Union criticises Swiss executive salaries

Swiss voters will decide about an initiative demanding lower executive salaries Keystone

Executives at Swiss companies continued to earn more than 200 times that of the lowest paid employees last year, a fact that threatens to further erode the public’s trust in larger corporations, warned trade union Travail.Suisse on Monday.

Travail.Suisse studied the annual reports of 27 international companies based in Switzerland and calculated the ratio between the highest and the lowest salary within the same company.

The ranking is headed by Roche Chief Executive Severin Schwan, who earned CHF15.7 million ($16.8 million) in 2012. That is 261 times more than the lowest paid employee at the Swiss pharmaceutical company earned. Second is Nestle CEO Paul Bulcke with 238 times more than his company’s lowest-paid employee, followed by ABB’s Joe Hogan with 225 times more and Novartis CEO Joseph Jimenez with 219 times more.

In a wider context, the pay gap between Switzerland’s top brass and lowliest workers is still the second smallest in Europe. According to calculations by The Economist, the disparity is the smallest in Norway, followed by Switzerland and Iceland, presumably because everyone in those countries is paid well.

The pay gap is widest in former Soviet countries such as Romania, Ukraine and Russia. A worker in Romania will take about 30 days to earn as much as his boss earns in an hour. In Switzerland, the worker would take less than three days.

Disgruntled population

Still, the Swiss union is concerned about the salary gap in Switzerland, particularly if one considers the trends.

A long-term survey showed that since 2002 the top salaries have doubled or almost tripled at companies such as Lonza, Clariant, Kuoni, Georg Fischer and Oerlikon. The lowest wages increased considerably less at these multinationals. Many of them posted financial losses in recent years.

“The massive increases of top salaries is all the more incomprehensible as the economic performance of the companies was rather modest during this period,” Travail.Suisse said. It urged politicians to assume a leadership role, to limit manager salaries and to guarantee a minimum salary.

The union also criticised cantons’ low-tax policies, aimed at attracting companies from abroad. It claimed that tax breaks primarily benefit the companies and their top managers. Excessive salaries and bonuses for top managers have irritated the Swiss population in the past, fuelling public initiatives demanding more rights.

In March Swiss voters approved the so-called “fat cat initiative”, which gives shareholders of publicly listed companies a bigger say on corporate payouts.

Citizens are also likely to have the final say later this year on an initiative by the political left to limit the salary structure at a ratio of 1:12 between top and bottom earners within a company.

Multinational companies

The continued lack of trust in larger companies is also an issue for the liberal thinktank Avenir Suisse, which on Monday published a paper showing the benefits of large multinational companies being based in the country. Avenir Suisse outlined that both employees with low and with high incomes profit from internationally competitive multinationals, which drive innovation in Switzerland.

The authors of the Avenir Suisse report warned that larger companies could decide to move their headquarters abroad if they are faced with less favourable labour and tax regulations.

Some regions have already observed a decline in corporate interest from abroad. The number of foreign companies settling in Geneva declined 41 per cent in 2012, the canton said on Monday. Only 23 new firms moved to Geneva, creating 92 jobs.

The main reasons for the decline were tax uncertainties and a decline of the worldwide economy, according to Daniel Loeffler, the director of the canton’s economic promotion. Foreign companies prefer to wait three to five years before deciding whether they want to move their headquarters to Geneva, Loeffler said in Indices, a monthly supplement of daily newspaper L’Agefi.