Swiss to take on excessive executive pay at polls, again
How much more should a company boss earn than the person who empties his wastebin? The issue is being hotly debated in Switzerland ahead of a popular vote seeking to dramatically rein in executive salaries.
On November 24, the Swiss head to the polls to determine whether it should be illegal for the highest wage-earner in a company to take home drastically more in a month than the lowest-paid employee makes in a year.
The radical proposal has been dubbed 1:12 after the ratio it seeks to set between the highest and lowest salaries in a company.
It was put forth by the Socialist youth wing two years ago, and received more than the 100,000 signatures needed to put any issue to a popular vote as part of Switzerland’s famed direct democratic system.
The initiative has also received widespread support from Swiss unions.
They have plastered the wealthy Alpine country with posters to illustrate the justness of their cause, including one showing a simple hamburger next to a towering stack of twelve hamburgers, reading: “12 times more salary, that’s enough.”
Switzerland, which has long boasted a business-friendly climate coupled with one of the highest average salaries in the world, has largely avoided the economic crisis that has dogged the neighbouring European Union.
Yet public anger has risen here as elsewhere over what is considered abusive levels of pay and bonuses for top bosses.
“Switzerland is a country built on consensus. If you earn a lot of money, it shouldn’t show,” Lausanne University economics professor Stephane Garelli told AFP.
The November 24 vote will not be the first time the Swiss take on the issue.
Last March, nearly 70 per cent of voters came out in support of a new law flat-out banning golden parachutes and excessive executive bonuses.
That vote came amid nation-wide outrage over revelations of a 72-million-Swiss-franc (HK$613 million) golden parachute deal for Daniel Vasella when he stepped down as chairman of pharmaceutical giant Novartis in February.
Vasella’s exit package has since been significantly scaled back, but the anger over such blatant excesses remains.
In another bid to iron out inequalities, activists last month handed over the signatures needed for a popular vote on an initiative calling for the government to pay each and every Swiss person a basic salary.
That referendum, which so far is deemed unlikely to pass, should take place at some point in the next couple of years.
The 1:12 initiative is also facing an uphill battle.
Initially brushed aside as too radical to take seriously, it had steadily been gaining traction, but a poll this week showed that support slipped back to just over a third of voters.
Business leaders, who campaigned hard against the initiative voted through in March and who are still feeling the sting of that defeat, have kept a lower profile this time around.
But as the campaign has picked up steam, some have begun cautioning that, if passed into law, the text might prompt some of the most qualified executives to leave the country.
Companies like Novartis and Nestle also recently sent letters to all their employees voicing concerns about the initiative, and some politicians have been sounding the alarm.
“I can understand that the Swiss are upset over some undeserved salaries, but (voting through) this initiative would be like shooting ourselves in the foot,” Christian Democratic Party chief Christoph Darbellay told AFP.
According to a study by the ETH Zurich technical university, between 1,000 and 1,300 companies -- many of them large multinationals -- would be impacted by the adoption of such a law.
The Young Socialists have meanwhile found a heavyweight supporter for their cause in Heiner Flassbeck, the former chief economist with the UN’s Conference on Trade and Development (UNCTAD).
“The initiative is justified because the deviation in higher pay packages is getting bigger and bigger,” the German citizen told AFP, insisting that executive pay packages were increasingly “disproportionate” with the growth potential they brought to a company.
While top executives in the country on average made just six times the salaries of their lowest-paid employees in 1984, the gap swelled to 13 times more by 1998 and 43 times more in 2011, according to the Swiss transport union.
At food giant Nestle, for instance the top executive was reportedly making 73 times the salary of the person on the bottom rung two years ago, while the lowest-paid employee at Novartis in 2011 would have to work 266 years to make the highest earner’s annual salary.
Credit Suisse chief Brady Dougan meanwhile takes the cake, having reportedly pocketed 90 million Swiss francs ($93 million, 72 million euros) in 2010, or 1,812 times more than the lowest wage earned at the bank that year.
Regardless of whether 1:12 passes muster at the polls, Garelli said the initiative should make companies stop and think.
“This sends an important message,” he said.
“It shows that the population considers that these high salaries have something indecent about them.”