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Swiss Ordinance On Abusive Remuneration Is "Practicable"

by Ulrika Lomas,, Brussels

28 November 2013

While underscoring that the Swiss Federal Council's ordinance on "abusive remuneration" (VegüV) will certainly prove challenging for enterprises in the Confederation, Swiss business federation Economiesuisse nevertheless welcomed the fact that it is at least "practicable."

The Federal Council was required to draft the VegüV ordinance following the March 3 adoption by the Swiss people of the Thomas Minder initiative on excessive remuneration. The initiative is intended to strengthen shareholders' rights in Swiss companies listed on the stock exchange, allowing them to vote on executives' pay, and imposing hefty sanctions and fines in the event that the rules are not respected.

Pointing out that the Federal Council's ordinance respects the wishes of the people, business federation Economiesuisse emphasized that the legislation has been formulated in such a way as to ensure that companies are able to effectively implement the measures. The ordinance provides clarification regarding the conditions under which remuneration and compensation are permissible, as well as clarification on the penal sanctions, the body explained.

Furthermore, Economiesuisse welcomed the fact that the criminal provisions provided for in VegüV respect the constitutional principle of proportionality. Members of the board of directors, the advisory board, and executive management, no longer have to fear a custodial sentence, the federation made clear, stressing that legal security – vital for the Swiss financial center – has thus been assured.

Highlighting the fact that questions surrounding remuneration are to be governed almost entirely by statutory means, Economiesuisse insisted that this ensures that the general assembly of a company will have greater flexibility in terms of approving remuneration and compensation, and what the legal consequences will be in the case of a negative vote. This solution strengthens shareholders' freedom to choose a system that is tailor-made to their company, Economiesuisse argued, noting that the provisions also take into consideration international standards.

Concluding, Economiesuisse regretted the fact that the ordinance introduces a comprehensive voting and disclosure obligation for pension funds, arguing that this will simply result in additional costs and bureaucracy for companies.

TAGS: business | law | legislation | Switzerland | standards | regulation

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