BERN – Switzerland may be set to become the world champion of shareholder democracy.
Swiss voters gave overwhelming approval to the popular initiative against excessive corporate compensation — an initiative launched by Thomas Minder, an entrepreneur from the city of Schaffhausen. Some 68% voted in favor of Sunday’s ballot measure, and each local canton received at least a simple majority of support for the new law.
Polls had shown that the text of the proposition had already convinced most Swiss voters even before the so-called “Vasella effect.” Three weeks from the vote, the country learned that president of pharmaceutical group Novartis, Daniel Vasella, was about to be granted a 72 million Swiss francs ($75.3 million) parting bonus. His refusal to cash in on the massive “golden parachute” wasn’t enough to appease popular anger.
Long trailing behind neighboring countries in terms of corporate oversight, Switzerland is now poised for a true revolution, ready to become a veritable model in shareholder democracy. Every year, the shareholders will – inconveniently for them – have to approve the salary of both the top tier of management and the executive board. Board members will also need to be reelected annually (as opposed to the previous three-year mandates), and on an individual basis.
Risk of jail time
Both parting “golden parachutes” and signing bonuses will be prohibited. In case of violation of the General Assembly’s decisions, the executives will face criminal charges that can be punishable by three years of jail time and a fine equivalent to six years of salary.
This text is binding, as it will be added to the Swiss constitution — which is almost never prone to modifications.
“I’m glad that this struggle is over,” said Thomas Minder to the German-speaking Swiss TV channel SRF.
This Robin Hood of Switzerland’s corporate world started his battle in 2002, after SwissAir’s 2001 downfall and the scandal of the 12.5 million Swiss francs ($13.2 million) signing bonus from Nestlé to its then incoming CEO Mario Corti.
Minder’s company, Trybol, specializing in cosmetics, was one of the airline’s subcontractors, and was denied payment at the time.
Now begins another battle as to how this popular initiative will be enacted and applied. Switzerland’s Federal Council has one year to enact the specific conditions according to which this new constitutional amendment will be enforced. The regular legislative process seemed off the table, for the Parliament was too slow to agree on an indirect counter-proposal.
“We know how divided the Parliament is,” said Minder. “The Federal Chambers had bargained for years over the initiative and its counter-plan, before it was presented to the citizens.”
