On 24 November 2013, the Swiss people will vote on the popular initiative “1:12 – for fair wages“. The initiative aims at anchoring in the Swiss Constitution that the highest salary paid by a company shall not exceed twelve times the lowest salary in the same company.
Ethos Foundation shares the concerns of the initiative's proponents. Ethos has always considered that reining in excessive pay is of paramount importance to shareholders, civil society and a sustainable economy. In particular, Ethos has clearly explained its views on the maximum amount of remuneration as well as on the gap between the lowest and the highest remuneration. The Foundation's “2013 Proxy Voting Guidelines and Corporate Governance Principles“ (pages 68-69) indicate that:
“The maximum amount of each component of the pay package must be fixed, thereby setting a cap on total annual pay. The maximum amount should be determined bearing in mind the company's size and complexity.”
It is also stipulated that:
“Additionally, the gap between the highest and lowest pay in a company should not exceed a certain threshold. The difference between the highest and lowest remuneration should not only be limited but also duly justified.”
However, Ethos is not in favour of the 1:12 initiative as an effective means of limiting excessive remuneration. The initiative calls for enshrining in the Constitution a maximum gap which is arbitrary and, unlike the Ethos principles, does not take into account the specific context of each company. It is the responsibility of the shareholders and the board of directors of each company to ensure that the principles of proportionality and moderation are respected in the field of remuneration.