Article Switzerland: Referendum on Executive Pay

(Mar. 27, 2013) On Sunday, March 3, 2013, the Swiss people voted for a popular initiative to limit executive pay. Voter participation was over 45%, and 68% of those voting supported the measure. (Volksabstimmung vom 3. März, 2013:08.080 «Gegen die Abzockerei» Volksinitiative [Popular Vote of March 2013, Popular Initiative Against Being “Ripped Off”], Die Bundesversammlung – Das Schweizer Parlament [Swiss Parliament] website (Mar. 3, 2013).)

The initiative amends the Federal Constitution by requiring that the annual shareholder meeting of corporate entities determine the sum total of all compensation to be paid to the Board of Directors, the management executives, and the Board of Advisors. The initiative also restricts proxy voting and bans severance pay, bonuses for the purchase and sale of companies, and consultancy agreements among related companies. In addition, loans, pensions, and remuneration in the form of stocks or profit sharing must be regulated by the bylaws of the company. (Botschaftzur Volksinitiative «gegen die Abzockerei» und zur Änderung des Obligationenrechts (Aktienrecht) [Message in the Popular Initiative “Against Being Ripped Off” and to Amend the Law of Obligations (Corporation Law)] (Dec. 5, 2008), BUNDESBLATT 299 (2009).)

The constitutional requirements are to be implemented through amendments to the Code of Obligations (OR, SR 220 (English translation, last updated Jan. 1, 2013)). Although the initiative calls for a one-year implementation period for the changes to the Code of Obligations, experts foresee a longer waiting period that may be caused by procedural wrangling in Parliament. (Neil MacLucas, Swiss Voters Curb Exec Pay, THE <?WALL STREET JOURNAL (Mar. 4, 2013), at 1.)

The executive pay initiative, first proposed in 2006 by Thomas Minder, a small business entrepreneur and Member of Parliament, was submitted to Parliament in February 2008. Since 2009, the Minder Initiative has been the subject of numerous parliamentary proposals and counter proposals that were designed to prevent a vote on the issue. (Gegen die Abzockerei Volksinitiative Parlamentsdienste Verhandlungen [Popular Initiative “Against Being Ripped Off”], Swiss Parliament website (last visited Mar. 27, 2013).)

Opponents of the measure feared its popularity and were apprehensive that it might prevent large companies from settling or remaining in Switzerland. (Abzocker-Initiative kommt endlich vors Volk [Rip-Off Initiative Finally Comes Before the People], NEUE ZÜRCHER ZEITUNG (Oct. 12, 2012).)

Switzerland is at the forefront of a movement to limit executive pay that has been growing throughout Europe and that may soon lead to restrictions in Germany and France. In Germany (as in Switzerland), the issue is viewed as relating to corporate governance and to the strengthening of shareholder rights. (Managergehälter werden reguliert [Managers’ Salaries Are Being Regulated], AACHENER ZEITUNG (Mar. 22, 2013), at 1, available in LEXIS online subscription database, Deutsche Presse file.) Meanwhile, the European Union has been in the process of restricting bankers’ bonuses. (Theresa Papademetriou, European Union: Draft Rules on Bankers’s Bonuses and Bank Capital Requirements, GLOBAL LEGAL MONITOR (Mar. 20, 2013).)

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