Swiss Campaign Targets Executive Greed | Business| Economy and finance news from a German perspective | DW | 12.02.2008
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Swiss Campaign Targets Executive Greed

Are executives' earnings obscene excess or legitimate incentive? A small-business owner in Switzerland (known for being pro-business) is pushing through a referendum that would lop off the superfluous zeros.


How much is too much?

Thomas Minder gets a bit angry when he talks about severance packages and bonuses for managers.

"Those things come from the US and they're not normal here in Switzerland," he said. "This kind of corporate policy is sick and has to be changed."

Minder, a small business owner from Neuhausen am Rheinfall in Switzerland, has launched an initiative against exorbitant salaries for managers. He says it's unjust that some executives earn 600 times more than an average worker -- and are even rewarded with seven-digit severance payments when they do a poor job and are dismissed.

After a year and a half of campaigning, Minder has nearly collected the 100,000 signatures that are necessary in Switzerland for a referendum. He and the signatories want the government to put an end to disproportionate executive salaries.

Salt in the wound

Swiss Air

Minder was hit hard when Swiss Air went bankrupt

The reason behind Minder's efforts is personal. About six years ago, Swiss Air placed a large order for hand lotion, lip balm and tooth paste with his small cosmetic company. When the airline declared bankruptcy shortly thereafter, Minder's firm was stuck with a pile of toiletries and an unpaid bill.

"When it came out a few months later that the CEO had gotten a settlement worth 12.5 million francs (7.8 million euros, $11.4 million), the world collapsed for us," said Minder.

His campaign has hit a nerve with the Swiss. Manager salaries in Switzerland continue to rise disproportionately to workers' wages -- just like in Germany, where the debate heated up several weeks ago.

According to the investment management fund Ethos, executive earnings at Switzerland's 20 largest companies rose 17 percent from 2005 to 2006. Workers' wages, on the other hand, only increased by 2.5 percent at most.

Unusual, but not unlikely


Switzerland is a direct democracy

The discrepancy upsets a lot of people, said political scientist Thomas Milic from the University of Zurich.

Milic, whose research focuses on public referenda, said that Milic's referendum has a chance, even though statistics suggest the contrary. Of the 200 or so petitions for referenda that have come from the Swiss populace, only 15 have gone through, he said.

Once the 100,000 required signatures have been collected, the parliament has to put it to a public vote within three years, according to Swiss law. Milic warned, though, that the government tends to water down the laws before they are voted on and present them side-by-side with counter-proposals.

However, Minder has the politicians on his side, too. The Social Democrats, the Green Party and a leftist splinter party are behind his initiative; only the right-wing Swiss People's Party hasn't yet taken a position.

Stockholders to take charge

If Minder's demands are taken on by the electorate, companies listed on Swiss stock exchange would have to make some changes. The initiative calls for banning termination pay, advances and bonuses for selling or buying a company.

What's more, stockholders would determine executives' salaries, not executives themselves. Minder aims to protect the company owners from the "boundless greed" of its executives.

Thomas Minder

Some say the chances are good for Minder's initiative

Still, he doesn't see himself as a socialist crusader. "I think civically and very liberally," he said. "The proposal is quite business friendly."

Pressure from market-minded Swiss

Wolf Linder, a political scientist at the University of Berne, said he didn't think Minder's proposal was business-friendly enough.

"The Swiss think in a much more economically liberal way than the Germans," he said. Even if it comes to a referendum, the people won't approve the bill, he added.

Still, the Swiss are clearly concerned about the issue. Thomas Limberger, head of the technology company Oerlikon, was supposed to get an annual salary of 20 million francs but decided to settle for a modest 7.7 million when public outrage swelled last month.

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