Swiss Citizens to Vote on Limiting Executive Pay

by John Sealander  

Will Switzerland Remain the World’s Watch Capital
If it Can No Longer Attract Top Executives?

The Social Democratic Party of Switzerland has collected more than 100,000 signatures in support of a referendum to limit Swiss executive salaries to 12 times those of a company’s lowest-paid employee. This would mean that nobody in a corporation could earn more per month than the lowest paid employee makes in a year.

According to Swiss law, this referendum can now be put to a vote of the Swiss people. Other European countries have already made attempts to limit corporate compensation, but the new Swiss initiative, if approved by voters, would institute more sweeping compensation changes than those seen to date in the European Union.

Harmful Side Effects?

Thomas Daum, director of the Swiss Employers’ Association, worries that these new rules, if enacted, would do serious damage to Switzerland’s attractiveness as a location to do business and could harm the country’s competitiveness by making it difficult for companies to attract top talent. “Interference like this would be very dangerous for the future success of Switzerland,” said Daum. “It should be up to companies and employers to design their own wage structure.”

A poll taken earlier this month by Isopublic showed 49.5% of respondents were in favor of the new initiative to limit executive pay. Top salaries at the largest Swiss companies were approximately 93 times those of the lowest-paid workers in 2011, and this growing wage gap angers many voters. There’s another side to this coin, however. One of the reasons for the resurgence of Switzerland as a global manufacturing center has been the ability of Swiss industry to attract the top talent from around the world with competitive salaries.

Effect on the Watch Industry

Switzerland currently has a well-deserved reputation as the watch capital of the world, with many of the industry’s most prestigious brands headquartered in the country. If salaries were capped, many of these companies would lose the ability to attract and retain the top-tier talent that allowed them to achieve their success.

This is a serious concern to Swiss Economics Minister Johann Schneider-Ammann, since some Swiss companies are already moving factories and manufacturing facilities offshore to control costs. “If salaries were fixed, Switzerland would lose a very successful model of setting salaries.” Says Mr. Schneider-Ammann. “Pay negotiations between unions and management, a traditional Swiss practice is preferable to government involvement in the process,” he adds.

In a global economy, any industry is free to locate wherever it feels is the most advantageous to their business model. For many years Switzerland has been a very desirable location for the watch industry. This could change quickly though if top Swiss watch companies lost the ability to attract and retain key executives. Some of these companies might decide that to stay competitive, it might be better to move their entire operation somewhere else. If the company leaves, so do the jobs for workers that the company employs. Swiss voters will soon have to decide if limiting executive pay might be limiting their own employment opportunities as well

About Gevril Group

Gevril Group is the exclusive US representative for select European watch brands, distributing and servicing luxury, fashion and sports timepieces at a wide range of price points. Gevril Group also operates a full-service watch repair department staffed by master Swiss watchmakers. Contact Gevril Group by email or by calling 845-425-9882.

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