The Official Blog for

The Executive School of the University of St.Gallen

Insights and observations on management and executive education from our directors and faculty.

Prof. Winfried Ruigrok

Prof. Winfried Ruigrok


Dean of the Executive School of Management, Technology and Law and Director of the Research Institute for International Management at the University of St.Gallen (HSG) […]

Swiss voters accept curbs on executive pay.

The result may be higher, not lower compensation.

This referendum outcome represents a triumph of the shareholder and of civil society- in the short run. In the future, shareholders will need to vote on listed Swiss firms’ executive pay packages. Nobody knows yet what this will mean.

Certainly, the past practice was not satisfactory. Boards of directors in Switzerland and most advanced countries set up a compensation or remuneration committee which determines executive pay packages. Unfortunately, research in Switzerland and other countries showed that after companies had set up a compensation committee, pay tended to go up, not down.

This referendum aimed to return power to the shareholder. However, this referendum outcome may have some unexpected consequences. Research has also shown that listed firms with many small shareholders (“dispersed ownership”) tend to have higher compensation levels than firms with a few large owners, such as family-owned companies. Where should thousands of pension funds and institutional investors managing your and my pension monies find the time to assess the compensation packages for each of the companies they invest in? Probably they will outsource their research and decision-making to specialised analysts. The result may not be an increase in accountability.

Executive pay in Switzerland has been amongst the highest in Europe. This will not change as a result of this vote. In the short run, the public feels it has put a stop to excessive pay. In the long run, I will not put my money on executive pay levels going down.

Further information:
Pay for power? Explaining CEO compensation as a function of CEO power (Ruigrok and Hengarter 2011)