More than ten years ago, the Federal Council implemented the Minder or «Rip-off» initiative, which aimed to combat excessive compensation at publicly traded companies, through a regulation (the provisions have since been incorporated into corporate law). The initiative was launched by then Schaffhausen Council of States member Thomas Minder, and the outraged public overwhelmingly accepted it in 2013 due to excessive manager bonuses.

Against this backdrop, the evaluation of shareholder voting behavior at general meetings (GM), presented by the corporate governance think tank and service provider Swipra Services on Friday, deserves special attention. Swipra examined over 2,000 items at the GMs of the 100 largest Swiss companies (SPI 100, an index that includes numerous banks, insurers, and financial service providers). The GMs took place between July 1, 2023, and June 10, 2024.

«No Real Salary Excesses Anymore»

A look at the numbers shows that the shareholder participation in compensation decisions introduced by the Minder initiative has indeed had an effect. The median compensation for a CEO of the largest 100 companies in Switzerland, which was  2,4 million swiss francs in 2013, amounted to  2,2 million swiss francs last year, a decrease of 8 percent (not accounting for inflation).

«After 10 years of Minder, no real salary excesses can generally be observed anymore, thus achieving the initiative's main goal. There is also a shift towards variable, performance-based compensation elements. However, the connection between target achievement and compensation is still often not well enough explained,» notes study leader and Swipra partner Christoph Wenk Bernasconi.

Higher Pay at Large Companies Due to International Competition

However, in companies represented in the SMI blue-chip index, the international competition for talented CEOs plays a role. In this segment, the median CEO salary has increased over the years to 8,2 million swiss francs, a growth of 22 percent, mainly due to higher bonus payments; this means that the decrease for non-SMI companies is quite pronounced at 16 percent.

This increase places the CEOs of large Swiss companies between their counterparts in the USA, where S&P 500 companies saw a 44 percent increase since 2013, and Germany, where DAX companies experienced a 13 percent increase. The 2024 GM season, however, shows that shareholders are pushing back more on compensation, observes Swipra. About 15 percent of shareholders voted against the compensation report, 50 percent more than in 2014 and almost twice as many as the European average.

Sustainability Overwhelms Shareholders

A recent area where new shareholder rights have been created is sustainability. The first year with a GM vote on the sustainability report demanded immense effort from companies to provide a wealth of new data, Swipra notes. «Shareholders seemed mostly overwhelmed by this data flood and approved the reports with an average of 97,1 percent approval.» Nonetheless, a foundation has been established, and in the future, shareholders will focus on whether the set sustainability goals are actually achieved.

Speaking of sustainability: Two out of three companies incorporate ESG indicators—ecological, social, and corporate governance metrics—into the variable compensation of management. However, in more than half of these cases, these are unclear, qualitatively defined goals, criticizes Swipra. From the outside, it is hardly possible to understand whether they are being met.

More Shareholders Demand More Diversity

There are also notable developments in the ongoing issue of diversity. The average percentage of women on the boards of SPI-100 companies rose to 33 percent. Shareholders apparently tolerate a low percentage of women less and less. Of the 100 board elections with the most opposition votes, 28 percent cited a lack of diversity as a reason for opposition (the main reason for a no vote is concerns about independence, such as in the case of double mandates).

It is likely that the recommendations of international proxy advisors and the investment guidelines of institutional investors play a significant role here—private shareholders typically have less interest in contemporary diversity concerns.