The anger over excessive executive pay has finally spilled over to affluent Switzerland, more than a year after igniting the Occupy Wall Street movement in the U.S. The outrage over corporate greed reached a boiling point last week with the news that Daniel Vasella, chairman of the Swiss pharmaceutical giant Novartis, was offered a $78 million payout to ensure he would not work for a rival company after his retirement on Feb. 22.
The announcement sparked a public outcry rarely seen in this usually placid country. Politicians and unions called the compensation “disgusting,” while an attorney representing small shareholders filed a lawsuit accusing Novartis and Vasella of the misuse of company funds. Faced with the mounting criticism, this week Vasella — who reportedly earned $14 million last year — announced he would forgo the payment because “many people find the amount unreasonably high.”
That is an understatement even in Switzerland, which has the richest and highest-earning population in the world. But the Swiss believe that wealth must be earned through hard work rather than handouts or windfalls and that the superrich should not flaunt their money. They often cite the example of the much admired Swiss tennis champion Roger Federer, who has remained modest and down to earth despite amassing great wealth.
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One of Switzerland’s most vocal critics of exorbitant corporate compensations is businessman Thomas Minder, who was famously — and forcibly — escorted out of a UBS shareholders meeting in 2008 for storming the podium to blame the bank’s then chairman, Marcel Ospel, for the loss of $50 billion during the subprime crisis, which required a bailout from the Swiss government. Minder is the CEO of Trybol, a firm that manufactures natural body-care products, but he has long expressed disdain for executives who are handed multimillion-dollar salaries, bonuses and other perks, especially when these payouts are not justified by their companies’ performance.
So Minder turned to Switzerland’s unique brand of direct democracy that allows any citizen who collects 100,000 signatures on a petition to bring an issue to a nationwide vote. On March 3, the Swiss will vote on his initiative, which would require shareholders to approve the pay of executives and board members of public companies.
“The initiative is not about high salaries in general but about excessive executive compensation, especially in companies that have not performed well or have been mismanaged,” Minder tells TIME. He cites the example of the country’s two largest banks, UBS and Credit Suisse, which have paid their top brass millions, even though share prices of both banks plummeted during the financial crisis and have not risen significantly in the past few years. As for Vasella’s controversial exit package, “no manager is worth that much money,” Minder notes.
Although several countries, including the U.S., allow shareholders to vote on the executives’ pay, Minder’s initiative goes even further. Such votes would not be optional; all public companies would have to poll shareholders on the compensation of their CEOs. The proposal would also ban “golden parachutes” — generous severance packages provided to top managers who leave because of a takeover or restructuring. Penalties such as hefty fines and even jail sentences would be given for violating these rules.
The government opposes the initiative, arguing that the new law would undermine Switzerland’s standing as the world’s most competitive economy by forcing companies to leave the country and deterring others from setting up there to avoid the burden of compliance with the new draconian regulations. Instead, the government has created its own, less rigid proposal that is also on the March 3 ballot, allowing shareholders to decide whether their “say on pay” vote should be binding or a just a recommendation. If voters reject Minder’s initiative, the government’s counterproposal will automatically pass.
Still, the latest polls indicate that about 65% of voters favor Minder’s proposal over the watered-down government version. Interestingly, the survey, conducted for Swiss Broadcasting Corporation, shows that the bulk of support comes from “average” (by Swiss standards) middle-class citizens — those who live in households with an income of up to $9,700 a month.
Even though, according to the Organisation for Economic Co-operation and Development, Switzerland has more income equality than many other nations, including the U.S, many egalitarian-minded Swiss are peeved at the wage differential between their top execs and average employees, and they see Minder’s initiative as a matter of economic justice. “This is about a sense of fairness and social cohesion, and voters are willing to make that statement on March 3,” says Georg Lutz, a political scientist at the Social Science Research Centre in Lausanne.
For Minder, this message is right on the money.