CEO Leads Swiss Backlash Over Executive Pay
By Edward Taylor
The Wall Street Journal
Saturday, May 26, 2007
In Switzerland, long a haven for big money, a backlash is
developing against outsized executive compensation.
The push is being spurred by an unlikely source: a CEO. Thomas
Minder, a 47-year-old chief executive of small cosmetics
manufacturer Trybol AG, is going to shareholder meetings at
Swiss giants like Novartis SA to challenge their CEO pay
Mr. Minder has been collecting signatures to call a national
vote -- as permitted under the Swiss constitution -- to amend
Swiss law to force more transparency and accountability on
executive compensation. He says his goal is to create ways for
shareholders to veto pay packages and create more "sensible" pay
practices in Switzerland, a country where wealth has
traditionally been welcomed, rather than frowned upon.
Across Europe, growing disenchantment with high executive pay is
increasingly a political issue. In France, the losing candidate
for the presidency, Ségolène Royal, called on Airbus to withdraw
its proposed 10,000 job cuts after it disclosed that Noël
Forgeard, former chief executive of Airbus and its parent,
European Aeronautic Defence & Space Co., received €6.1
million ($8.2 million) in an exit pay package. The company said
the package was provided for in his contract, but Ms. Royal
called the payment a "scandal."
In Germany, Finance Minister Peer Steinbrück has said Europe's
social model couldn't be sustained if the wages of low earners
fall as company profits rise.
Switzerland is set to introduce greater disclosure of executive
compensation for companies listed on the Swiss exchange.
Starting next year, companies must disclose the salaries of the
highest-paid member of the management board. Previously, Swiss
companies released only the total salaries of the combined
management board and the individual salary of the highest paid
member of the supervisory board, which is akin to a U.S. board
of directors. And the Swiss government is considering further
amendments to laws governing public companies, aimed at
improving corporate-governance practices.
Some of the companies that will be affected by any new rules
include engineering and industrial concern ABB
food maker Nestlé SA, drug giant Novartis and banks UBS AG and
Credit Suisse Group.
Current law allows Swiss companies to disclose less detail on
executive pay than U.S. companies. They aren't required to
disclose individual pay packages for chief executives and often
don't have to mention benefits such as personal loans or housing
The government's efforts on further pay disclosure don't go far
enough for Mr. Minder, however. He wants to introduce a law
that allows shareholders to block pay packages, among other
Mr. Minder says he pays himself "far less" than 100,000 Swiss
francs, or about $81,000, a year and took on his campaign
because pay levels are so high that "executives don't suffer
personal financial hardship even if their performance at the
helm of the company is miserable."
"We need to bring this relationship between pay and performance
back into line," Mr. Minder says.
Among his 25 proposals: giving shareholders the right to block
or approve pay packages; a complete ban on "golden parachutes,"
or pay packages given to executives upon leaving a company; and
measures that would force institutional shareholders to disclose
how they voted on issues such as approving bonuses.
In setting pay, companies also should consider factors such as
customer satisfaction and staff morale, he says.
Mr. Minder says he follows his own recommendations in setting
his compensation. He owns the company and he sets his pay,
considering factors including the company's revenue and the
views of customers and its 30 employees.
Many large multinationals based in Switzerland already
voluntarily disclose more information than required by law about
executive compensation, in line with their international
rivals. The more-detailed disclosures at Nestlé and Novartis,
for example, often draw public criticism at home.
At Novartis's annual shareholders' meeting in early March, Mr.
Minder questioned the size of Chief Executive Daniel Vasella's
pay package. Mr. Minder pointed out that the Novartis CEO's pay
rose to about 44 million francs ($35.8 million) last year from
about two million francs in 1996.
While Mr. Vasella's pay package wasn't put to a shareholder
vote, the company said his golden parachute -- the equivalent of
five years' salary -- won't be renewed when the CEO's contract
expires in 2009.
Novartis spokesman John Gilardi said the decision to end the
award of the golden parachute was a mutual decision made between
Mr. Vasella and the remuneration committee and is "completely
unrelated to anything Mr. Minder has done."
Mr. Gilardi said the value of Mr. Vasella's package last year
represented the cumulative value of share grants over a number
of years. More than 90% of Mr. Vasella's compensation is linked
to performance-related variables such as stock price, the
spokesman added. Novartis declined to comment on Mr. Vasella's
salary in 1996, saying the company hadn't then adopted the
policy of disclosing the chairman's salary.
Novartis said it needs to pay salaries that are competitive
globally to attract the best scientists. The average Novartis
employee's salary rise has outpaced the Swiss average, he said.
Spokespeople for UBS, Credit Suisse and Nestlé declined to
comment on Mr. Minder's cause. They said their compensation
practices reflected international standards and were necessary
to attract global talent to their companies.
If Mr. Minder collects 100,000 signatures, his proposals will be
put to the Swiss Parliament and federal councilors. They can
come up with a counterproposal or allow a popular vote on Mr.
Minder's proposals, thanks to the Swiss tradition of direct
democracy. Mr. Minder has until May 2008 to hand in the
signatures, and he says he is "very well on track," without
being specific. A national vote may not follow for at least a
While the chances of success for a popular vote, known as a
plebiscite, are very slim, the move to force a vote makes the
issue part of the mainstream political agenda, said Wolf Linder,
a professor of politics at the University of Berne. "Many
political ideas have been brought to a vote by means of popular
initiatives and often against the firm conviction of almost all
political elites," he said.
Write to Edward Taylor at