Swiss to vote on linking bosses' pay to wage of office cleaner

Reuters

* Swiss to vote on Nov. 24

* Initiative taps into anger over spiralling executive pay

* Opponents warn it would harm competitiveness

* Latest poll shows proposal falling short of a majority

By Caroline Copley

ZURICH, Nov 19 (Reuters) - Switzerland will vote on Sundayon whether to limit the salaries of top executives so they don'tearn more in a month than the lowest paid workers earn in ayear, a move that could mean big pay cuts for business leadersearning millions.

The so-called 1:12 initiative for Fair Pay, the latestattempt to narrow a growing wage gap in one of the world'swealthiest nations, was brought about by the youth wing of theSocial Democrats (JUSO), who gathered the 100,000 signaturesneeded to force a nationwide vote.

Despite its high standard of living, Switzerland is agenerally egalitarian country, increasingly unhappy with risingwealth inequality as wages of executives balloon while those oflow-skilled workers lag.

"After the Second World War the growth of salaries andwealth was more or less parallel," JUSO President David Rothtold Reuters. "In the last ten years one small part of societytook the big profits and the majority ... had less in theirpockets."

In 2010, the 10 percent of the workforce with the lowestsalaries earned just under 4,000 Swiss francs ($4,400) permonth, according to the Swiss Trade Unions Association. Thatsuggests that top earners' wages would be capped at around576,000 francs ($632,000) a year if the referendum passes.

That would imply savage cuts for some chief executives. Theaverage compensation of CEOs at Swiss blue-chip companies was6.7 million Swiss francs in 2012, according to accountants PwC.

Aside from its own banks and industrial giants, Switzerlandis also home to high-paying trading houses attracted byfavourable tax rates, in addition to the scenery and theagreeable lifestyle.

OCCUPY MOVEMENT

Calls to limit the pay of top executives are not restrictedto Switzerland. Anger over huge payouts was reflected inprotests by the Occupy Movement.

French President Francois Hollande is pushing ahead with acap on pay at state-owned firms of 20 times that of the lowestpaid employee. Spain's opposition Social Democrats have adoptedthe 1:12 ratio as part of its economic policy, Roth said.

But the Swiss system of direct democracy - which allows forup to four national referendums a year - means popular outragecan more easily be translated into strong action.

Disbelief over a proposed $78 million payoff to formerNovartis chairman Daniel Vasella helped fuel supportfor a proposal to give shareholders a binding say on executivepay, which was overwhelmingly backed by voters in March.

Some cantons have also scrapped preferential tax breaks forforeigners, while a grassroots committee is further calling forSwitzerland to introduce a basic income of $2,800 per month fromthe state.

Opponents, including the government and big business, saythe proposal would hurt competitiveness, drive companies out ofthe country, cost jobs and lead to a shortfall in socialsecurity contributions and higher taxes.

They have plastered train stations and billboards with blackplacards calling for a 'no' vote to a 'wage diktat'. Supporters,lacking the budget of business lobby groups, have hung red flagsemblazoned with 1:12 from balconies and windows.

CHIEF EXECUTIVES

Glencore Xstrata Chief Executive Ivan Glasenberg,eligible to vote in the referendum after taking on Swissnationality, told Swiss Sunday newspaper SonntagsZeitung theinitiative would be a catastrophe for his firm and could forcethe commodities giant to leave Switzerland.

Glasenberg was paid $1.5 million last year, but as ashareholder he also made $173.5 million in dividends in the lastyear, which would not be affected by the referendum's proposals.

Roche CEO Severin Schwan said it would be harder torecruit skilled staff if the proposal is accepted. Schwan waspaid 261 times as much as Roche's lowest paid worker in 2012,according to a study by employee group Travail.Suisse.

The warnings appear to have rubbed off on voters. The latestpoll published on Nov. 13 by gfs.bern found 36 percent ofrespondents were in favour of the proposal, while 54 percentwere against and 10 percent were undecided.

To pass, the initiative needs to win a majority in thecountry's 26 cantons and among the total population.

If the proposal is adopted, companies may try and get roundthe rules by outsourcing low paid jobs, giving top earnersforeign subsidiary contracts or by leaving Switzerlandaltogether, say Kepler Cheuvreux analysts.

Cutting top salaries at firms in the financial sector, wherewages are among the highest costs, could even have the sideeffect of boosting margins, they say.

In 2009, Credit Suisse CEO Dougan took home 19.2million francs in cash and stock, and was also paid 70 millionfrancs worth of stock under a bonus plan for 2004. That meanthis total pay was 1,182 times that of the bank's lowest paidemployee, according to Travail.Suisse.

Credit Suisse's former chairman Walter Kielholz has sincecalled the payment programme a mistake.

The 1:12 campaign has not only made executives jittery.Managers of Swiss soccer clubs have also gone public withconcerns about how to attract and retain top talent.

"Switzerland is not an island," Andre Dose, chairman of theGrasshoppers club in Zurich told the Schweiz am Sonntag paper."If clubs can't pay the best Swiss players market rates, theywill transfer abroad even earlier."($1 = 0.9120 Swiss francs) (Editing by Giles Elgood)

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