Double package presented to cap manager pay

Thomas Minder wants shareholders to confirm salaries of executives and board members of public companies Pixsil

Voters look set to have a choice between two proposals to combat excessive manager salaries and boost shareholder rights.

The House of Representatives on Wednesday came out in favour of an initiative to end large bonus payments and give a greater say to shareholders, but also agreed to present a slightly less restrictive alternative despite opposition from the right.

The marathon debate, which lasted 12 hours, was marked by tactical considerations between the four main political forces in parliament.

Wednesday’s discussions were also fuelled by announcements by bank UBS about massive bonus payouts to failed managers. At the same time the bank confirmed a SFr2.7 billion ($2.6 billion) loss for the year.

On various occasions the right and the centre-left traded accusations of obstructing swift and effective measures or playing political games ahead of next year’s elections.

“The real aim of the People’s Party is delay a ballot on the initiative,” said Social Democratic parliamentarian André Daguet.

People’s Party president Toni Brunner scolded the centre-left for blocking a solution. “The debate has shown that the Social Democrats and the Greens are only interested in cheap propaganda,” he said.

The right had previously suffered a setback in its attempt to push through a compromise whereby a constitutional amendment would have been withdrawn in favour of a reform of the shareholder law.

Right question, wrong answer

During the debate the centre-right Christian Democrats and Radicals joined forces with either the left or the People’s Party to win a majority for their proposals.

They both warned of a negative impact a constitutional amendment would have on the Swiss economy and preferred a counterproposal, hammered out by parliament.

“The initiative asks the right questions but it offers the wrong answers,” said Christian Democrat Pirmin Bischof.

Justice Minister Eveline Widmer-Schlumpf said she welcomed a decision to put both the initiative and the more business-friendly counterproposal to a nationwide vote.

“What is wrong about giving voters the final say on both proposals in a democratic procedure?” she asked.

She also promised to have the necessary details finalised to prepare for nationwide ballot next year.

The Senate still has to wrap up its debate on the issue at a later stage. It had rejected the initiative last year but did not discuss possible alternatives.

Executive salaries

The initiative by businessman Thomas Minder, supported by the Social Democrats, the Greens and the Protestant Party, won the necessary signatures for a nationwide ballot and was submitted to authorities in 2008.

It seeks to introduce an annual confirmation by shareholders of the salaries of board members and the management of listed companies. The initiative also aims to ban “golden hellos” and “golden handshakes” – special payments to attract new managers and significant severance payments.

The counterproposal only includes approval of board member salaries but no mandatory ballot on those of the top management. It allows for special severance payments and proposes far-reaching transparency rules for salaries.

The initiative was prompted by several cases of excessive payoffs for top managers while their companies were hit by financial setbacks or even collapsed, including the former flag airline, Swissair, in 2002.

But Minder last month struck a deal with the strongman of the People’s Party, former leader Christoph Blocher, and agreed to withdraw his initiative if parliament approved a reform of the shareholder law.

This plan was botched by the other main parties, which accused Blocher, a multi-billionaire businessman and former justice minister, of misleading voters.

Urs Geiser, swissinfo.ch (With input from Matthew Allen)

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 next year.

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

UBS bonus payments

Bank UBS revealed that it had awarded SFr55 million of the total SFr2.9 bonus pool last year to senior managers. UBS stemmed its full year losses from more than SFr20 billion in 2008 to SFr2.74 billion last year.

Chief executive Oswald Grübel and chairman Kaspar Villiger voluntarily waived bonus payments and Villiger went a step further by asking for his base salary to be cut from SFr2 million to SFr850,000. As he joined in April 2009, he received SFr676,571.

But Carsten Kengeter, who was appointed co-head of investment banking in April 2009, was awarded SFr12.5 million in performance-related pay to supplement his SFr700,00 base salary last year.

Perhaps more shocking was the SFr24 million total compensation paid out to former investment banking chief Jerker Johansson for his 14 month stint in office that ended in his sacking early in 2009.

Executives who were either fired or stepped down in 2009 received total compensation of more than SFr41 million, of which nearly SFr38.5 million came in the form of performance related pay.