- Swiss voters overwhelmingly backed curbs on corporate wages
- Move will snatch the power away from company boards for compensation
- Comes after European-wide steps last week to address top management pay
- Switzerland has an even broader set of curbs after 68% of voters approved rule change
European executive pay has come under attack for the second time in less than a week after Swiss voters overwhelmingly backed curbs on corporate wages that snatch the power away from company boards.
The move comes on the heels of European-wide steps last Thursday to address top management pay, which has been a lightning rod for public anger across the world since the financial crisis.
EU proposals to cap bankers' bonuses at twice their salary have stunned the City of London, with senior bankers warning that the cap will drive top staff to Asia or New York and eventually prompt a shift in operations from London. "This will have consequences," said one high-ranking executive at a leading investment bank in London.
The referendum in Switzerland has introduced an even broader set of curbs after 68 per cent of voters approved rules that include giving shareholders a binding say on executive pay; banning golden hellos and goodbyes; requiring annual re-elections for directors; and threatening criminal sanctions for non-compliance.
Brigitta Moser-Harder, an activist shareholder who spearheaded the yes-campaign together with entrepreneur Thomas Minder, said that the result, one of the most emphatic yes-votes ever in a Swiss referendum, sent a clear signal to companies both within and beyond Switzerland's borders.
"The EU is already capping bankers' bonuses and now the Swiss people has spoken very clearly as well. The message to company boards and managers is: you have to rein in executive pay," she said.
Britain plans to mount a last-ditch attempt to revise the EU bonus cap at a meeting of finance ministers on Tuesday with chancellor George Osborne trying to gather opposition to the proposal. But while Mr Osborne is fighting to change some details, the prospects of a big reversal are slim. An overwhelming majority of EU member states is willing to sign up to the political deal reached with the European parliament, which is part of legislation to enact a sweeping overhaul of bank capital rules.
"It is too late, it is really too late," said one diplomat involved in the talks. "We don't want to stigmatise one member state but we have come to the end of the argument."
Other EU states are eyeing even more stringent restrictions. The Netherlands, which has been involved in multiple bank rescues, imposed a bonus cap in 2010 and is considering tightening the limit to 20 per cent of salary.
The UK is also introducing reforms to give shareholders a binding vote on pay in October, as well as measures to make remuneration packages more transparent.
The tougher rules in Switzerland have struck a chord with a Swiss public wearied by a string of high-profile corporate mishaps, and had looked likely to pass since news broke two weeks ago that the Swiss pharmaceuticals giant Novartis planned to give its departing chairman a SFr72m pay-off, even though the plans were subsequently dropped.
Despite public anger over such revelations, Switzerland's business establishment has continued to argue vehemently against the new rules, and Ursula Fraefel, who ran the no-campaign, said that the changes marked "a deterioration of what was once a liberal set of rules on corporate governance".
However, Ms Moser-Harder rejected such concerns as "scaremongering".
"Companies will continue to come here. Switzerland still has all sorts of other advantages which make it an attractive place to do business," she said, adding that the curbs elsewhere would make fleeing Switzerland less attractive.
Simonetta Sommaruga, Switzerland's justice minister, said adopting the new rules would be a "serious challenge" for Swiss business, but expressed confidence that the Alpine state's fabled competitiveness would not be undermined.
"Switzerland's appeal doesn't just depend on its corporate laws," she said, citing the country's ability to innovate, its educated population and its quality of life as other important attractions.
The Swiss government has a year to convert the initiative's proposals into law.