Swiss vote for corporate pay curbs - FT.com
Swiss vote to cap pay of top company executives - The Irish Times - Mon, Mar 04, 2013
Now this is a good thing. I believe shareholders should have an active role in voting for the pay levels of execs, and that re-electing directors on an annual basis is the correct position to be in.Executive life in Switzerland will soon be less lucrative after more than two-thirds of Swiss voted yesterday in favour of capping pay at listed companies.
Some 68 per cent backed the so-called “rip-off initiative” in a referendum, giving shareholders a veto over salaries of managers and board members. New provisions, to be anchored in the Swiss constitution, will outlaw golden handshakes for arriving and departing managers, plus bonus payments for executives involved in mergers and acquisitions.
But what will this actually mean?
- Golden Hellos are now illegal. So, I'm a US candidate that Nestlé want to hire on a 5 year contract. Prior to this vote they would have paid me $100k up front along with $100k per year. Nestlé still want to hire me. I still expect my $100k. So won't Nestlé just pay me $120k a year now? The practical benefit for the company is that people won't get paid before they've actually carried out any work. The drawback is that a very small number of people may pass up Swiss jobs because the benefit no longer exceeds the risk
- Golden Handshakes are now illegal. So an increase in messy boardroom breakdowns, increase in court cases, increase in associated costs, delay in hiring in replacements as those in exisiting positions refuse to accept termination. Benefit would be increased transparency from those cases/public breakdowns.
- Exec Pay must be voted on by shareholders, directors must be voted in annually: Most listed companies have a block of voters who hold many shares. Using Credit Suisse as an example, 50% of their shares belong to 9 parties.
Those parties don't care about exec pay or directors as long as the companies performing for them. They're going to be less interested in "fair" pay as long as the results are right.
It's a good thing, it realy is, I just don't see it as this revolution some are making out.