A Daring Swiss Bid to Stomp Out CEO Pay Excess

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This article first appeared in The Institute for Policy Studies’ Too Much newsletter.

Brady Dougan, CEO of Credit Suisse. (AP Photo/Keystone, Steffen Schmidt)

Something astounding is happening in Switzerland. For the first time ever, voters in a modern developed nation are going to be voting on whether to create what amounts to a “maximum wage.”

The vote will come Sunday, November 24, on a ballot initiative that bans any Swiss corporate executive compensation that runs over 12 times worker pay.

In effect, under this “1:12 Initiative for Fair Pay,” no Swiss company would be able to pay its top executives more in a month than the company’s lowest-paid workers make in a year.

Swiss 1:12 activists Cédric Wermuth and Mattea Meyer. Photo Credit: Too Much

Swiss corporations currently compensate their top execs more generously than any other nation in continental Europe. At pharmaceutical giant Roche, CEO pay runs 236 times the firm’s lowest wage. At Nestle, the divide spreads 188 times.

Gross margins like these four years ago caught the attention of activists in Juso, the youth wing of Switzerland’s Social Democratic Party. The activists sensed growing public outrage at a corporate pay system that has, as former Juso president Cédric Wermuth recently related, “greedy managers earning millions while other people earn too little for living.”

Juso decided to challenge corporate pay inequality head-on, through Switzerland’s “direct democracy” initiative process. Under current Swiss law, propositions that gain 100,000 signatures can trigger a national referendum.

The “1:12” initiative that Wermuth and his Juso vice-president Mattea Meyer organized would go on to gain broad union support and backing from Switzerland’s top two progressive parties, the Social Democrats and the Greens.

This past spring, the 1:12 effort filed enough signatures for ballot status — and Corporate Switzerland has been feverishly attacking the initiative ever since.

Any move to limit CEO pay to 12 times worker pay, charges SwissHoldings, the federation of Swiss-based multinationals, would constitute “a frontal attack on freedom” — and “prosperity,” too! If the measure passes, the SwissHoldings anti-1:12 manifesto declares, “almost all” of Switzerland’s 57 corporate giants “would be forced to restructure or move parts of their companies abroad.”

One Swiss lawmaker, Zurich’s Ruedi Noser, has ratcheted up the hysterics to an even higher level. A “yes” vote on the 1:12 proposition, he’s claiming, would turn Switzerland into the “North Korea of Europe.”

But Swiss society, 1:12 supporters counter, has functioned quite successfully in the not-so-distant past with quite narrow gaps between executive and worker compensation. In 1984, points out the Swiss Denknetz think tank, CEOs in Switzerland only averaged six times more in pay than average Swiss workers.

A 1:12 campaign flyer that traces Switzerland’s growing divide between average worker and CEO compensation.

Many Swiss today still remember those more equal times, one reason why headlines about 21st century executive paydays — like the $100.5 million Credit Suisse CEO Brady Dougan grabbed in 2010 — so infuriate the general public.

In 2007, Swiss chief execs nationwide averaged 56 times more than average worker pay. But big companies pay their execs far more, the Swiss trade union federation points out and these execs desperately want their gravy trains to continue. Nestle, the drugmaker Novartis and other Swiss companies have been bombarding their employees with letters decrying the dangers 1:12 poses.

Swiss corporate execs unleashed a similar political blitz earlier this year when corporate gadfly Thomas Minder, a successful entrepreneur, led a campaign to give shareholders more say over top executive pay — and ban executive new-hire and “golden parachute” bonuses.

Swiss multinationals bitterly opposed Minder’s proposal. But his initiative passed anyway this past March, with a stunning 67.9 percent of the vote.

Corporate interests don’t have to reveal how many millions they’re pouring into the campaign to kill the 1:12 initiative and some observers are estimating that initiative opponents may be outspending supporters by as much as 50 times.

Adding to the huge drumbeat against 1:12: official opposition from Switzerland’s Federal Council, the country’s ministerial cabinet. The Swiss media, meanwhile, have been overwhelmingly hostile as well.

“No major Swiss newspaper is supporting the 1:12 initiative,” Juso activist Mattea Meyer points out and only about 15 percent of major media coverage, she estimates, has been friendly to the pay cap effort.

Remarkably enough, given this deeply unequal political playing field, the 1:12 initiative has remained competitive in the opinion polls. In October, one survey had the measure in a virtual dead-heat, with 44 percent both pro and con.

