anti rip-off vote coming up in Switzerland

[Keunert]

Switzerland just voted for the most potent shareholder rights europe wise:

http://www.nytimes.com/2013/03/04/business/global/swiss-voters-tighten-countrys-limits-on-executive-pay.html?hp&_r=0

[Mr. Bigglesworth]

You may have heard that the former Novartis CEO Vasella made a deal to not join any competing chemistry company within the next 6 years. they will pay him 70mio for this.
but he got that much pressure that he stepped back from the deal. the pressure comes from an upcoming vote in march: there is an anti rip-off vote initiated by a right wing
medium sized company ceo called Minder. He felt that the top salaries of UBS, Novartis and the like were rip offs and that he as a shareholder should have a vote in
the amount of money going into salaries.

the vote will most like succeed and will forbid any golden goodbye gifts, it will force the top salaries to be accepted by the shareholders. it also forces institutional investors to execute their
right to vote.

this thing has some interesting aspects: it was initiated by a CEO, not by social democrats, it is initiated in the least social democratic country in europe and there is an extraordinary
level of agreement on the issue.

It may be a translation thing but that is not the right wording. It gives shareholders a vote on executive salary. They can force salaries.

The point LB, is executives were writing their own wage inflation. This puts their salaries into the hands of those that own the company. Nothing wrong with that IMO.

[Mr. Bigglesworth]

The problem is partly due to the fact that the very people who sit on one pay review committee are very often executive officers in another firm. There is a vested interest in seeing pay inflation occur. Ironically, you always hear the mantra that if you don't pay excessive sums, you won't attract the right people. I can think of a lot of people who would work hard, bring the right skills etc to a firm without earning the equivalent of a lottery win every year. This is a relatively new phenonmenon over the last thirty years or so, but politicians and executives (particularly in large firms) buy into the idea very quickly because of self-interest. To suggest that shareholders have much control over the wage hikes is naive, when you consider that shareholdings tend to be fragmented amongst the public, or more commonly by large investment organisations like pension companies whose own executives benefit from the same inflated pay culture. It is not in their own interest to oppose it.

Well said.

[LongBlade]

You may have heard that the former Novartis CEO Vasella made a deal to not join any competing chemistry company within the next 6 years. they will pay him 70mio for this.
but he got that much pressure that he stepped back from the deal. the pressure comes from an upcoming vote in march: there is an anti rip-off vote initiated by a right wing
medium sized company ceo called Minder. He felt that the top salaries of UBS, Novartis and the like were rip offs and that he as a shareholder should have a vote in
the amount of money going into salaries.

the vote will most like succeed and will forbid any golden goodbye gifts, it will force the top salaries to be accepted by the shareholders. it also forces institutional investors to execute their
right to vote.

this thing has some interesting aspects: it was initiated by a CEO, not by social democrats, it is initiated in the least social democratic country in europe and there is an extraordinary
level of agreement on the issue.

It may be a translation thing but that is not the right wording. It gives shareholders a vote on executive salary. They can force salaries.

The point LB, is executives were writing their own wage inflation. This puts their salaries into the hands of those that own the company. Nothing wrong with that IMO.

Agreed. The board should provide a check to people writing their own paycheck. Good move.

[Martok]

Switzerland just voted for the most potent shareholder rights europe wise:

http://www.nytimes.com/2013/03/04/business/global/swiss-voters-tighten-countrys-limits-on-executive-pay.html?hp&_r=0

Thanks for the update, Kenny.  I'm fascinated to see where this goes, and how it works out. 

[Boggit]

You may have heard that the former Novartis CEO Vasella made a deal to not join any competing chemistry company within the next 6 years. they will pay him 70mio for this.
but he got that much pressure that he stepped back from the deal. the pressure comes from an upcoming vote in march: there is an anti rip-off vote initiated by a right wing
medium sized company ceo called Minder. He felt that the top salaries of UBS, Novartis and the like were rip offs and that he as a shareholder should have a vote in
the amount of money going into salaries.

the vote will most like succeed and will forbid any golden goodbye gifts, it will force the top salaries to be accepted by the shareholders. it also forces institutional investors to execute their
right to vote.

this thing has some interesting aspects: it was initiated by a CEO, not by social democrats, it is initiated in the least social democratic country in europe and there is an extraordinary
level of agreement on the issue.

It may be a translation thing but that is not the right wording. It gives shareholders a vote on executive salary. They can force salaries.

The point LB, is executives were writing their own wage inflation. This puts their salaries into the hands of those that own the company. Nothing wrong with that IMO.

Agreed. The board should provide a check to people writing their own paycheck. Good move.

"Should" is of course the operative word if the culture is to be changed. The trouble is how do you ensure this happens on a board where in the absence of a non-executive pay committee colleagues need the support of their peers for a pay rise. A "quid pro quo" situation frequently arises in the cause of self interest. Even with non-executive pay committees the issue of wage inflation is tainted with self interest, since many non-execs are executive board members elsewhere relying on the same process for their wage rises. This has been a serious corporate governance issue for many years and seems no closer to resolution. To rely on shareholders to determine this in large companies is also flawed for two main reasons. 1. Many large shareholders are large corporations themselves and don't wish to rock the boat because it can negatively affect wage negotiations at their own firms; and 2. General Public shareholdings are diffuse and there is a poor track record of achieving coherent shareholder consensus sufficient to matter in a resolution in all but a few cases.

[Mr. Bigglesworth]

http://www.reuters.com/article/2013/03/10/us-nordics-pay-idUSBRE92906M20130310

[Keunert]

interesting article Mr. B. Scandinavia can do with the second best....
Over here the next vote is coming soon... it's called 1/12 and aims at limiting the wage difference of the highest wage being at max 12 times of the governments minimal wage limit. it will be at half a million swiss franks a year. 12'000 person earned that much in 2010. the issue is going strong, i am a little surprised.