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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 against curbing executive pay excesses via state-imposed caps

This year, Switzerland has already voted twice on pay-related referenda (1:12 Initiative, Minder Initiative). Over the next years, two more will follow. A key background is that Swiss executive pay levels are higher than in most other European countries. What explains this higher pay in Switzerland?

First, executive pay is directly related to firm size. Firm size increases complexity, and large firms need managers who can harness and oversee this complexity. Switzerland has a far bigger share of large companies than almost any other country, so it is no surprise that Swiss pay levels are also higher. Second, pay levels are higher in some industries than in other. Over the past decade executive pay has been particularly high in industries that benefited from deregulation in the 1990s, such as financial services and pharmaceuticals. These industries are very well represented in Switzerland. Third, pay levels are higher the more international the company is. Just like with firm size, a firm’s degree of internationalisation drives its complexity, confronting it with a myriad of different national laws, cultures, languages and stakeholder expectations. On average, the largest 100 companies generate around 70% of their revenues abroad. Note that the top 100 also include local players such as the Swiss railways and retailers, i.e. for many large Swiss companies this percentage is well over 90%.

There are additional drivers which help to explain why Swiss executive pay is comparatively high. It is understandable that pay is heavily debated in Switzerland and economic actors should take societal concerns more seriously than they have done so far. However Swiss voters correctly understood that imposing pay restrictions cannot be the answer.