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Corporate Governance – portrayed in the individual cultural and legal framework, from the standpoint of equity capital.

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26 February 2020

Governance in Swiss translation?


6 July 2018

2018 - General meetings of spi companies stabilisation of remuneration

Since the entry into force of the Ordinance against excessive remuneration (the Minder initiative), the different votes on board and executive remuneration are the proposals most contested by the shareholders, which is reflected in a stabilisation of overall remuneration in SPI companies and a slight decrease in the largest listed companies.

During the first half of 2018, 187 annual general meetings and five extraordinary general meetings of companies included in the Swiss Performance Index took place. The average attendance rate of shareholders has remained stable for 4 years at 66% of the voting rights. Part of the absenteeism is explained by the low participation of mutual funds in general meetings. In contrast to other countries, mutual funds under Swiss law are not obliged to exercise their voting rights.

In total, more than 3,500 proposals were put to the vote in 2018 with an average approval rate of 96.6%. 27 proposals voted in companies with a controlling shareholder (holding at least one-third of the voting rights) would not have been approved had the sole vote of the other shareholders been taken into account.

Proposals relating to board and executive remuneration remain particularly contested. The advisory vote of the remuneration report received 87% approval on average, while more than 21% of the remuneration proposals received less than 80% affirmative votes.

Ethos' voting recommendations are published on its website and are based on its 2018 guidelines, which are also publicly available. During the 2018 proxy season, Ethos advised more than 200 Swiss institutional investors representing Swiss equities exceeding CHF 40 billion. Ethos recommended to approve 81.6% of the proposals (81.0% in 2017). In general, the items for which Ethos recommended to oppose were approved by 90.6% of the votes while those for which Ethos recommended approval vote were approved by 97.7%.

Remunerations decreasing in SMI companies

Average remuneration remained almost unchanged overall, but with strong variations depending on the size of the companies. In particular, the average 2017 remuneration of the CEOs of the SMI companies decreased by 7% to CHF 6.8 million while that of the CEOs of the following 27 companies (SMIM index) decreased by 8% to CHF 3.7 million.

A stabilisation of board and executive remuneration has now been observed over the last 3 years, which tends to confirm that the rights granted to shareholders in the area of remuneration since the Minder initiative was implemented make it possible to curb excesses. However, certain levels of remuneration remain too high and not always in line with the performance of companies. Thus, in accordance with its guidelines, Ethos recommended to oppose 35% of the binding votes on the remuneration of the board of directors and 33% of the binding votes on the remuneration of the executive management.

In particular, within the financial sector, the link between pay and performance is not demonstrated. The stability of the remuneration of board and executive remuneration in this sector contrasts with the nearly 44% decrease in net income since 2009 of the 26 financial companies among the 100 largest Swiss caps and the 7% decline in the number of employees of these companies.

The sustainability report: a major missing part of the reporting of listed companies

Shareholders must also approve annual reports and company accounts. More and more investors expect companies to be more transparent about extra-financial topics, such as risks related to climate change or respect for human and labour rights, particularly in the supply chain. Since 2018, companies can announce to the Swiss stock exchange the existence of a sustainability report (opting in) provided that this report is drafted in accordance with a recognised standard. This proposal allows investors to know which companies are publishing standardised sustainability reports. Ethos notes that, unfortunately, as of today only 13 companies out of more than 200 listed companies in Switzerland have declared the existence of such a report to SIX Swiss exchange. Despite the urgency of climate risks and many social issues, self-regulation is currently still far from being effective.



30 October 2017

Ethos’ Funds are aligned with the 2° climate target

The results of the climate compatibility test organised by the Federal Office for the Environment (FOEN) in collaboration with the non-governmental organisation (NGO) 2° Investing Initiative were published on 23 October 2017. They show that pension funds are not yet aligned with the target of keeping global warming below 2° as set by the Paris Agreement on December 2015 and of which Switzerland is also a signatory. Ethos also submitted its funds to the test to check their compatibility. According to this assessment, the Ethos funds are compatible with the 2° scenario.

The study organised by the FOEN measures the alignment of investor portfolios with the 2° scenarios of the International Energy Agency (IEA). More precisely, the exposition of the stock and bond portfolios of investors to the sectors with the highest greenhouse gas emissions was measured and compared to a 2°C compatible model portfolio. The Swiss pension funds and insurers thus have the chance to measure the alignment of their portfolios free of cost.

Swiss pension funds still very exposed to fossil fuels

79 institutional investors (pension funds and insurers) took part in the study. On the basis of aggregated information, the FOEN published a study which shows that in general, Swiss pension funds maintain a significant exposure to fossil fuels. In particular, the percentage of investments in coal-fired power greatly exceeds the 2°C scenario. The study presents different courses of action to allow pension funds to improve their exposition and take concrete steps.

