[ARCHIVE] Make Your Move

Swiss Egalitarianism Runs Amuck With Executive Pay Limits

American culture over at least the last few years seems to have developed an anti-big business and anti-executive attitude. It seems that many people feel that businesses and executives make too much money. America is not alone in that perception (and it is just perception unless you want to concentrate on outliers). The Swiss have taken up the cause with some recent legislation. 

Switzerland has recently put in place an amazing set of rules that curb executive pay and remove power from the board of directors. There is a power tilt back to the shareholders. This may sound good to some on the surface, but can we really expect a large number of largely uninvolved shareholders to know more about the company than the directors? 

The Swiss have decided that shareholders will set executive pay, ban golden hellos and golden goodbyes, limit directors to a one-year term, and ban bonuses that incentivize the buying or selling of firms. Non-compliance could lead to jail terms. This is ridiculous in the extreme. The above will ensure that the best CEO’s and directors will avoid Switzerland and that Swiss businesses run the risk of being guided by people who have no in-depth knowledge of the business given that one year of experience is not enough time to gain the needed in-depth knowledge. Banning the incentives will discourage leaders from entering into prudent buy/sell transactions given that human nature will most likely cause leaders to want to maintain status quo, to wit hang onto their jobs. This is a prime example of egalitarianism run amuck – and hopefully it won’t spread to the rest of the EU and to America as it will likely mean that businesses wind down to the lowest common denominator instead of striving for excellence.

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