Swiss voters struck a blow against corporate executives and the culture of greed that has driven senior executive salaries into the stratosphere, with little regard for work or company performance. Last year, the head of Credit Suisse made 1,800 times more than the lowest paid workers in the company. A 200 to 1 executive to average-worker-salary ratio is not uncommon among the top Swiss firms. The number of executives pulling down a million a year in salary has quadrupled over the past few years.
Voters made their opinion known this weekend with their overwhelming approval of a constitutional amendment that grants shareholders in publicly traded Swiss companies the full right to elect board members annually and to determine the salaries of executives and board members. It also removes incentives to sell public companies. Swissinfo.ch described the second provision, one that will end the gravy train that CEOs ride when they sell their companies or get fired by new owners: "Upfront payments, termination pay and bonuses when companies are bought or sold are forbidden. Proxy voting is also not allowed."
governance reform advocates campaigned without success for this in the
United States and won a small victory in Great Britain. But this is a
first in terms of scope, clarity, and impact. The legislation will
govern Credit Suisse, UBS, Nestle, Novartis, and Swiss Re.
This happened in Switzerland, not Venezuela, Cuba, or Russia. The Swiss vote is, nonetheless, as radical as any laws or doctrine restricting capitalism for years.
Thomas Minder, owner of a small business, campaigned for this reform or over a decade. In 2001, his business nearly went under when an incompetent executive at Swiss Air drove the company to financial ruin. The airline was Minder's biggest customer. Minder and his firm barely survived. He was appalled and disgusted when the Swiss Air executive went on to other high paid positions despite his record at the airline.
Minder got the required 100,000 signatures to put his resolution on the ballot. The huge margin of approval - 68% - shows how clearly the need for restrictions speaks to Swiss citizens. Switzerland has the wealthiest population in the world. But that doesn't translate into the most complacent and gullible population. There is a broad public awareness of the disparities the middle and super wealthy are not a reflection of innate superiority or performance. They've had enough of crony capitalism.
Hans Kissling, former chief of statistics for the canton of Zurich, provided analysis that supported the movement against executive greed. Kissling's recent book, Wealth without performance. The feudalisation of Switzerland, makes the case for a very high inheritance tax, and efforts to close the the gap between the elite and middle class. The "the richest one tenth of a percent had 1,027 times more wealth" than the average citizen in Zurich, he pointed out. The danger, he says, is that systems tilted to the rich result in inefficient economies that increase the gap between the wealthy and everyone else.
This is a great story, one that provides evidence that The Money Party is not invincible, that citizens can make a difference.
Beyond that, the Swiss story took me to a truly revolutionary critique of the current plutocracy masquerading as serious business leaders. On the Road Back to the Dark Ages by Y.S. Brenner, 2010 (free download) explains the underlying basis for our current troubles:
The old Captains of Industry were owner-managers. They operated with their own money, or with borrowed funds for which they staked their good name. Their wealth determined their position in the social hierarchy. It reflected what was taken to be evidence for their economic sagacity. The new Captains of large enterprises are managers whose personal wealth and attainment is less directly tied to their businesses profitability than that of the owner-managers. Y.S. Brenner, p. 24
Brenner was a professor at Utrecht University and a prominent economist for years. He pointed to a troubling outcome of current trends, presuming the Swiss example is an exception and there is no broader movement reverse the downward socioeconomic spiral:
The Free Market system in its recent form, unless it is successfully resisted, is also going the way the Soviet system went, or may socially lead us back to the dark ages and most likely also to economic stagnation in the western world. To economic stagnation because paradoxically the bureaucratic efforts of centralized management, to reduce costs and its measures to curb inefficiency, and corruption hinder the development of workers talents and individuals' drive to innovate which for three centuries marked post- Renaissance western civilization. But without inventiveness and experimentation, capitalism cannot survive for long the competition from the newly industrializing countries like India and China. Y.S. Brenner, p. 13
We'll see how it all turns out, I suspect, all too soon.
On the Road Back to the Dark Ages by Y.S. Brenner, 2010 (Free pdf or here)
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