Swiss giants face investor ‘say-on-pay’ battle

Some of Switzerland’s largest companies face a shareholder revolt on management pay after Ethos, the Geneva-based foundation which looks after CHF2.3bn (€1.4bn) in assets run on a socially responsible basis on behalf of Swiss pension funds, said it would lead a group of eight other Swiss pension funds in filing a series of “say-on-pay” shareholder resolutions at next year’s annual general meetings (AGMs).
The funds say they will file the resolutions at the 2009 shareholder meetings of ABB, Credit Suisse, Nestlé, Novartis and UBS.
The move is one of the first signs of action by institutional investors following worldwide condemnation by politicians in recent days of excessive executive pay as being at the heart of the credit crunch and financial markets meltdown. Ethos, which earlier this year led an attack on financial transparency at UBS, after the bank revealed huge sub-prime related losses, said the resolutions would enable shareholders to cast “advisory votes” on whether they believed executives at the Swiss companies were being paid too much. Switzerland currently is the only major global stock market that does not give shareholders the right to express their opinion on executive pay.A report issued yesterday by Ethos on remuneration practices in 2007 amongst the major Swiss listed companies, suggests the targeted companies could be in for a fight. Ethos, which has around 80 pension fund members, mostly pension funds, found that that pay amongst certain Swiss executives was “inappropriate” and “excessive” in light of company performance. Ethos said: “Remuneration policies often do not follow international best practice guidelines. In most cases, variable pay is not determined by adequate performance criteria and recent events have demonstrated that a bad remuneration structure can have very negative consequences on the company’s strategy. The co-signatories of the Ethos statement are Aargauische Pensionskasse, Caisse d’assurance du personnel de la Ville de Genève et des Services industriels de Genève (CAP), Caisse de pensions de la République et Canton du Jura, Caisse de prévoyance du personnel des établissements publics médicaux du canton de Genève (CEH), Caisse de prévoyance du personnel enseignant de l’instruction publique et des fonctionnaires de l’administration du canton de Genève (CIA), Luzerner Pensionskasse, Luzern Pensionskasse Post, Bern Pensionskasse Stadt Zürich, and Pictet Funds.