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The Fatter the Cat, the Louder the Howl

Bloomberg reports Swiss Voters Approve Limits on 'Fat Cat' Executive Pay

Swiss voters approved some of the world's toughest limits on executives' pay in a referendum, a move critics say could make Switzerland less attractive to multinational corporations. The initiative against "fat cats," proposed by Thomas Minder, head of a herbal toothpaste company, was backed by 67.9 percent of the voters today, the government said on its website today.

The proposal gives shareholders an annual ballot on managers' pay. It eliminates sign-on bonuses, as well as severance packages and extra incentives for completing merger transactions. The initiative also includes rules punishing executives who violate the terms with as long as three years in jail.

How much executives take home was called into question in Switzerland after the country's biggest bank, UBS AG (UBSN), had to be bailed out during the financial crisis, while in 2010 Credit Suisse (CSGN) CEO Dougan received 71 million francs ($76 million) of shares. That compares with a gross average Swiss monthly wage of $7,800 for 2011, according to UN statistics.

Fat Cats Respond

  • Economiesuisse, a business lobby which had campaigned against the proposal, said "the result is a "negative signal for Switzerland as a place for doing business."

  • Nestle CEO Bulcke said the plan Switzerland less attractive to corporations and managers.

  • At least five of Europe's 20 highest-paid chief executive officers work for Swiss companies: Credit Suisse Group AG CEO Brady Dougan, ABB Ltd. (ABBN)'s Joe Hogan and Joe Jimenez of Novartis AG. (NOVN) Roche Holding AG (ROG)'s chief Severin Schwan and Nestle SA (NESN)'s Paul Bulcke are also in the top tier.

  • Offshore drilling contractor Transocean Ltd. (RIG) and oilfield service company Weatherford International Ltd. (WFT) choose Switzerland as their base. It's safe to count those companies in the opposition list.

Unsurprisingly, the fatter the cat, the greater the opposition to "fat cat laws". However, that does not address the primary question at hand.

Is Executive Pay a Problem?

Before finding solutions, we must first understand the problem. Is executive pay a problem?

The answer (that too few see) is executive pay is a "symptom of a problem" not the "real" problem.

Three Real Problems

  1. Fractional reserve lending
  2. Central bank "too big to fail" policies
  3. Government spending out of control

Want to rein in excesses at corporations? Then fix the real problems and the executive pay problem will mostly take care of itself.

For further discussion, please see


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