At the end of the 2015 Swiss proxy season Ethos publishes a study on the different aspects tied to the implementation of the Minder Initiative and the corporate governance of the companies comprised in the Swiss Performance Index (SPI). Ethos has found that the spirit of the Minder Initiative is often circumvented regarding the vote on the remunerations of the board and executive management. In addition, several principles of good governance are often not respected such as the independence of the board or the equal treatment of shareholders.

Circumvention of the Minder Initiative

At the 2015 annual general meetings of Swiss listed companies, shareholders were able for the first time to vote on the global amount of the remuneration for the board and the executive management respectively. The ordinance against excessive remuneration (ORAb) however allows each company to decide on the vote modalities.

Ethos regrets that only 28% of the companies have decided to request a retrospective vote (at the end of the financial year) on the variable remuneration. The others propose to vote on the amount of the bonus in advance when the annual results are not yet known, which constitutes a blank check and does not accurately reflect the spirit of the Minder Initiative. Ethos fully supports the revision project of Swiss company law which prohibits such a practice.

Limited contestation at the annual general meetings

The average support to the board’s proposals remained stable in comparison to last year at around 96%. Ethos was much more critical with only 84% positive recommendations.

The most contested proposals are the advisory votes on the remuneration report with an average support of 88% (Ethos 45%). The capital increase requests received an average support of 91% (Ethos 61%). Finally, the remuneration amounts were accepted at an average rate of 94% (Ethos 65%), despite the amounts often remaining relatively high. This observation casts doubts on the effectiveness of the Minder Initiative.

Remunerations still high

In financial year 2014, the global amount of board and executive remuneration of the 206 companies in the SPI Index rose by 4%, while the SPI itself gained 13%. At the 20 largest companies of the SMI index the remunerations nevertheless often remained very high with an average of CHF 2.5 million for the chairman of the board and CHF 8.2 million for the CEO.

Unequal treatment of shareholders

Ethos points out that half of the SPI companies have a shareholder controlling more than 33% of the voting rights. Most of these companies have also introduced one or several protection measures which allow them to have control over the company with a minority share of the capital. 36 companies have multiple categories of shares with different nominal values and 50 companies limit the exercise of voting rights for certain shareholders. In addition, 57 companies have an opting out (or opting up) clause which releases the purchaser of more than a third of the share capital from making a public offer to the rest of the capital.

The possibilities of unequal treatment of shareholders can present a major risk to minority shareholders. For this reason Ethos proposes to limit discrimination of shareholders in the framework of the Federal Council’s modernization project of Swiss company law.