Swiss vote on fat-cat pay a victory for business

Sixty-eight per cent of Swiss voters have backed a constitutional amendment on "fat cat" pay. Sunday's verdict was clear: shareholders of publicly listed companies will have a binding say on pay.

However, many comments on the initiative are confusing at best. A measure that is liberal by intent is seen as "restrictive", "curbing executive pay" and "not business-friendly". To discuss the Swiss solution in the same vein as the European Union proposal to cap bonuses for bankers further obfuscates its merits.

The Swiss people have not voted to undermine their liberal corporate laws. Quite the contrary, they have moved to protect the market economy against glaring abuse from the inside. Corporate executives and all those depending on them have corrupted the system. The very fact that their interests are commonly confounded with those of business proves the point.

Elite employees have exploited the power vacuum which developed over time as ownership in large companies with a dispersed shareholder base became weak. It was time to strengthen management's accountability to shareholders. While this may not be of benefit to executives, it is a boost to those who fund them and carry the business risk.

From a capitalist's point of view, the vote is pro-business. Moreover, the Swiss remain reluctant regulators. Executive pay shall neither be set nor limited by government. However, "thou shalt not steal" is crucial enough to be enforced. "Ask before you take" is among the first rules we teach our children. Sadly, corporate elites need to be retrained.

The power grab by the salaried elite in the developed world may only be the tip of the iceberg. Just as shareholders wonder whether managements are working for them, people increasingly question whether politicians, governments and central banks have their interests at heart.