- By Andrew Brady
Today UK Chancellor George Osborne sulked alone after European Union finance ministers vowed to push ahead with proposals to curb bonuses in the finance sector. The Chancellor cited the all too ubiquitous line that London’s financial centre could be damaged. The EU is proposing to cap bonuses to 100 per cent of a banker’s annual salary or to 200 per cent if shareholders approve.
There of course is a lot of debate swirling around this issue and how people wouldn’t dream of capping footballers, actors or Formula One drivers salaries – well some would actually – but the fundamental point is that taxpayers have bailed out our financial institutions who took us to the brink of ruin as the gambled away and lost.
Only last week in a story that shocked everyone RBS – eighty-one per cent state owned – revealed a £607 million bonus bonanza including £215 million for investment bankers, despite plunging into the red by £5.2 billion in 2012. And wait for it the RBS hierarchy had the audacity to play down the move by the EU on bonuses in the finance sector saying it was “significantly less of a problem than a few years ago“.
Amidst all this frenzy in a move that has largely gone unnoticed the Swiss have approved a “fat-cat referendum” to limit executive pay by a crushing 68 per cent to 32 per cent. What makes this all the more surprising is that Switzerland has often been viewed as a country propagating and being a pantheon of tax avoidance, evasion and a whole other raft of schemes.
The referendum was the brainchild of Thomas Minder a legislator who began his struggle to give shareholders in Swiss-listed companies the right to control the pay of executives and board members in 2006 on the back of Swissair going bankrupt in 2001. Other shameful examples include in 2002, former ABN CEOs Percy Barnevik and Goeran Lindahl returning around 137 million francs in payments after an awful period for the company. In 2012 about 37 per cent of UBS shareholders also voted against the bank’s pay awards for after the Swiss bank said it changed the way it set bonuses for executives.
Minder’s company, which supplied toothpaste to Swissair, almost went bankrupt because its invoices initially went unpaid. Mario Corti, the chief executive officer of Swissair’s parent Sair Group, left the company after a few months, pocketing 12 million Swiss francs.
The “yes” campaign received a huge boost when it emerged that Daniel Vasella, the outgoing CEO of pharmaceuticals company Novartis AG, was to be given a £50 million payoff over six years in exchange for not working for any of the company’s competitors. Vasella rejected the payoff once all hell broke loose but the damage was done. The move is a victory for Swiss shareholders who campaigned against paying Vasella’s 12 million francs.
Paul Rechsteiner, the president of the Swiss trade union confederation, said that the Government in opposing the measures in the referendum “underestimates the problem of low salaries” in Switzerland. He was speaking last week in the capital, Bern, about the results in a study, which found that 437,000 people, or 11.8 per cent of employees, are employed on a subsistence level salary.
The result of the referendum will give huge momentum to two more referendum initiatives. One would set a legal minimum wage of 4,000 Swiss francs a month; the other is the so-called 1:12 initiative, which would restrict the highest salary in a Swiss company to no more than 12 times the lowest one. Joseph Jimenez, Vasella’s replacement at Novartis, earns for example, 266 times more than the lowest paid employee in the company. So it looks as if the citizens of Switzerland could show us all a lesson on holding executive pay to account.
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