Christian Katz, CEO Swiss Exchange on the impacts of the Minder Initiative. Dienstag, 22. Januar 2013 - 05:31
"The Minder Initiative is only aimed at companies listed on the stock exchange - there is little point in it."
On 3 March 2013, the Swiss go to the polls to vote on the Swiss federal popular initiative to combat exorbitant salaries. Christian Katz, CEO Swiss Exchange, explains the impacts that the initiative would have on the Swiss stock exchange.
The “Abzocker” or Minder Initiative (named after its initiator and a current member of the Council of States Thomas Minder) proposes 24 constitutional articles for restricting the bonuses and salaries of members of boards of directors and management teams of listed Swiss companies. The Federal Council and parliament are making an indirect counter-proposal to the Minder Initiative which firstly addresses the main remuneration concerns of the initiative and secondly plans wider-scale improvements in corporate governance through further provisions.
The indirect counter-proposal will automatically come into effect if the Swiss people vote against the Minder Initiative.
Mr Katz, what would adoption of the Minder Initiative mean for SIX Swiss Exchange? Christian Katz: The idea behind the initiative is good but it’s the wrong way to achieve it. The main problem with the Minder Initiative is that it is only targeted at the 300 or so listed companies. But there are more than 300'000 companies in Switzerland, of which around 190'000 are public limited companies. Adoption of the initiative would encourage small listed companies to delist themselves and return to the lack of transparency associated with private equity. Fewer large listed companies would locate in Switzerland and the number of IPOs would certainly fall. This would impact negatively on the commercial success of the business area Swiss Exchange and therefore SIX as a company.
What do you mean by the lack of transparency associated with private equity? Listed companies have to satisfy more stringent transparency requirements than non-listed companies. They therefore have better corporate governance. The general public can obtain all information about a listed company, including earnings. People don't generally know the profit or learn key details such as management remuneration of a private company.
Do you believe that the initiative is able to effectively limit salaries and bonuses? No, because it only applies to Swiss public limited companies which are listed within Switzerland and abroad. As already mentioned, it would apply to around 300 of the 300'000 companies operating in Switzerland. That's around one in every thousand companies. So all non-listed companies would be excluded from the intended improvement of corporate governance. It doesn't make sense and may even be considered as harmful.
What do you think of the indirect counter-proposal from the Federal Council and parliament? The indirect counter-proposal includes around 80 percent of the key concerns of the Minder Initiative. In terms of remuneration, it also envisages stricter conditions for companies listed on the stock market. But there are three major differences: the counter-proposal features fewer rigid prescriptions than the initiative, but does impose clear limits on corporate freedom. Secondly it doesn't threaten management with imprisonment, but fines. And lastly the indirect counter-proposal also includes companies not listed on the stock market in general improvements to corporate governance. By including all Swiss companies, this would guarantee a fair playing field with the same conditions for all players.
The public are very upset about abusive salaries. How likely do you think it is that the Minder Initiative will be voted in? I think it's very likely that the initiative will be passed because society is very frustrated – and rightly so - about excessive salaries. I can understand this frustration and believe that the rules and regulations governing stakeholders and companies, especially corporate governance, need improving. But as I've said I don't think the Minder Initiative is the right way to go about it. The Minder Initiative is only aimed at one thousandth of the companies potentially affected. If corporate governance needs to be improved, then it has to be improved across the board. The indirect counter-proposal responds to this concern by including further conditions on, for example, general meetings and elections to administrative boards. It is also not as rigid as the initiative in terms of remuneration conditions. The situation needs to be clarified so that the people going to the polls can understand this complicated subject and form their own opinions.
Will you be getting involved in the campaign? Yes, we certainly will because the initiative directly affects the work of the Swiss stock market SIX Swiss Exchange, the company SIX and Switzerland as a financial and industrial center. SIX will be joining the no campaign and will publicly set out its position in the media.
Context
Responsibility
As the infrastructure service provider for the Swiss financial center, SIX bears a major responsibility. Top priority is accorded to the availability of the systems. However, SIX also maintains a caring and respectful relationship with its stakeholders and the environment.