Most major Swiss companies published their 2006 annual reports in the past few weeks. On the whole, the remuneration policy for executives is presented much more clearly than last year.
However, several companies disclose very high salaries and remuneration plans that are not in line with international best practice standards. Because shareholders in Switzerland do not have the possibility to vote on the remuneration policy, it is very difficult for them to express their disapproval. At present, the only thing they can do is to oppose the re-election of Board members responsible for setting executive pay.
Ethos has therefore decided to vote against the re-election of Mr. Peter Spuhler, member of the Remuneration Committee, at the UBS Annual General Meeting of shareholders (18 April 2007). This decision doesn’t call into question Mr. Spuhler’s entrepreneurial skills. Nevertheless, as member of the Remuneration Committee, Mr. Spuhler participates in the establishment of UBS’ remuneration policy, which in many aspects is not in line with best practice. At last year’s annual meeting, 25% of votes opposed the creation of a pool of conditional capital for stock option plans. In spite of this substantial opposition, UBS continues to set aside more than 3% of capital every year for shares and options, whereas the maximum accepted under best practice is 1% per year. Moreover, the performance criteria for exercising stock options are not sufficiently challenging and the bonuses are not capped. Finally, UBS refuses to allow the shareholders to vote on the remuneration policy, even though last year the Chairman of the Remuneration committee stated that he was personally in favour of an advisory vote of the shareholders.
Regarding the Annual General Meeting of the CS Group (4 May 2007), Ethos recommends that shareholders vote against the re-election of Mr. Aziz Syriani, Chairman of the Remuneration Committee. While it is true that last year Credit Suisse introduced a new incentive plan for executives and senior management (ISU) which differs substantially from the old plans PIP1 and PIP2, the latter will remain in force for five years and the ISU is also very generous. Under all the company’s plans, on average, 3% of the Bank’s capital is distributed every year, essentially to executives and senior management.
As a long-term institutional investor, Ethos cannot accept that the Board of Directors of certain companies unilaterally establishes pay packages that are not in line with international standards of best practice. This is why Ethos calls on the Swiss Parliament to amend Swiss company law in order to allow shareholders to vote on the remuneration policy for executives of listed companies.
