Swiss Voters Reject High-Pay Initiative

ZURICH—Switzerland stepped back from a movement to control corporate pay, overwhelmingly rejecting an initiative that would have restricted executive salaries to 12 times that of the lowest paid employee.

Roughly 65% of Swiss voters Sunday opposed the 1:12 Initiative for Fair Pay, according to results from all of the country's 26 cantons reported by Swiss television. Another 34% supported the proposal, which was named for the organizers' belief that no one in a Swiss company should earn more in a month than someone else makes in a year.

The rejection of the 1:12 initiative marks a move away from Swiss efforts to more tightly govern how companies compensate their employees that has been driven by a growing wealth gap between the country's executive class and everyday workers.

Earlier this year, Swiss voters approved a strong say-on-pay proposal that will require a binding shareholder vote on executive salaries at all publicly traded Swiss companies when a law is finalized. Named after Swiss businessman and politician Thomas Minder, it also will ban signing bonuses, golden parachutes and other forms of compensation.

"I am very pleased at the outcome of the vote," the head of the Swiss Department of the Economy, Education and Research, Johann Schneider-Ammann, said at a news briefing Sunday. "It will help us preserve the attraction of Switzerland as a business location and thus secure jobs."

Opposition to the 1:12 initiative had been fierce, with the cabinet and both houses of parliament issuing recommendations that voters reject the measure because it would make Switzerland a less attractive place to for companies to do business.

The government is allowed to present its opinion to voters, under the laws governing Swiss referendums. Major companies also urged employees to think carefully before heading to the polls.

Pharmaceutical giant Novartis AG NOVN.VX -0.21%told employees in a letter that the 1:12 initiative would limit "the ability of companies like Novartis to recruit experienced employees who are capable of leading international activities."

On Sunday, Switzerland's corporate community expressed satisfaction with the outcome of the vote.

"It shows the Swiss want to maintain a competitive economic system and an open society in their country," said Nestlé spokesman Robin Tickle.

The youth wing of the Social Democratic Party of Switzerland, which organized the initiative, said the country had missed an opportunity to curb executive pay that it sees as spiraling out of control.

"We're obviously disappointed at the result, but we were faced by opponents who ran a high-profile fear campaign," David Roth, the president of the youth wing, known as Juso, said. "One positive from the campaign, however, is that the issue of fair pay and a fair economy has been placed in the public domain."

Business lobby group Economiesuisse said rejection of the measure showed the public had endorsed Switzerland's model for growth. "The vote is clear backing for the Swiss economic model," said Ursula Fraefel, a member of the directorate of Economiesuisse.

One of the backers of the initiative, the Swiss trade union group SGB said the vote had given the Swiss public the opportunity to discuss corporate pay.

"The issue of excessive pay at senior corporate level won't go away," said SGB spokesman Thomas Zimmermann, who added the topic would continue to be divisive.

Public anger over corporate pay reached a peak in February, when local media reported that Novartis was planning an exit package that could have totaled 72 million Swiss francs ($79 million) for former chairman Daniel Vasella .

Faced with a backlash that included public comments by the country's justice minister, Novartis scrapped the original plan for a package worth roughly 5 million francs, including cash and shares.

The uproar caused by the incident is credited with encouraging passage of the Minder initiative.