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Swiss fund steps up shareholder action

SWITZERLAND - Bernische Pensionskasse (BPK), a CHF8.6bn (€5.3bn) pension fund, has become the latest Swiss institutional investor to demand better corporate governance at the nation's biggest corporates.

BPK, which has 18% invested in Swiss Market Index companies, said that at annual meetings for these firms, it would no longer back a chairmanship role for chief executives of the companies.

BPK also said that in future it would insist that the firms' shareholders, instead of compensation committees, set the pay for all board executives at the firms.

"There are hardly any good arguments in favour of one person acting as CEO and chairman. Executive pay is also normally a bit too high and severance pay is often disturbing. None of this does any firm good," said Hans-Peter Wiedmer, head of investments at BPK.

BPK's sentiment is shared by Ethos, a socially-responsible asset manager that looks after CHF2.3bn from Swiss institutional investors, notably pension funds.

Indeed, both BPK and Ethos sought to block the re-election of a senior official at Novartis during last Wednesday's annual meeting of the Swiss drugs giant. The official in question was Hans-Jörg Rudloff, head of Novartis' executive compensation committee.

In a protest about Daniel Vasella's dual role as CEO and chairman of Novartis, BPK and Ethos abstained during a vote to re-elect him to that role. The institutions are big shareholders in Novartis with Ethos owing 1% of the firm and BPK holding 0.31% of the voting rights.

Yet despite their actions, Rudloff and Vasella were re-elected with more than 90% of the vote from Novartis' shareholders. Ahead of the annual meeting, Novartis declined to comment on BPK and Ethos' criticisms and afterwards only announced the re-election Rudloff and Vasella.

The BPK scheme insures around 30,000 civil servants in and around the Swiss capital of Berne. Its return for 2006 totalled 5.3% - or under the 6.9% average for Swiss pension funds.

Beyond the 18% invested in Swiss equities, BPK has 15% of assets in foreign equities and 51.2% in fixed income. It also allocates 4% to real estate.

Separately, BLVK, a CHF4.7bn pension fund for teachers in Berne and surrounds, said a good performance of its assets last year enabled it to cut its funding deficit. The deficit declined to CHF580m in 2006 from CHF736m in 2005. BLVK's return for 2006 was 6.9%.

Several years ago, BLVK's funding deficit was as high as CHF1bn.

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