The popular initiative "Against fat-cat salaries", bearing 114,260 valid signatures, was submitted to the Federal Chancellery on 26 February 2008. By improving corporate governance, its initiators aim to put a stop to what they believe are excessive pay packages for the top management of exchange-listed companies. Specifically, the initiative proposes that the annual general meeting should vote on the total pay awarded to the board of directors, executive board and advisory board, and that directors, the chairman and the compensation committee should be elected on an annual basis. Golden parachutes, golden handshakes and bonuses would all be outlawed.
Concerns already addressed
The Federal Council Opinion offers a reminder that the need to improve corporate governance was one of the factors that prompted the ongoing revision of company and accounting law. The revision will institute changes that will result in balance between the various governing and executive bodies in a company, create sufficient transparency in the pay packages awarded to top managers, as well as in internal processes, and instigate measures to secure the position of shareholders as the company's owners. Compared with the initiative, the proposed revision is more comprehensive and essentially covers all joint-stock companies under Swiss law – not just those whose equities are listed on a stock exchange.
The Federal Council has also extended its bill to give greater protection to shareholders' assets. The experience of recent months and years has shown that pay policy in the corporate sector cannot continue to be self-regulated. The additional provisions of the bill would therefore mean, specifically, that the fees paid to the directors of exchange-listed companies would have to be approved on an annual basis by the company's annual general meeting. The bill would also make it easier to enforce claims for the reimbursement of unjustified payments.
Leaving enough scope for shareholders
The Federal Council's bill and the popular initiative correspond on several points. Where they differ, the draft bill is more moderate and less rigorous overall. It represents an appropriate response to the problem of excessive pay, but does not lay down restrictive provisions for the company's articles of association, neither does it determine any bans or penalties. This will ensure that, in the future as today, shareholders will have sufficient scope to structure the company according to their needs.
The Federal Council firmly believes that, were Switzerland to abandon its liberal company laws in favour of restrictive, heavy-handed regulation, it would lose its advantage over other countries as a business location. This would result in more firms being established outside Switzerland, companies moving their registered offices abroad, and fewer relocating to Switzerland. Jobs and tax revenues would then also be lost. In addition, were the popular initiative to pass into law, there would have be another major overhaul of company law, which would itself mean delays and legal uncertainty.
Last modification 05.12.2008