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Will Switzerland Vote to Limit CEO Pay?

Will Switzerland Vote to Limit CEO Pay?

Should CEO pay be limited? That’s a question Switzerland is putting to its voters this month. A new referendum on the ballot would institute what amounts to a “maximum wage” for business executives.

Under the proposed law, Swiss CEOs would not be permitted to earn more than 12 times the amount of their company’s lowest paid employee. The idea is to halt income equality by lessening the salary gap.

Switzerland’s ill will toward rising CEO pay has mounted in recent months. In March, 68% of Swiss people voted on a similar reform, which outlawed golden parachutes and signing bonuses. This victory motivated 100,000 voters to sign a petition to get this new legislation aimed at CEOs on the ballot, as well.

For what’s it worth, advocates of the proposal point out that the law would only impact 0.3% of existing businesses – and 3,400 corporate executives in total — in Switzerland. While only a sliver of companies have a massive pay discrepancy, those that do tend to be major offenders. Five of the highest compensated CEOs in all of Europe work in Switzerland, with the top ones earning about $14 million apiece.

Although the proposal looked like it may pass after it first gained recognition, the poll numbers shifted in the following months. According to The Wall Street Journal, 54% of Swiss voters now intend to vote against the referendum.

The sway in public opinion is not surprising considering a massive campaign against the potential law. Large companies in particular have allocated significant money to prevent the proposal from taking effect. Economic experts believe that the legislation would compromise the integrity of the free market and scare large businesses from operating in Switzerland.

Part of the problem might be that the reach is too much too soon. If the ballot measure were to have settled for a higher ratio than 12:1, it is possible that the majority voters would see the issue as being just without pushing top businesses out of the country.

Another one of the obstacles for the proposed law is that Switzerland’s income inequality is much less significant than other industrialized nations like the United States and Great Britain. Since Switzerland isn’t feeling the pain of income inequality as much as other parts of the world, this measure doesn’t seem as necessary.

Then again, it’s probably the country’s attention to this issue that has probably helped to minimize the problem in the first place. Even if the legislation doesn’t pass, the public is making it known to its business executives that it is monitoring its behavior and won’t stand for the situation to get out of control.

Perhaps Americans – who could really use this type of reform – could take a clue from Switzerland and attempt to institute a similar policy of its own. In 1982, American CEOs earned 42 times their average employee; today, that discrepancy has skyrocketed to American CEOs earning 354 times their average employee.

Yahoo Finance has a compelling chart demonstrating how much money American executives would lose if the 12:1 rule were applied in this country. Even the CEOs who take home over $30 million annually would suddenly find their salaries slashed to the higher six figures.

While those changes may be too drastic to be realistic, a ratio of even 100:1 could help keep things in check. If CEOs believe they can’t possibly work for/live off of a salary with that equation, how do they suppose their lowest paid employees are getting by?  Hey – if executives want raises under that system, they could always start paying their employees more and everyone would win.

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139 comments

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2:49PM PST on Jan 12, 2014

Once again, David F manages to illustrate the breathtaking ignorance at the heart of modern conservatism in two pithy posts. Kudos! First, he demonstrates the fallacy that the spending of rich people is just as good for the economy as that of the non wealthy; in an economy like that of the US, which consists almost entirely of us buying and selling things to one another, it's incredibly important that so many people have their heads up their asses on this one. Here's a quick quiz: what generates more economic activity? A) A rich person spending $100,000 on a watch, or B) 100 people buying refrigerators? If you don't understand why the answer is B, you should not be able to vote.

Second, he claims that CEOs get their jobs and compensation packages purely on merit. Apparently, he does not understand the incestuous relationship between boards of directors and CEOs, who are all members of a tiny elite, interconnected by ties to prep schools, universities, fraternities, charitable boards and clubs that we will never get to join and who set one another's salary and benefit packages. It's truly amazing that those who are quick to see an "I'll scratch your back if you'll scratch mine" relationship between unions and Democrats are utterly blind to the all pervasive and purely destructive nature of it among the rich.

