Swiss voters approved a law on Sunday, March 3, that would limit the salaries of executives. The law is called the Minder Initiative after its sponsor, Thomas Minder, a senator and cosmetics company owner. Swiss voters overwhelming approved the Minder Initiative with 68 percent voting in favor. The law will give shareholders a binding vote on pay, and more say on who is on boards. It even does away with certain bonuses, including golden parachutes and bonuses for takeovers. The law will only pertain to Swiss companies listed on either Swiss or foreign stock exchanges.
According to details from Swiss Info, the law specifically will allow shareholders at the annual general meeting (AGM) every year to decide how much pay the board, executive, and advisory board will receive. Every year, shareholders will elect the chairperson of the board, board members, the compensation committee and the independent proxy holder. Violation of the law means up to three years in prison and a fine equaling six years’ pay.
“The people have decided to send a strong signal to boards, the Federal Council (Swiss government) and the parliament,” Minder said. “It is a great advantage for investors,” he added.
The Minder Initiative joins just a handful of other countries with laws that mandate a binding vote: the Netherlands, Sweden, Denmark and Norway. The EU itself may soon limit bonuses. The EU introduced a rule to limit bonuses in the financial sector, and it is expected to pass.
Momentum for the Minder Initiative picked up a couple of weeks ago when the Swiss press found out that Daniel Vasella, the former head of the pharmaceutical company, Novartis, would receive a $78 million golden parachute to be paid over a six-year period after he stepped down in February. Public outrage over it caused Novartis to rescind the offer.
Perhaps anger over executives pay is also fueled by the fact that at at least five of the highest paid CEOs in Europe are at Swiss companies, including Credit Suisse, ABB Ltd., and Novartis, according to Bloomberg.
American companies have a wide pay gap
Swiss companies are not the only ones with a large pay gap between the CEO and the median worker. Just take a look at the following list of the top 10 Fortune 50 companies (all are American companies) with biggest CEO to median worker pay ratios:
- Walmart Stores, Inc. (Pay disparity ratio is 717:1)
- Verizon Communications, Inc. (613:1)
- McKesson Corp. (537:1)
- CVS Caremark Corporation (456:1)
- Medco Health Solutions, LLC (431:1)
- IBM Corp. (349:1)
- AT&T Inc. (342:1)
- United Technologies Corporation (326:1)
- PepsiCo Inc. (322:1)
- AmerisourceBergen Corp. (308:1)
What do you think should be done to reduce the pay gap? Do you think governments should get involved?
Image credit: Flickr user, Orkla