exceed the lowest one by more than 12 times.

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