Should Swiss business be very worried?

Swiss business groups are warning that so country’s biggest companies and banks could pack up and move elsewhere to avoid tough new rules on executive compensation that voters approved in a March 3 referendum. Where, though, would they go? Probably not to Britain, where rules set to take effect this year would, like Switzerland’s, give corporate shareholders a binding vote on executives’ pay packages.


The European Union and the US don’t look too attractive either: they already require nonbinding shareholder votes on executive compensation. Some EU officials want to go further, letting shareholders vote on the ratio between a company’s highest and lowest paid workers. The EU is preparing to slap restrictions on bankers’ bonuses, too. The say-on-pay movement, as it is known, is spreading worldwide, says Jon Terry, a partner in the reward and compensation practice of PricewaterhouseCoopers in London.

“It’s only a matter of time before, globally, we have binding votes” on executive pay by shareholders of most public companies. In the Swiss referendum, 68% of voters approved a plan that will require publicly listed companies to give their shareholders a binding annual vote on top executives’ pay. The measure prohibits “golden handshakes” and “golden parachutes” for executives when they join or leave a company.

Executives who violate the new rules could face up to three years in jail. Lavish corporate pay packages have become a hot issue with Swiss taxpayers, especially since 2008, when they bailed out UBS, the country’s biggest bank. Swiss pharmaceutical group Novartis recently withdrew a plan to pay outgoing chairman Daniel Vasella $78 million, after details of the payout spurred public outrage.

Critics say the say-on-pay rules could drive away multinationals that were drawn to Switzerland because of its relatively low tax rates. But most Swiss businesses won’t be affected by the new rules, which apply only to a handful of high-level positions at listed companies. And the government still needs to determine how and when the rules would be implemented.

Moreover, Swiss companies could find that their shareholders are relatively compliant. In the US, shareholders approved more than 97% of executive-pay proposals presented to them last year, according to Los Angeles-based consultancy Semler Brossy.