The question facing Swiss voters on March 3rd was called the "people’s initiative against fat-cat pay". With a billing like that, who wouldn’t vote yes As it happened, 68% of the electorate did, passing a measure that requires listed companies to offer shareholders a binding vote on senior managers’ pay and appointments at each annual general meeting. The penalty for bosses who fail to comply is up to three years in jail or the forfeit of up to six years’ salary. Switzerland’s penchant for direct democracy has trumped its tolerance for tycoons.
Swiss business is shaken. It had backed a "counter-initiative" giving shareholders more voting powers without threatening criminal sanction. That was rejected by voters. The new law, which will be written into the constitution, endangers Switzerland as an investment destination, the business lobby claims. Economiesuisse, the Swiss Business Federation, now accepts the popular verdict but warns that such complex and highly charged changes must be implemented carefully. The laws needed to put the vote into practice will take ten years to write, some cynics suggest.
The initiative is the brainchild of Thomas Minder, who runs his family’s toiletries business. He has apparently never forgiven Swissair for backing out of a contract when it nearly went bankrupt 12 years ago and then awarding its former boss a big pay-off. Mr. Minder’s campaign gained momentum last month on news that Novartis, a Swiss drug firm, intended to pay its departing chairman, Daniel Vasella, a severance package of SFr 72m ($76m). Mr. Vasella later refused the package.
After Mr. Minder’s victory it will become harder to extend such corporate generosity. Some of the new restrictions seem sensible. Shareholder votes on executive pay, hitherto ad hoe and advisory, will become routine and binding. Pension funds will be required to vote in the interests of their members and make their votes public. Board members will not be permitted to have consulting or other contracts with firms in the same group.
But other provisions are more burdensome. The law will ban incentives that can be useful, such as "golden hellos" and severance packages for board members. It will also bar them from accepting rewards for buying or selling company divisions. According to Paragraph 3, Thomas Minder ______.