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IPE special report May 2018

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Executive pay at Swiss financial companies falls in 2011

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  • Executive pay at Swiss financial companies falls in 2011

SWITZERLAND - The aggregate board and executive pay in the companies of the Swiss financial sector fell by 23% in 2011, according to a study by the Swiss foundation for socially responsible investment Ethos.

However, pay rose by 5% in other sectors.

Overall, remuneration was down 6% by compared with 2010.
 
A chief executive's 2011 average pay was CHF3.2m (€2.6m), down by 6% on 2010, while other executives received on average CHF1.8m, 7% less than in the previous year.

Chairmen of the board received on average CHF1.1m in 2011, down by 17% on 2010.

Other members of the board received on average CHF210,000, a decrease of 4% on the previous year.

Despite these decreases, the levels of remuneration remain high.

The top 20 highest paid in executive management received more than CHF5m each, while the top 20 highest paid chairmen earned more than CHF1m each.

Progress was slow in terms of say-on-pay votes.

In 2012, only 49 companies put their remuneration report to the advisory vote of the shareholders, which is only four more than in 2011.

However, the number of votes against continues to rise.

In 2012, average opposition to the remuneration report stood at 14.4%, up from 13.6% in 2010.

Ethos also notes an improvement in the transparency of the remuneration reports, as well as a more open attitude toward dialogue in the companies that submit their remuneration report to shareholder vote.

Despite the positive impact of these votes on the transparency and structure of board and executive remuneration, more than half of the companies still do not abide by self-regulation.

Ethos said it was therefore urgent to reinforce shareholder rights. The foundation supports the counter-project of the Swiss parliament established in response to the initiative 'Against excessive remuneration'.
 
The project requires listed companies to prepare a remuneration report that should be submitted to the shareholder vote.

This allows them to have a say not only on the amount of executive remuneration but also on the remuneration system, including the bonus and incentive plans, which are often the sources of high payouts for executive management.

In addition, the shareholders can submit resolutions on the agenda of general meetings to amend the remuneration system.

Eventually, Ethos says, the counter-project will lead to a rapid enhancement of shareholder rights with regard to board and executive remuneration, as it will be enacted immediately by force of law.

The initiative, however, prescribes a series of principles to be included in the Swiss Constitution, which will subsequently have to be converted into a set of regulations following a long process of elaboration of new laws.

Ethos's 2011 study on board and executive remuneration in the 100 largest Swiss listed companies can be found - in German and French only - here.

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