Swiss citizens voted yesterday to impose some of the world's strictest controls on executive pay, forcing public companies to give shareholders a binding vote on compensation.
The initiative against "fat cats," proposed by Thomas Minder, head of a herbal toothpaste company, was backed by 68 per cent of the voters in a referendum yesterday, the government said.
The proposal would limit the mandate of board members to one year, and would ban certain kinds of compensation, including the so-called golden handshakes or golden parachutes given to executives when they leave a company.
In addition, it would ban the bonuses received for takeovers, or when a company sells off part of its business. The initiative also includes rules punishing executives who violate the terms with as long as three years in jail.
"I'm glad the long battle is over," Minder, who started the campaign in 2006, said. "It's a powerful sign, this proportion above 60 per cent."
At least five of Europe's 20 highest-paid chief executive officers work for Swiss companies, according to data compiled by Bloomberg.
The initiative received a boost last month with news that Novartis was planning to pay outgoing chairman Daniel Vasella as much as US$78 million to prevent him from potentially working for rival companies. In response to public anger, Europe's biggest drugmaker scrapped the accord.
How much executives take home was called into question in Switzerland after the country's biggest bank, UBS AG, had to be bailed out during the financial crisis, while in 2010 Credit Suisse CEO Dougan received 71 million francs (HK$584 million) worth of shares.
Yesterday Economiesuisse, a business lobby which had campaigned against Minder's proposal, said the result is a "negative signal for Switzerland as a place for doing business".
Nestlé CEO Paul Bulcke said last month Minder's plan would make Switzerland less attractive to corporations and managers.
The Swiss are not alone in their desire to rein in executive pay in the wake of the financial crisis. Members of the European Parliament last week struck a deal to ban bonuses that are more than twice bankers' fixed pay if ratified by European Union countries and the full parliament.
Minder, who blames highly paid executives for the financial crisis, collected more than 100,000 signatures, triggering yesterday's referendum. He says manager payouts highlight the gap between corporate chiefs and the average wage-earner.
In theory, the initiative takes immediate effect, though the government could need time to issue ordinances and adapt national law.
The Swiss government and the upper house of parliament have opposed the initiative, warning that some large companies might decide to move their headquarters out of the country.
But Minder rejected that argument, saying he expected his initiative would become Switzerland's "best export product".
"It is a great advantage for investors," he said, suggesting that instead of chasing companies away, such a law would entice investors to set up companies in Switzerland.
He also said he hopes other countries will feel inspired by the initiative.
Reuters, Bloomberg, Agence France-Presse