Switzerland rejects rule to cap senior executives’ pay

Swiss voters appear to have rejected a proposal to limit executives’ pay to 12 times that of junior employees, a measure that would have gone further than any other developed nation.

The pay ratio measure was opposed by 66% of voters, SRF television projections showed as of yesterday evening.

“It’s a big relief,” Valentin Vogt, said president of the Swiss Employers’ Association.

“It’s a signal that it’s not up to the state to have a say in pay.”

Switzerland is the home to at least five of Europe’s 20 best-paid chief executives.

Opposition to excessive pay has stiffened among the traditionally pro-business Swiss following the government bailout of bank UBS in 2008 and the plan — later scrapped — by Novartis to pay outgoing chairman Daniel Vasella as much as $78m (€57.6m).

In March, Swiss voters approved the so-called fat-cat initiative that gave a company’s shareholders a binding vote on managers’ pay and blocked golden handshakes and severance packages.

While polls after that vote suggested the pay ratio initiative could pass, support for it waned, in part because of vociferous opposition by company executives, including Roche Holding CEO Severin Schwan and ABB Ltd chief Ulrich Spiesshofer, who said it would crimp competitiveness and damage the economy.

The vote highlights the growing discontent within Europe where managers have earned millions while unemployment soared to a record high and taxpayers bailed out banks.

In Spain, the country’s Socialist party is proposing to apply the same restriction.

“Today we’ve lost,” said Young Socialist party leader David Roth. “But we’ll continue to fight long-term.”

Supporters of the pay ratio initiative said that, if passed, it only would have affected 0.3% of all Swiss companies and 3,400 managers.

Switzerland acts as the home of Europe’s largest drugmakers, as well as the headquarters of the world’s largest oil traders Glencore Xstrata Plc and Vitol Group.

Given its pro-business climate, Switzerland is the world’s second-most competitive country behind the US, according to an annual ranking published by IMD’s World Competitiveness Center.

— Bloomberg