Why the Swiss Scorn the Superrich

November 22, 2013

Why the Swiss Scorn the Superrich


WINTERTHUR, Switzerland — Abroad, Switzerland may be best known for its smart ski resorts and discreet banking services for the superrich, but the Swiss themselves are remarkably allergic to the trappings of conspicuous wealth. It was not quite another Occupy moment perhaps, but in a referendum held in March of this year, the Swiss electorate voted by a two-thirds majority to ban bonuses and golden handshakes and force companies to consult shareholders on executives’ remuneration. It’s not easy for ballot initiatives like this to succeed in Switzerland: Of the 110 that have made it to a vote in the last 32 years, only 20 have passed. Many observers agreed that Daniel Vasella, the C.E.O. and chairman of the pharmaceutical giant Novartis, played a decisive role in the plebiscite’s success.Shortly before the vote, it emerged that Mr. Vasella was demanding a $78 million severance package in return for a promise not to work for a competitor for six years. More disturbing than the sum itself was the way Novartis tried to suppress the story, and Mr. Vasella’s own reaction.

Business associations predicted that companies would leave the country in droves in the wake of the referendum. That has yet to happen.

Instead, less than a year later, we have another vote on executive salaries, the 1:12 initiative. It would permit companies to award their best-paid worker no more than 12 times what the worst paid took home. The referendum takes place on Sunday. This time, the initiative looks destined to fail: The latest opinion poll put the yes vote at 36 percent, with 54 percent opposed, and 10 percent undecided.

One reason for that may be that in most Swiss companies, the pay disparity is lower already. Salaries are close to the European Union average, and few companies pay starvation wages. But a handful of large corporations buck the trend: Among the big banks, the ratio between the best and worst paid has been around 1:500 for years; for Novartis in 2009, it was 1:752; at Credit Suisse the same year, the differential was as high as 1:1,812. Even companies that were heavily in the red continued to pay extravagant boardroom bonuses and salaries.

It was not always this way. Until the mid-19th century, Switzerland was poor. My great-grandmother, who grew up in an Alpine valley, often went hungry; occasionally, she was even forced to eat grass to fill her belly. Switzerland’s elevation to the ranks of the most prosperous nations was largely because of its manufacturing industry: watches, textiles and mechanical engineering.

It was only after World War II that Switzerland became an important player in the financial sector. Despite our reputation abroad, that is probably why banks don’t really figure in our sense of who we are; we just let them get on with it. Their revenues contributed substantially to our welfare, but we were never in love with them.

What is inescapable in Swiss daily life and culture is agriculture — even though only 4 percent of Swiss still work in it and farming represents just 0.7 percent of our gross domestic product. Our national heroes are not scientists or artists or captains of industry, but fictional characters: an ornery farmer by the name of Wilhelm Tell, a goat-girl called Heidi. Our national sport is “schwingen” wrestling, a farmers’ sport; the first prize at big events is a steer.

The Swiss are a well-traveled lot internationally, but at home they often live their entire lifetimes in one village or valley. There is social cohesion, but little internal mobility. To this day, the local Parliaments of Switzerland’s 26 cantons, or districts, vote by a show of hands; across the country, legal contracts are settled by a handshake.

Above all, Switzerland is egalitarian. The notion of being conceited about your wealth or talents is abhorred; expecting special treatment is scorned.

For a long time, even the rich in Switzerland bowed to this modesty. They kept to themselves and spent their money discreetly. Sponsorship of the arts was often anonymous; bankers didn’t think twice about pro bono public service. Those times are gone.

In his 2004 autobiography, the eminent banker Hans J. Baer deplored what he saw as the self-enrichment mentality of the new executive class. He described their insistence on high salaries as “a call to class warfare from above.”

Opponents of the 1:12 referendum like to talk about the politics of envy but find it hard to justify top salaries. No one among the big earners has cared to join the debate. Instead, representatives of medium-size companies have chipped in, such as Carl Elsener of Victorinox, the makers of the cult Swiss Army penknife. The initiative would not affect him — his company already has a wage ratio of 1:6 — but he opposes it on the grounds that it would involve more regulation and additional costs. Even if the measure passed, he’s skeptical that it could be enforced: “The small minority that likes to overdo things is perfectly able to get around the 1:12 initiative.” If the polling is correct, many voters appear to agree with him.

It’s not that Mr. Elsener is a fan of “rip-off” salaries, but he favors a policy of voluntary restraint — in effect, the old Swiss way of moral pressure. That may seem naïve nowadays, but at least in Mr. Vasella’s case, it seemed to work. He renounced his $78 million deal and, declaring himself upset by so much personal criticism, retired to quiet seclusion. In the United States.

Peter Stamm is the author, mostly recently, of the story collection “We’re Flying.” This essay was translated by Michael Hofmann from the German.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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