The Swiss proxy voting foundation Ethos has called on Pensionskassen to focus on remuneration and said it will require performance-linked compensation.
In a recent referendum, the majority of Swiss people voted in favour of the so-called Minder Initiative to curb “excessive” remuneration at Swiss companies last year.
A law based on the outcome of the vote also contains an obligation for pension funds to take part in votes at annual general meetings of Swiss listed companies in which they are invested.
As a consequence of this new law, Ethos has called on pension funds to focus on compensation and governance issues at companies and will also do so in its own voting guidelines.
“Under no circumstances will the Foundation be able to accept, prospectively, remuneration amounts without knowing in detail the mechanisms linking compensation to performance,” it said in a statement.
As a benchmark, Ethos states that, “in the event of outstanding performance, the variable remuneration should not exceed three times the fixed salary in order to avoid excessive risk-taking by the management”.
Further, the foundation suggests “separate votes for the fixed and variable compensation paid to executive management”.
Additionally, bonus payments should only be voted on after the performance is achieved.
As for the remuneration committees in a company, Ethos “requests that most of the candidates be independent and do not hold executive positions at other companies”.
In general, Ethos stressed that it would “pay very close attention” to corporate governance rules such as the maximum number of mandates held by executives on various supervisory boards.
In its most recent annual survey on executive remuneration in the 100 largest companies listed in Switzerland for the financial year 2012, Ethos found remuneration “remained very high”, averaging almost CHF2m (€1.6m) for a member of executive management.
It added that transparency regarding remuneration allocation mechanisms was "still inadequate in many companies” and that “the structure of remuneration systems often still falls short of best practice”.