Polling released last week does have the “no” side gaining ground and passage this Sunday, observers feel, remains a longshot. But however the vote goes, activist Cédric Wermuth stresses, egalitarians have made substantial progress.

“We’ve launched,” he notes, “a major debate about wage equality and a just income distribution, a subject regarded as taboo before.”

Advocates for the 1:12 initiative see their effort as part of a broader “strategic counter-project” to reverse top 1 percent-friendly rule changes that have made Switzerland so much less equal over recent decades and next steps are filling the Swiss referendum pipeline.

Among these next steps: an initiative to create a basic minimum income for everyone in Switzerland — at the equivalent of $2,800 a month — and campaigns to put in place both a stiff inheritance tax and a new tax on foreigners using Switzerland as a tax haven.

The Swiss 1:12 activists see themselves as part of a global effort and 1:12-like campaigns, they note proudly, have taken root in France and Germany.

“We stay in close contact with them,” says Cédric Wermuth, who currently serves as a member of Switzerland’s federal parliament.

The Swiss 1:12 activists are also staying in close contact with leading global egalitarian thinkers. They’ve hosted talks in Zurich, Basel and Bern, for instance, from the British epidemiologist Richard Wilkinson, one of the world’s foremost authorities on the impact of inequality on our daily lives.

The 1:12 effort, Wilkinson noted last week, has already made a major contribution — by helping the entire world understand that businesses “do not have to be organized as systems for the undemocratic concentration of wealth and power.”

Labor journalist Sam Pizzigati, an Institute for Policy Studies associate fellow, writes widely about inequality. His latest book: The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970.
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  • strider367

    “A frontal attack on freedom” — and “prosperity,” But isn’t this exactly what these CEO’s been denying their own workers for years. Squeezing the workers for every dime they can keep for themselves. Claiming they have to be competitive in a global economy? While paying themselves and their crony’s millions. I never understood what these CEO’ and CFO’s do in the first place? But this is a step in the right direction. At least a win for share holders who only get pennies on dividends. While these CEO’s take everybody else to the cleaners…

  • Ed

    This is what democracy really looks like.

  • Anonymous

    The problem is that the compensation transfer doesn’t have to be in salary. The campaign against this is just noise intended to distract. Salary is the least of a CEO’s compensation. The accountants probably already have this handled.

  • Anonymous

    A win for “Referendum” as a political tool. If it existed at the national level in the US, the corruption of corporate control at the Congressional evel would be reduced. Go, Switzerland, Go.

  • http://plus.google.com/+OleOlson novenator

    Excessive CEO pay robs working folks of the wealth they create

  • Anonymous

    I agree, but don’t underestimate how difficult this is. The Swiss have had this in their Constitution since God-knows-when. They know how to make this work, how to frame the issues in order to get clear answers, how to deal with inherently contradictory outcomes (e.g. lower taxes AND more services) etc.
    This is a real good thing to have, but it requires a lot of work.
    One thing tho': put this to your nearest Tea Party drum-banger and see how he reacts …

  • Anonymous

    Bravo!!! We are cheering you onward! Next stop. USA!!!

  • The Bajeezus

    I wish this movement all the success in the world. It seems impossible in the US, but what a platform! I wish Occupy had had such a direct message.

  • Anonymous

    Once again, you’ve opened my eyes to possibilities Bill Moyers! Thanks X 12^1,000,000

  • Anonymous

    Switzerland celebrated the 722nd anniversary of its independence this year but their current constitution is just 14 years old. It updated the prior constitution of 1874, which revised the original document from 1848. The referendum section was added in 1874.

  • Anonymous

    Spoken like a truly greedy capitalist pig. Oh…how awful for you if you can’t afford a second or third mansion!

  • Gary Whitfield

    1. an economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state, but whose salaries and wages are tied to each other by a multiplier and regulated by the laws of the state.

    For example: Executives can make no more than 100 times the wages of the lowest paid worker. The CEO may continue to make his salary as is, potentially, and bonuses are paid based on performance which benefit the shareholders. A worker who makes $10,000 per year would dictate that each executive can make no more than $1,000,00 per year before bonuses.

    Time for new legislation in Congress! Lets do it! — in San Francisco, CA.

