The Swiss referendum on compensation, or
“Minder” Initiative, which was voted in 2013, enters into effect in 2014.
Nestlé will be one of the first large Swiss companies to implement the
decisions of this referendum, which requires the compensation paid to corporate
officers to be submitted to vote at General Meetings. The scope of the Swiss law is extremely broad in the sense that variable
compensation can only be paid once shareholders have agreed on the amount;
meanwhile, shareholders must also issue an opinion on the maximum compensation
amount (fixed, and variable, etc.) that can be paid to a corporate officer. This is what Nestlé will be proposing at its 2014 General Meeting
We would remind you that compensation has
been subject to a vote in the United Kingdom for a number of years, and that
French limited liability companies and joint stock companies must submit their
managing directors’ compensation to their General Meetings. Moreover, the European Commission has announced that it is going to
demand a vote on corporate officers’ compensation in Europe, including the
amount, the cap, and the multiple of average salary, etc.
It is paradoxical that, following the many
discussions on this issue in France, the French-style “Say on Pay” process is
not restricted and leaves companies’ choices wide open, on the understanding
that a vote in the form of a regulated agreement will be for “information
purposes only”, which leaves the Board of Directors free to judge whether it
will listen to shareholders in the event of a vote against.
Accordingly, the French government and
AFEP-MEDEF have encouraged companies to adhere to the “Say on Pay” process
despite the reluctance of some Boards of Directors that did not want to adopt
the process, as they now take the view that they will not call the decision in
question in any event if shareholders voted against in the form of regulated
agreement, as that vote is “for information purposes” only from a legal
standpoint.
We must hope that Boards of Directors will
be able to present compensation to shareholders in a transparent and clear
manner, and that shareholders will respect the decision; otherwise the risk is
that the image of our companies’ directors, and therefore the company’s image
will be sullied once again, at a time when we need everyone to love companies
in order to create jobs and give companies the means to run their business.
Olivier de Guerre
Chairman of PhiTrust Active Investors
