Switzerland Weighs Radical Approach to Runaway Executive Compensation
More: Switzerland Weighs Radical Approach to Runaway Executive Compensation
Voters in Switzerland will weigh in on a novel approach to runaway executive pay later this month as regulators, economists, and lawmakers in the United States continue to grapple with the problem.
A referendum is set for November 24 on a law called the “1:12 Initiative” that would impose a flexible cap on top employee compensation at Swiss companies. If approved, the highest-paid employee of any given Swiss firm could not earn more in a month than its lowest-paid employee makes in a year. By using a ratio rather than a dollar figure cap, the 1:12 Initiative would both shrink the salaries of top executives and raise the pay of underlings. “You shouldn’t just say a maximum salary, because what we really want is a relationship between the lowest and the highest,” said David Roth, one of the plan’s architects, in an interview with Business Insider. In March, Swiss voters overwhelmingly approved a package of CEO pay reforms, including an outright ban on so-called “golden parachute” payouts for fired executives.
The 12-to-1 ratio would be a massive shift for Swiss businesses, many of which currently pay their top people a couple hundred times what their worst-paid workers earn. Here in the United States, the prevailing ratio was 273-to-1 last year.
