Swiss voters overwhelmingly reject salary caps

Despite opinion polls showing strong opposition to huge executive paychecks, Swiss voters yesterday rejected severe limits on executive pay.

The measure, called the 1:12 initiative as it sought to bar executives from earning more than 12 times as much as the lowest-paid employees at their companies, was rejected decisively by 65 per cent of voters, according to provisional official results.

A rigid government-imposed salary cap did not go well with many people.

In Switzerland, one of the most business-friendly countries in Europe, businesses are lightly regulated and have to pay relatively lower taxes on income than several other European nations.

Consequently, the country is a popular base for not only banks and hedge funds, but also major chemical, pharmaceutical and machinery companies.

The New York Times quoted Daniel Kübler, an associate professor of political science at the University of Zurich, as saying most voters considered an outright salary cap as too extreme.

He added, people had concerns about the way modern capitalism worked but the still preferred a free-market economy.

Parliament voted against recommending the measure and so did the Federal Council, the eight-member panel that governs the country.

According to the council, though it sympathised with the sentiments behind the initiative, it feared it would drive away business and be difficult to enforce.

Valentin Vogt, president of the Swiss Employers' Association, told Swiss national TV, SRF, that the vote was a big relief. He added, it was a signal that it was not up to the state to have a say in pay.

Opposition to excessive pay had increased among the traditionally pro-business Swiss after the government bailed out UBS AG, Switzerland's biggest bank, in 2008 and a plan -- later scrapped -- by Novartis AG to pay outgoing chairman Daniel Vasella as much as $78 million.

Swiss voters, in March approved the so-called fat-cat initiative that gave company shareholders a binding vote on managers' pay and blocked golden handshakes and severance packages.

Speaking at a news conference in Bern yesterday, economy minister Johann Schneider-Ammann described the pay cuts as ''absurd'' and welcomed the voters decision.

''We know there would have been lots of ways to circumvent the restrictions,'' Schneider-Ammann said. ''Switzerland stays attractive as a business location.''