Swiss 'Rip-off Initiative' to hit corporate pay packages

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.

A plan to crack down on excessive corporate pay packages is predicted to pass at the ballot box today.

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, including 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.

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

The measure targets all Swiss-based companies - homegrown and offshore alike - as long as their shares are publicly traded.

In Europe, some other countries such as the Netherlands and Denmark already have similar legislation allowing shareholders at least a binding vote on executive compensation. But such "say-on-pay" votes are non-binding in the US and Britain.

The proposal has divided Swiss business groups, political parties and labour unions. But public opinion in Switzerland - traditionally a haven for light-touch regulation and pro-business sentiment - has been overwhelmingly in favour of the Rip-off Initiative.

A survey conducted mid-February by polling group gfs.bern found 64 per cent of voters in favour of the proposal, 27 per cent against and 9 per cent undecided.

Anger at perceived corporate greed was 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 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 got an unexpected boost when it emerged that the outgoing board chairman of Swiss drug maker Novartis, Daniel Vasella, was due to receive US$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 Swiss francs (HK$248 million) last year.

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

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