The Swiss Council of States (the upper house of the Swiss Federal Assembly) has discussed an amendment to Swiss company law in an attempt to encourage Thomas Minder to withdraw his proposed referendum to insert provisions on directors pay into the Swiss Constitution. The Council of States has argued that regulations on the remuneration of directors of listed companies should not be anchored in the constitution and are better placed in company law.

Thomas Minder, CEO of Trybol Cosmetics launched his campaign in October 2006 and collected nearly 118,600 to bring bring about a national referendum on remuneration. Minder, who needed a minimum of 100,000 signatures on his petition to force the referendum, is targeting a ban on transaction bonuses, salary in advance and golden handshakes (to departing executives). Minder's proposal would provide for annual votes on the total remuneration of the board of directors, the executive board and the advisory board. There would also be annual votes on the election of  the chairman of the board, the individual directors and the members of the remuneration committee. Pension funds would be required to disclose their voting behaviour. The articles of association of companies would be required to set out the maximum number of board members for executives, the duration of their employment contracts and ceilings on the value of pensions, credit and loans provided to corporate executives.

The Swiss parliament counter proposal bans 'in principle' the payment of golden hellos or golden parachutes. However shareholders in general meeting will have the authority to override the ban. The proposed amendments to Swiss company law also state that the total remuneration of board of directors should be voted upon annually, unless the articles of association provide otherwise.

A second part of the proposal is to be considered later this month by the parliament - whether there should be specific rules for bonuses in excess of CHF 3m.

Opinion polls have shown approximately 85% of the Swiss public to be in favour of Minder's proposal.

Update:  The Council of States has determined that bonuses will be prohibited where a company has posted a loss. Also any bonus in excess of CHF 3,000,000 will not be tax deductible for companies. The proposed legislation on say-on-pay has now been approved by the Council of States (on a unanimous vote) and now proceeds to parliaments other house, the National Council, in the new year.

Further Reading

World Radio Switzerland - radio report [in English]

Geneva Tribune Editorial

Thomas Minder's remuneration initiative website

Swiss Federal Assembly - Contre les rémunérations abusives