No upper limit put on executive salaries

Top managers at banks like UBS don't have to worry about pay cuts for the time being Keystone

Swiss voters have rejected a proposal limiting the salaries of top executives. About two-thirds of voters said no to the Young Social Democrats' plan. The aim was to reduce the salary gap to a 1:12 ratio – to limit the salaries of top executives based on the annual minimum wage of the lowest paid employee within the same company.

The vote brings to an end to more than six months of intense campaigning by the youth wing of the centre-left Social Democratic Party who were backed by trade unions.

“We’re disappointed we lost today. Our opponents used scare tactics. Our fight will continue against fat cat salaries and an unfair pay system. This system has no future. We succeeded in mobilising many people and to launch a broad debate,” said Young Social Democrats’ president, David Roth.

But Economics Minister Johann Schneider-Ammann was pleased with the outcome. “Switzerland´s economy remains competitive and attractive for investors.” He also warned the business community not to ignore the fact that – despite the vote result – there was dissatisfaction among the populace with excessive manager salaries. “They [executives] have to understand that social cohesion must not be put in jeopardy.” 

Heinz Karrer, president of economiesuisse, Switzerland’s main business lobby, was clear in his interpretation of the margin of defeat. “Voters decided they didn’t want state interference in setting wages.”  

The director of Switzerland’s Association of Small- and Medium-sized Enterprises, Hans Ulrich Bigler, added that a yes vote would have had far-reaching, negative consequences. “Approval would have harmed not only the Swiss economy but would have had a direct impact on all cititzens, because the pension system would have suffered.”

It was one of the arguments used by the business community – and other opponents including the government and most political parties – in the few weeks leading up to the vote.

November 24 votes – the verdict

An initiative to limit wages within a company at a 1:12 ratio:

Yes 34.7% 

No 65.3%

A proposal to grant tax breaks for families who raise their children at home:

Yes 41.5%

No 58.5%

A plan to increase motorway fees:

Yes 39.5%

No 60.5%

Turnout: 53%

An estimated 5.2 million citizens were eligible to take part in the ballot, including registered Swiss expatriates.

About 158,000 citizens were eligible to vote online as part of ongoing trials with e-voting. Just over 15% of them used the otion.

The November 24 vote was the fourth and final nationwide ballot this year.

Votes and elections also took place at cantonal and local levels around the country.

Competitive edge

They warned that approval of the initiative would undermine Switzerland’s competitive edge, result in a shortfall in state revenue and impose unnecessary restrictions on relations between employers and employees in a liberal market economy.

Political scientist, Claude Longchamp, said of the vote outcome that there was a clear polarisation between the political left and the right on the issue, and in these cases, it “usually results in defeat for the left”.

“It is the typical outcome for an initiative by a leftwing group,” Longchamp added, explaining that it was built on an initiative earlier this year to give shareholders a greater say on manager salaries. “In comparison to the initiative in March, the Young Social Democrats could not convince older voters.”

Another factor that may have worked against the 1:12 campaign, according to the political scientist, was the leftwingers call for direct state interference in controlling wages, while the so-called Minder initiative on shareholder empowerment favoured a more liberal policy.

Not final word

Despite voters’ distaste for the 1:12 initiative, it is not the final word on efforts to curb excessive pay packages and reduce the perceived gap between rich and poor. This was acknowledged by both Karrer and Schneider-Ammann. “The same thing will again be on the agenda when we vote on an initiative by the Trade Union Federation to introduce a minimum salary,” Karrer said.

Schneider-Ammann said rejection of the 1:12 initiative was an encouraging sign ahead of future votes on pay, including the one on a minimum wage. He said it was a signal that the Swiss don’t want state intervention, but have confidence in a liberal labour policy.