Swiss pension funds oppose ‘Minder’ executive pay proposal ahead of referendum

Fund association fears increased workload and costs

Swiss pension fund association ASIP has come out against the historic initiative to curb excessive executive pay, saying the measure would mean a huge amount of extra work for their members, which in turn, could raise costs for beneficiaries.

On March 3, Switzerland will hold a referendum on the so-called “Initiative Against Rip-Off Artists.” It was conceived by Thomas Minder, a small businessman turned politician. Minder’s initiative requires shareholders, including pension schemes, to vote on executive pay on a yearly basis. The schemes must also inform beneficiaries about how they voted.

Given that there are more than 2,000 pension funds that hold between 50 and 100 shares in their portfolios, ASIP calculated that the initiative would lead to between 150 and 300 of additional work hours for each scheme.

The association said funds that lacked the resources to deal with this would either have to make new hires or rely on outside help, resulting in higher costs.

ASIP also rejects the idea of the schemes’ relying heavily on Swiss corporate governance advisors like Ethos and Actares, saying this would concentrate power in a few hands.

“Introducing a mandatory vote contradicts our understanding of how pension funds should be run – namely in a manner that is cost-efficient and based on asocial partnership,” ASIP director Hanspeter Konrad told Responsible Investor.

ASIP prefers the counter-proposal put forward by the Swiss parliament, as it provides pension funds with more flexibility on voting. This proposal will take effect if Minder’s initiative fails.

“Mandatory vote contradicts how pension funds should be run”

But Minder, an MP in the Swiss upper house, told the Blick newspaper that ASIP’s complaints were overblown. “The new media enables the schemes to inform their beneficiaries in an efficient manner and to even consult them on controversial measures,” he said. Minder added that the schemes, as now, did not even have to show up to annual meetings but simply mail in their votes.

Less than two months before the referendum, a poll in Blick shows that 54% of Swiss citizens support Minder’s initiative against 30% who don’t, with 16% undecided.

Business lobby group Economiesuisse is campaigning against the initiative, arguing that it would scare away firms seeking to domicile in Switzerland and make it difficult for companies to attract executive talent. Link to ASIP