Say-on-Pay in Switzerland. Major overhaul of rules on executive compensation and other corporate governance matters for Swiss listed companies. This post comes from Arie Gerszt, LLM’10, Corporate Governance Concentration.

March 15, 2013 in Uncategorized by Anastasia A. Tolu, M.Jur. CGC Site Administrator

In March, Switzerland voted on a constitutional amendment regarding corporate governance and executive compensation matters that will apply to around 300 listed corporations incorporated in Switzerland (but not foreign corporations listed in Switzerland).

As a consequence, the following principles will become part of the corporate governance framework for listed Swiss corporations:

–  binding shareholder resolution on total compensation of the board and senior management;

–  annual election by shareholders of the chairman and the compensation committee members;

–  prohibition of severance payments, advance compensation, and transaction-based success fees;

–  institutional proxy voting in shareholders’ meetings only by independent proxies (elected by shareholders);

–  electronic shareholder voting;

–  pension funds must vote shares in the interest of their insured persons and disclose how they voted.

More specificities can be found in a Deloitte memo, PwC news and in this WSJ article.

Noteworthy (and peculiar) is that non-compliance with the new rules will be subject to substantial criminal sanctions.

While these rules on executive compensation will be much tougher than the current regime, two things seem important. First, the amendment leaves open a number of questions that the legislator will need to address. Second, the new rules primarily affect executive compensation, for which they foresee a relatively rigid framework. Rules on executive compensation must be seen, however, in the broader context (e.g., general company law, stock exchange law, tax law, etc.). In such a broader perspective, Switzerland will – irrespective of the new rules – retain a very flexible and attractive legal environment for corporates.

— Anastasia Tolu, Corporate Governance site administrator

March 29, 2013