Swiss firms face increased scrutiny

Former CEOs Goran Lindahl (left) and Percy Barnevik were at the centre of a pension scandal at ABB Keystone

New Swiss corporate governance rules came into force on Monday aimed at restoring investor confidence after a spate of high-profile company scandals.

The Swiss Code of Best Practice for Corporate Governance and a new set of rules drawn up by the Swiss Stock Exchange (SWX) in Zurich are both designed to improve corporate transparency.

A series of recent scandals, including the collapse of the Swissair Group and a row over pension packages awarded to two former chief executives of the engineering group, ABB, have brought the issue of transparency to the fore.

“The most important aspect of these new rules is that information is given on the structure and the workings of the management of every listed company. It provides the investors with a framework of information that should help him to decide on his investments,” Heinrich Henkel, CEO of the Swiss Stock Exchange, told swissinfo.

A lack of confidence in Swiss company leadership, coupled with fears that the government would impose its own set of rules are said to have compelled the stock exchange to act quickly.

“The new code of conduct is a very positive move for investor confidence, which needs to improve after the recent financial scandals,” explained Jan Poser, an economist at Bank Sarasin.

Welcome first step

While the new rules and guidelines are widely seen as a welcome first step, politicians and pressure groups say more needs to be done to restore corporate credibility.

The Swiss justice minister, Ruth Metzler, speaking at a meeting of the Swiss-American Chamber of Commerce in Zurich last week, expressed doubt that self-regulation alone could provide the answer to the challenges facing the finance sector.

Under the new SWX rules, information regarding a firm’s shareholding structure, capital structure and shareholders’ participation rights must be published.

Pay and perks

The board of directors and management board must disclose the pay and perks of the boards as a whole. The highest paid executive salary must also be published.

Companies breaching the rules will face sanctions, such as heavy fines, and could be de-listed from the exchange.

The code of conduct issued by the Swiss Business Federation, economiesuisse, focuses on a firm’s structure and internal procedures.

Corporate regulation

“No corporate governance regulation can prevent a company from collapsing,” said Thomas Pletscher, economiesuisse board member.

“But you have the mechanisms to alert the management of responsibilities, to create structures so that you can deal with something that would be negative without action,” he said.

The code, which is not legally binding, is expected to become a de facto framework of guidelines for Swiss companies.

“This is really good. It is the first time Switzerland has had this sort of regulation,” said Dominique Biedermann, head of Ethos, a shareholders’ group representing pension funds.

However, Biedermann is calling for even more regulation to be introduced within the next few years. For example, he wants to see compensation published for each individual on executive and management boards.

by Karin Kamp with agencies