No end to tug-of-war over fat cat salaries

Newly-elected Senator Thomas Minder wants his initiative to be put to a nationwide vote Keystone

For nearly four years parliament has been struggling to present an alternative option to a people’s initiative aimed at restricting excessive management salaries.

During the current winter session, the House of Representatives threw out a counter-proposal but the decision has not stopped further attempts to seek a way out of the political tangle.

Ever since the issue of so called “fat cat” salaries was put on the political agenda, parliament has been grappling to ensure that the initiative would have to compete against an alternative when it finally comes to a nationwide ballot.

The initiative, launched by entrepreneur Thomas Minder, seeks to cap undue executive pay for listed companies.

However, even seasoned politicians admit that the discussions about the issue have reached a high level of confusion.

“There are probably only very few politicians who really see the bigger picture,” says Social Democratic Senator Roberto Zanetti.

“And even specialists have trouble finding a way out,” adds Viola Amherd, a senior parliamentarian for the centre-right Christian Democrats.

For his part, Minder – who was recently elected to the Senate – is indignant about the to-and-froing of parliament and the subsequent delays.

Observers say the protracted procedure is a sign that many politicians are worried that the initiative could win a majority among voters.

No bonus tax

The rejection earlier this month by the House saw off the latest in a series of moves to present an alternative solution – in this case, a legal amendment to introduce a company tax on bonus payments above SFr3 million ($3.2 million).

In September the Senate had voted in favour of changing the accounting method, no longer listing bonus payments as personnel costs but as part of the company asset.

But a majority of the House, made up of the rightwing and parts of the centre-right, would have none of it, sinking the proposal by the Christian Democrats who had the backing of the centre-left.

Minder, an independent close to the rightwing Swiss People’s Party, was fundamentally opposed to the counter-proposal. He says it was a misnomer and would harm companies and shareholders.

“What’s more it would have no restraining impact because there is no direct link between company taxes and excessive salaries,” Minder says.

To make his point he adds that a number of cases where managers and board members of major Swiss banks were granted huge bonus payments even though their firms suffered spectacular losses.

Time running out

The Christian Democratic Party remains convinced that its counter-proposal is promising. It plans to table it again in a different form in parliament despite the recent defeat.

Parliamentarian Amherd is aware that it will not be easy to find enough support. “We will hold bilateral discussions with other parties to find a compromise,” she says.

The Liberal Greens have already indicated that they might be willing to back the new attempt.

For now, it is the turn of the Senate to examine yet another counter-proposal in the spring session.

But time is running out for parliament to wrap up its discussions; it has already twice extended the deadline for the presentation of a counter-proposal. Now the chambers will have to deliver within the next six months.

One thing seems certain: Minder is not willing to withdraw his initiative.

“Two years ago I showed my willingness to compromise,” he says. But parliament has failed to agree on an amendment to the corporate law in the meantime.

“Now I want voters to have the final say,” Minder said.

Initiative

The initiative to put an end to excessive executive pay and boost shareholder rights was handed in with more than 118,000 signatures in 2008.

A nationwide ballot on the issue is expected by March 2013 at the latest.

There are an estimated 180,000 limited companies in Switzerland. About 300 of them are listed on the stock exchange.

Counter-proposal

The latest counter-proposal, drafted by a Senate committee in 2010, is aimed at amending the corporate law while taking over elements of the initiative.

The parliamentary chambers still have to iron out differences over whether bonus payments can be subject to approval by a shareholders’ assembly.

In addition, the chambers do not agree whether a group of shareholders should be entitled to demand a change to the salary regulation.

Opinions also differ over flexible salary elements and the right of a company board to set a ratio between fixed and flexible salary components.

The House of Representatives came out in favour of a compromise on executive salaries: every year shareholders would agree the bonuses, but they could opt for a mandatory or a consultative vote.

(Adapted from Italian by Urs Geiser)