  • Anonymous

    The people who complain that companies might move are looking at this in the wrong way in that the problem is that all countries should adopt this so that there are no advantages based on politics. If a company leaves just because CEO (and executives) cannot be given the bonuses other countries can then there is a problem with the system – not the one country that is trying to stop a trend that is not socially responsible or sustainable.

  • Anonymous

    Obviously this needs to be addressed – the same can be seen with worker compensations which have been reduced in many ways – at least in the U.S. in health care expense increases (double since 2000), lower matching funds in investments and other benefits….

  • Alastair Gregor

    I do not agree with the stiff inheritance tax, that is double taxing and definitely does not help the country keep wealth turning through the economy, it just shortens the path for the government to grab more taxes from families who have earned that money legally.

  • Alastair Gregor

    CEO Pay has to include everything including bonuses, and director fees. Only then will it make sense, it has to be based on total annual compensation.

  • Anonymous

    I have too many battles with “conservatives” in the U.S. who call it socialism (as if it was the same as communism or “the devil”).. I always say in a democracy you can have socialism as really democracy is about socialism in a way as if “the people” vote, they will vote for things that serve “the people” and what other definition of socialism is there?

  • Anonymous

    You are saying this as if it is some surprise that people try to keep as much as they can – that’s human nature – especially for people who battle for the top of the food chain. We all have different levels of abilities and interests – the interest that makes one run a huge company generally dovetails with a healthy (or unhealthy) dose of ego. Just as the people it takes to create new ideas and products are generally not the people who will run a company efficiently it takes and ego to battle it out at the top – and if you are an employee you want those people at the top.

    Yet, we can see the trend in pay and bennies is unsustainable, and that is what we need to think about.

  • Outofsite

    Don’t underestimate the Swiss !

  • Bev Mabry

    1:12 ratio sounds a little rough, but so does 1:188 or 1:236 which is just insane. meanwhile, these same folks sure don’t want to pay that same share in taxes, do they?! Maybe we just all need a fair tax – a straight percentage with no deductions.

  • Anonymous

    People might be more sympathetic if these Masters of the Universe used some of their largesse for good instead of to torpedo initiatives like these or (in the U.S.) to influence elections/media in their favor. The Koch brothers have supplied millions to right-wing candidates, media/think tanks, and anti- union/liveable wage/climate change propagandists. The top earners generally give a lower percentage of their income to charity than the 99%. The Walton’s recent charitable idea was to encourage Walmart employees to donate food to other needy employees this Thanksgiving. It’s misleading to say that “Swiss multinationals bitterly opposed…” Ask most of their employees if they’re bitterly opposed.

  • http://Beaufishblues.wordpress.com/ leah #lovemyplanet

    Its not just about disparity in income. The excess pay affects the world as a whole because it encourages excess power to use resources and squander them.
    In a fair world if corporate money was used to avoid pollution, create more organic farms, protect water and the environment, the profit would be limited.
    I think the directive should be that each corporation before they pay big salaries have to be subject to rules showing what they do and how they do it , prove it does not damage, people, the environment and waste resources that belong to all.
    So ethically speaking is not about income it is more on how that profit is generated and how it affects all of us and the planet.

  • http://Beaufishblues.wordpress.com/ leah #lovemyplanet

    the balance needs to be found in ethical reasoning of the means of production, the affect on employee and the environment.
    If you have a coal mine and make a profit should you set up a better working place so your employee do not get sick and take avoidable risk? If so how much will it cost? It will reduce profit. the reason big profit exist is unethical behavior, using resources that belong to the people for free or very little and lack of social responsibility toward their community and the planet.
    When the big builder comes along, immediately prices of house go up and people cannot afford to live on one job now need two…who created the dysfunction? The builder greed to profit by using money to hog resources and cut off competition. Better and ethical government is needed to avoid disparity

  • http://Beaufishblues.wordpress.com/ leah #lovemyplanet

    one thing we read in history was that corporations were not allowed to exist for long in the US. Only long enough to do a job.
    WHY? because the founding father had experienced the robber barons in the old world and Thomas Jefferson warning sounds prophetic today. Big banks first then corporations will grow around them and soon after “you will find yourself homeless in the land your fathers founded”.

    We have no need for corporations and global investors or multinational. We need more small business everywhere, like it used to be and stop giving corporations business.

  • http://plus.google.com/+OleOlson novenator

    Agreed. We wont start fighting back successfully until we actually REVOKE a couple corporate charters (Walmart would be a good start) to show these greed machines that there are limits to what we will tolerate.