Voters in Switzerland have rejected a proposal to impose a cap on executive remuneration. In a referendum held at the weekend, the so-called ‘1:12’ plan, which would have restricted the monthly pay of Swiss executives to no more than their lowest-paid workers earn in a year, was defeated with 65.3% voting against and only 34.7% in support.
“It’s a big relief,” said Valentin Vogt, president of the Swiss Employers’ Association, said in a television interview. “It’s a signal that it’s not up to the state to have a say in pay.”
David Roth, the president of Switzerland’s Young Socialists and main proponent of the measure, expressed disappointment and blamed the defeat on scare tactics by his opponents. Swiss employers had claimed the initiative would undermine the country’s competitiveness, reduce tax revenues and create a precedent by giving the state a role in relations between employers and employees. Both the government and parliament also urged voters to reject the proposal.
At a news conference in Bern, the economy minister, Johann Schneider-Ammann, described Roth’s initiative as ‘absurd’ and welcomed the result. “We know there would have been lots of ways to circumvent the restrictions,” he said. “Switzerland stays attractive as a business location.”
Christian Keuschnigg, professor of public economics at the university of St Gallen, told
newspaper that a study he had conducted for Swiss companies found the cost to the state would have ranged from “close to zero to as much as four billion Swiss francs (SFR), depending on the reaction of business. The proponents of the scheme, backed by the Socialists and Greens, argued that the savings in top executive pay would be redistributed among the lower paid.
However, he suggested companies might have increased their dividends or relocated to other countries. “Multinational corporations could easily switch their headquarters elsewhere. That danger in our view was quite real.”
The referendum follows a vote last March,
when Swiss voters supported other measures to limit executive pay
including giving shareholders the right to veto pay packages and the threat of up to three years’ jail for company board members who do not comply. It followed shortly after pharmaceutical group Novartis abandoned plans for a SFR72m payoff to departing chairman Daniel Vasella in the face of fierce opposition from shareholders.
However, the concept of placing an upper limit on executive payouts has proved popular with the electorate elsewhere in Europe. In Spain, the country’s Socialist party is proposing measures similar to the 1:12 imitative.
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