The way Swiss companies pay their managers is changing, with equity-based compensation becoming more common.
As PricewaterhouseCoopers (PwC) Switzerland noted in a reportexternal link published on Tuesday, the gap between board member salaries at small firms and at large ones is narrowing.
Since 2007, pay for board members at Switzerland’s SMI companies (the 20 largest) has gone up by 12.4% to a median of CHF1.1 million ($1.15 million). During that same period, CEO pay at SMIM firms (ranked 21-50 on the SIX Swiss Exchangeexternal link) has jumped by 80% – from a median CHF380,000 up to CHF690,000.
As for SMI CEOs, the median pay has fallen to CHF7.5 million (-7.9%) over the past eight years. For SMIM CEOs, the rate has gone up to CHF3.4 million (+19.4%).
At many Swiss companies, equity is playing an ever-larger role. According to PwC, it represented 50% of the typical compensation package at SMI companies in 2014, while in the case of SMIM companies, it was 35%.
“The level of compensation for a manager cannot be viewed in isolation from the specific type of compensation. Equity creates incentives, but it’s also risky for managers and this risk needs to be rewarded,” says PwC’s Remo Schmid.
This year was the first that shareholders had a binding vote on compensation packages. According to the authors of the PwC study, the say-on-pay rules can have an impact when companies “clearly explain the connection between the level of compensation, compensation structure and performance”.
The consulting firm compiled its study by analysing the annual reports of Switzerland’s largest listed companies.