Listed firms to come clean about executive pay

The Swiss stock exchange is demanding more accountability from its members Keystone Archive

Companies on the Swiss Stock Market (SWX) are to reveal how much they pay their top management.

The move comes after the Swiss-Swedish engineering group, ABB, revealed it had paid out SFr230 million in retirement benefits to two former CEOs, sparking a public outcry about the level of executive pay, and calls for more transparency.

Under the new corporate governance directive, which is expected to be approved on April 17, companies will be obliged to disclose details of all remuneration to board members and top management, including salaries, bonuses and perks.

The pay packets of non-executive directors as well as former directors must also be published.

Transparency

The SWX said the directive, which would bring Switzerland into line with European Union rules, was intended to improve transparency and openness.

SWX spokesman, Leo Hug, told swissinfo that it had been in the pipeline for some time. “Investors want to know everything about a company in order to trust it and at the end of the day it is important for the company to be more transparent to attract more investors.”

However, analysts say that although Swiss firms are becoming more transparent, they remain far more secretive than their counterparts in many other countries, such as the United States.

“Swiss companies are lagging behind with transparency,” Herbert Fritschi, a senior analyst at Zurich cantonal bank, told swissinfo. “The US has always been a good example for us.

“Only a few years ago, a lot of Swiss companies did not publish any quarterly reports – only annual or bi-annual reports,” he added.

Opaque balance sheets

Listed firms, particularly in the US, have been punished in the wake of Enron’s collapse with investors deserting companies with opaque balance sheets.

To qualify for a listing on the SWX, companies must apply one of three accounting standards – the International Accounting Standards Board (IAS), the US’s Generally Accepted Accounting Principles (GAAP), or the Swiss Accounting Standards Board (FER).

The SWX says only eight listed firms use GAAP, with the majority following the FER standard.

Hug says the GAAP is the most rigorous of the three but that Enron’s collapse proves that it too has limitations.

“GAAP is the strictest standards but the Enron case has proved that there is always a niche to hide something and if you know a standard well, you also know how to dodge it.”

by Billi Bierling