Here’s an idea for how to end corporate greed and reverse the trend of growing income inequality worldwide: impose a new rule that would limit the pay of top executives to just 12 times that of the lowest-paid employees at the same firm. In other words, prevent CEOs from earning more in one month than the lowliest shop-floor worker earns in a year. This proposal might sound like something cooked up by Occupy Wall Street or another radical protest movement, but in fact it comes from the heartland of a nation not usually known for its disdain of money-making: Switzerland. On Nov. 24, the Swiss will vote in a referendum on whether to enshrine the 1:12 pay ratio — in their national constitution, no less. The initiative is backed by an assortment of mainstream political groups, including the Social Democratic Party and the Greens, who argue that CEO pay in Switzerland has gotten out of control and needs to be reined in. They quote a raft of figures to show that the ratio of top to bottom earners in Swiss firms has grown from about 1 to 6 in 1984, to 1 to 43 today. And that’s just the average. In some companies, especially banks, the gap is much wider, with top executives such as Brady Dougan, the American CEO of Credit Suisse, and Andrea Orcel, head of investment banking at UBS, earning hundreds of times as much as their juniors.
The campaign’s backers consider salary inequality to be a social injustice. A video cartoon made by the Social Democrats features a Swiss nurse who is astounded by the way top manager salaries have grown to “astronomical” proportions, even as hers has barely increased. Regula Rytz, a co-head of the Greens, says that a constitutional amendment is necessary because neither the government nor business has “a recipe against the self-service mentality in corporate suites.”
Swiss business, meanwhile, has made a so-far successful effort to sway public opinion. A month ago, public opinion for and against the initiative was split at about 44 percent. Swiss business launched a public relations campaign, warning that the measure would spark an exodus of corporations. Employers’ associations commissioned studies that predicted lost jobs and higher taxes if the measure is passed. The latest polls this week suggest that the measure is unlikely to be approved, with just over 50 percent opposing it.
Even so, the issue isn’t likely to go away, and is gaining traction beyond Switzerland. Kristina Schüpbach, leader of the youth wing of the Social Democrats and one of the campaign initiators, says that “the main thing this time is to get a result that sends a strong signal” — to business and government. Significantly, the 1:12 campaign has made inroads in Spain, where the opposition Social Democrats have just adopted it as official policy. Schüpbach says the idea of setting a ceiling on pay ratios is also being discussed within the opposition Social Democratic Party in Germany. And more broadly, the issue of executive pay has become a red-hot political topic in France and elsewhere on the continent.
Full Article: Swiss outrage over executive pay sparks a movement in Europe | The Great Debate.