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Investors up dissent over Swiss corporate governance, pay

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Shareholders of listed Swiss companies stepped up their opposition to resolutions at this year’s general meetings, in particular in relation to remuneration, according to Ethos, a Swiss pension fund-owned proxy voting foundation. 

Publishing its annual report on Swiss corporate governance, it said 14% of resolutions received less than 90% support from shareholders, up from 12% last year.

There was also an increase in resolutions that received less than 80% support. In 2016 this was 4%, and in 2017 it was 7%.

The figures are for the 200 companies in Switzerland’s main stock market index, SPI.

The average approval rate was still high – 95.4% in 2017 versus 96.3% in 2016 – but 27 resolutions were rejected at annual general meetings.

Regarding remuneration reports for boards and executive management, 21% of advisory votes were supported by less than 80% of shareholders, up from 16% in 2016, Ethos said.

The average opposition to a remuneration report stood at 13.3% in 2017, up from 11% last year.

The rise in shareholder opposition came as average pay remained “more or less constant”, but varied across sectors, according to Ethos.

However, average executive pay at financial companies among the 100 largest Swiss listed companies increased by 4%, despite profits decreasing by 16%.

“When voting on remuneration issues, this translates into a higher level of opposition at financial companies than in other sectors,” Ethos said.

At asset manager GAM, shareholders rejected the report on pay for 2016 (54% voted against, 28% abstained) and the proposals for performance-related pay for executive management for 2017 (65% against, 28% abstained).

At Credit Suisse, meanwhile, shareholder pressure led to the executive management voluntarily cutting its bonus by 40%, Ethos noted.

Having a retrospective vote on the 2016 bonus was key to this, it added.

In Switzerland, a 2013 referendum on the so-called Minder initiative on executive pay led to considerable changes to corporate law and corporate governance, such as a requirement for companies to hold an annual, binding vote on executive compensation.

However, there is some flexibility as to how they have to do this. For example, they can choose to have variable pay approved by shareholders retrospectively or prospectively. In 2017, according to Ethos’ report, the majority of companies opted for a vote on prospective pay, while 23% held a vote on pay proposed for the year gone by.

The Swiss parliament has begun debating a draft revision of company law put forward by the federal government. Ethos has called for the reintroduction of a ban on prospective votes on variable pay, which was included in a preliminary draft of the law but later removed.

Ethos said the revision to the law was aimed at adapting it to changes in market practice, in particular since the implementation of the Minder initiative.

Last week, the UK’s asset management trade body reported that shareholders in FTSE250 companies had rebelled against pay packages more often in the 2017 AGM season than the year before.

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