Parliament considers probe of corporate pay practices

The executive compensation debate heats up

Payouts, share-plans and other reimbursements for top Swiss business leaders and board members look set to fall under parliamentary scrutiny.

This content was published on February 14, 2002 - 17:10

Pressure is mounting against Switzerland's corporate culture to make the often-secret salary packages paid to its top managers transparent.

A Swiss parliamentary committee is poised to open an inquiry into the politically sensitive issue next month.

The committee's trigger to investigate corporate remuneration hinges on a motion from centre-left Social Democrat parliamentarian Pierre Chiffelle.

The motion will be debated during the March session of parliament.

Perks and wages

Swiss business practices have long been criticised by both overseas investors and internal opponents.

However the questioning of wages, and the often-complex share and bond deals that top them up, has become louder following a string of corporate failures.

Swissair Chief Mario Corti became a media target in January after revelations that his salary package was worth over SFr12.5 million ($7.4 million).

This week, Swiss investors learned that the Swiss-Swedish engineering giant ABB, which has announced losses of more than SFr1.1 billion, is attempting to retrieve more than SFr233 million ($138 million) paid to former executives in unwarranted pensions and salaries.

The disquiet has not been eased by news of the take-home pay of Switzerland's top public service managers.

In 2001, Federal Railways CEO Benedikt Weibal earned SFr400,000, plus SFr76,000 in bonuses - a salary that left even the Swiss gasping.

Political warnings

Alexandre Fäzesseéry, a committee secretariat spokesman, told swissinfo that the move towards an inquiry sent a serious political warning to industry chiefs.

The committee has made it clear that industry either take the initiative to become more transparent, or face regulation.

"We expect industry, the stock market, and the Swiss Business Federation to become pro-active in establishing guidelines and principles," Fàzesseéry said.

"Otherwise the committee will proscribe changes to legal obligations."

Bigger wages

Thomas Pletscher, a Swiss Business Federation board member told swissinfo that compared with international standards of transparency Switzerland was near the top group of countries.

He warned that greater salary transparency would only inflate wages.

Chiffelle on Wednesday criticised the "shockingly-high fees" collected by Swiss board members in an interview with French-language newspaper "24 Heures".

The need for greater transparency is "absolutely essential" in Switzerland, he said.

"It's about transparency, and the need to build trust," Chiffelle said.

Similar demands for more openness are coming from the other end of the Swiss political spectrum.

Populist conservative Swiss Peoples Party leader Christoph Blocher - a successful businessman in his own right - has also spoken out against the "intolerable situation" of top managers cashing-in fat paycheques even during times of corporate failure.

The parliamentary committee is expected to consider changes to share and bond regulations, as well as the Swiss Stock Exchange laws.

Swiss standards lag

Compared with other developed countries, Switzerland is still seen as dragging its heels on legal reform.

The European Union has enshrined the concept of transparency in business laws since 1983, while most business-watchers agree that US stockholders enjoy far more public disclosure than those in Switzerland.

In addition to the pending review, another parliamentary standing committee is already studying a proposal to limit top public-service salaries.

by Gaby Ochsenbein and Jacob Greber

In compliance with the JTI standards

In compliance with the JTI standards

More: SWI certified by the Journalism Trust Initiative

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