1:36AM PST on Jan 12, 2014

My recollection is that during the Eisenhower years, the top earners generally did not make more than thirty times the bottom earners. I think that we should go back to the tax rates, adjusted for inflation, that we had during the Eisenhower years. Executives would not go after such enormous earnings when 90% of the take would go to the government. The tax rates would also encourage charitable giving. The government could then ensure that every citizen had adequate housing, nutrition, education, transportation, and medical care.

12:27PM PST on Dec 2, 2013

HAHAHAAHAHAHAHAHAAHAHAHAH David……..what a frikking fairy tale. They dodnt protect the workers…….in fact if it will fatten the pockets of their investors they will chop off half the workforce to do so. I DO agree the CEOs have special skills. But they dodnt use most of those skills ethically anymore. I also agree that the wages they are paid becasue of competition for those unethical business leaders. It has become a self perpetuated gloating pig. How can we legally cheat for our own best interest.

Stop trying tp paint them as King Arthurs. They are men with legions of lawyers that let them legally steal from everyone and anyone they can…….including entire nations. Hell they can even buy or pressure enough congressmen or even Presidents to use our own army of young idealistic young people, to help them in their goal of global financial dominance. Oh they are gifted alright……

Free market my ass.

9:51AM PST on Nov 30, 2013

CEO's that make large income usually have the responsibility of protecting the company and the thousands, sometimes 100's of thousands, even millions of employees and their families. They typically have experience and talents to make quick, correct and complex decisions or they would not have that job or income level. The free market competes for the most talented to lead the company, more power to them if they can make things happen. The Obamacare disaster is a good example of a massive undertaking with only political leadership, totally void of the talents often found in CEO's.

4:19PM PST on Nov 27, 2013

HIgh Fives Mary B

3:25PM PST on Nov 27, 2013

ty

10:51AM PST on Nov 27, 2013

No one 'earns' that kind of money. They may recieve it for one reason or another, but they don't 'earn it in any usual sense of the word. So YES, it should be capped, and all this mis-formation about 'the free market' needs to be exposed as well. There is no free market when there is this kind of income gap because there is no competion between small and large business that can under price the small ones every time, and as far as investments go, if the rich are too stupid to invest in the well being, education, safety and good will of the work force and their families, kids and elderly,thru the safety net, they are too stupid to be in charge of the money supply. There is absolutly not one reason I can think of that can justify CEO's making the kind of income they get.

12:17AM PST on Nov 27, 2013

Earning good money isn't wrong. Exploiting the rest of us to do so however clearly is. More pay for ethical CEOs, more prison time for the bad ones.

6:22PM PST on Nov 25, 2013

Liberal Virginia B. the nail on the head, she says “A single person or even his family can't spend his / their way through several billions even if they tried!! Now I'm excluding spending on more investments; I'm talking about buying everything a family could possibly want and have the appetite, time, and capacity to consume. Just how many homes, goods, cars, personal jets, servants can a person/family buy??” unquote, So they buy a big house, big pool, big yacht, jet airplane, doing so employs thousands of blue collar workers. Good for them, what do they do with the rest? Take it with them to the grave? No, they perform do-diligence and invest it where it is needed the most and will return the most on the investment. If they are intelligent enough to make a billion $s then they are not going to blow the money as BO did in his “green energy movement” The Billionaires don’t take a slice from the economic pie they expand the diameter.

5:45PM PST on Nov 25, 2013

In 1982, American CEOs earned 42 times their average employee; today, that discrepancy has skyrocketed to American CEOs earning 354 times their average employee. The Swiss are correct. The law should be that no CEO in America, can make more than ten times the average worker's pay, or they must share the profits, and pay their workers higher wages. The avarice, and selfishness of American corporate CEO's is despicable.
l

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