Swiss voters recently approved tough pay limits for executives of privately owned companies, including a binding annual vote by shareholders on management salaries. The referendum eliminates sign-on bonuses, severance packages, and incentives for completing mergers. Offending executives face criminal penalties up to 3 years in jail or forfeit of 6 years' salary.
Swiss officials now must translate the referendum into workable laws without driving companies out of the country. The results will apply to Transocean Ltd. and Weatherford International Ltd., which moved corporate headquarters to Switzerland from Houston 4-5 years ago.
Proponents emphasize 67.9% of the voters who went to the polls supported the referendum. Yet only 46% of the Swiss electorate turned out, indicating the other 54% were satisfied with the status quo.
Switzerland isn't the only nation seeking to penalize corporate executives for the downturn in the global economy. The European Union voted to limit bankers' bonuses in proportion to their annual salaries. Denmark and the Netherlands authorized binding shareholder votes on corporate executive compensation. Nonbinding shareholder votes on executive pay have been introduced in the US and Germany.
'A better year'
Some credit this change to Occupy Wall Street and others protesting what they see as corporate excesses. But this share-the-wealth push is much older than that. In 1930 during the Great Depression, baseball star Babe Ruth was asked why he made more money than President Herbert Hoover. Ruth replied, "I had a better year."
That pay-difference continues. New York Yankee Alex Rodriguez, considered one of the best baseball players ever, made $29-31 million in 2012. Quarterback Drew Brees with the New Orleans Saints signed a 5-year, $100 million contract that included a $37 million signing bonus. Dr. Dre, rapper, actor, and record company chief executive was named by Forbes Inc. as the highest-paid entertainer of 2012, taking in $110 million. By comparison, President Barack Obama earns a base salary of $400,000/year. His expense account, travel, and entertainment stipends bring his annual government pay to more than $550,000.
The highest paid corporate chief executive in 2012 was John H. Hammergren, chairman, president, and chief executive officer of McKesson Corp., a medical and scientific supplies company, which is certainly a growth industry. Hammergren drew $6.3 million in salary and bonus and also realized $112 million from exercise of vested stock options for a total $131 million. According to Forbes, the next four top-paid chief executives also earned most of their pay through stock options or vested stock awards. That means, unlike sports players, most entertainers, and politicians, these men actually own part of the companies that employ them, increasing their incentive to make their firms prosper. That includes top-paid oil and gas executive Richard D. Kinder, chief executive officer of Kinder Morgan Inc., which he started with college buddy William Morgan. Kinder earned $60.94 million last year.
Doors of opportunity
Government control of company payrolls is seen by some as a slippery slope to fascism. In the early 20th century, fascism "was seen as the happy medium between boom-and-bust-prone liberal capitalism, with its alleged class conflict, wasteful competition, and profit-oriented egoism, and revolutionary Marxism, with its violent and socially divisive persecution of the bourgeoisie," according to the Library of Economics and Liberty web site.
For ethnic minorities who came to this country in the late 19th and early 20th centuries, the quickest, least impeded ways out of the slums, ghettos, and barrios were through crime, sports, entertainment, and politics. But today international trade, improved education and training, affirmative action, and other developments have opened doors of opportunity in business. People in corporate boardrooms are as talented, smart, and capable as any on the playing fields, stages, and in the halls of government. The brightest and best today are more often attracted to business than to other callings and deserve to be awarded for their accomplishments.