In the context of its activities, Ethos proposes different services to help investors improve their portfolios:

- 2°C compatible sustainable investment funds

- Exercise of voting rights in Switzerland and abroad

- Dialog programmes (engagement) with Swiss and foreign companies

- Portfolio analysis including measuring the exposition to sensitive sectors such as coal and other fossil fuels

Ethos’ funds are compatible with the 2°C scenario

Ethos also publishes the aggregated assessment of the whole of its investment funds carried out by the NGO 2° Investing Initiative. The analysis shows that Ethos’ funds are perfectly aligned with the target of keeping global warming below 2 degrees. Ethos has been dedicated since many years to reducing the environmental impact of its investment funds. In particular, Ethos excludes companies active in coal extraction or coal-fired power plants. Furthermore, in order to reduce the environmental footprint of its funds, Ethos has developed, in addition to its environmental, social and corporate governance analysis (ESG rating), a carbon rating which minimizes the exposure to the biggest emitters of greenhouse gases. As a signatory of the Montréal Carbon Pledge, Ethos also publishes the carbon footprint of its investment funds.

Since early 2017, the Ethos funds are open to all investor categories.


20 September 2017

A group of 100 global investors amongst whom Ethos and the members of the Ethos Engagement Pool international called on the world’s largest banks for more commitment to fight global warming by financing the transition to a low-carbon economy

In letters sent by investors led by Boston Common Asset Management (US) and ShareAction (UK) to 62 banks – including UBS and Credit Suisse, as well as Citigroup, Goldman Sachs and Deutsche Bank – the group called for enhanced disclosure of banks’ climate-related risks and opportunities and of how these are being managed by banks’ boards and senior executives.

The global banking sector stands at a crossroad on climate. The Paris Agreement became effective in November 2016 and has catalyzed the urgency of climate risks such as ‘stranded assets’ i.e. assets that suffer from premature write-downs due to fossil fuel phase-out. At the same time this shift offers unprecedented opportunities for banks to finance the transition to a low carbon future. These developments are set to have a profound impact on the banking sector over the short, medium, and long term. For these reasons there is a growing need among institutional investors for robust climate-related disclosures and risk management from the banking sector.

Against this backdrop, the central banks have formed the Task Force on Climate-related Financial Disclosures (TCFD) to issue recommendations for climate-related corporate disclosure to investors. The recommendations cover four areas: climate-relevant strategy and implementation, climate-related risk assessments and management, low-carbon banking products and services, and the banks’ public policy engagements and collaboration with other actors on climate change. As these recommendations remain voluntary progress depends on investors pressing companies for action!

As part of this campaign Ethos and the members of the Ethos Engagement Pool international will continue to engage UBS and Credit Suisse to ensure the letter leads to concrete actions and improvements.



5 July 2017

Human Rights: Ethos and other global investors successfully push global apparel brands to improve working conditions in Bangladesh

Four years ago, in the aftermath of the Rana Plaza tragedy, the ‘Accord’ on Fire and Building Safety in Bangladesh (the ‘Accord’) created a five-year, legally binding framework for factory inspections aiming to identify and remediate unsafe working conditions in Bangladesh’s textile industry. By publishing an Investor Statement on the 4th Anniversary of the Rana Plaza tragedy this spring, a coalition of global institutional investors, amongst whom Ethos and the members of the Ethos Engagement Pool International, pushed heavily for a prolongation of the ‘Accord’ until all remediation measures are completed.

To double down on this effort, Ethos and the members of the Ethos Engagement Pool International have followed up the Investor Statement with direct letters to eight key corporate members of the ‘Accord’. The companies were asked to extend the ‘Accord’ for the period of time needed to remediate the remaining issues and to broaden the current scope of the framework to include freedom of association and the right to collective bargaining for workers.

On 29 June 2017, several companies and trade unions have agreed to renew the ‘Accord’ for an additional term of three years. The agreement will enter into effect when the current ‘Accord’ expires in May 2018. The renewed framework builds on its previous features such as independent safety inspections, training of workers in health and safety protocols and remediation of all remaining issues, but adds improvements like granting severance pay to employees when they are laid off or relocated due to safety reasons. Last but not least, the renewed agreement puts greater emphasis on freedom of association and collective bargaining, and broadens the scope of the Accord to include additional parts of the supply chain where similar risks exist.

The explosion of a boiler at a Multifabs factory in Bangladesh on July 3, 2017 which resulted in several fatalities underscores the importance of renewing and strengthening the Accord to ensure that such accidents are avoided in the future.



20 April 2017

Ethos has taken good note of Credit Suisse’s voluntary decision to reduce by 40% the variable remuneration of the executive management and to keep the board’s fees unchanged.

In Ethos’ view, the remunerations are still too high in light of the CHF 2.7 billion loss posted by Credit Suisse in 2016.

Ethos therefore maintains its voting recommendations issued on 7 April 2017. Ethos recommends to oppose the remuneration report, the amount of fees for the board, the fixed and variable remuneration of the executive management, as well as the reelection of the Chairman, Urs Rohner and the Vice-chairman Richard Thrornburgh.



20 April 2017

In the run-up to the general meeting of Credit Suisse on 28 April 2017, Ethos opposes the re-election of several board members as well as the discharge of the board. In addition, in light of the poor results and the concerns regarding the bank’s capital ratio, Ethos also refuses the remunerations of the governing bodies and the dividend proposed by the board.

In light of the significant litigation involving the bank in the past decade, the enormous indemnifications and fines paid as well as the lack of strategic vision at board level, Ethos recommends changes at the top at the bank. Ethos therefore opposes the re-election of the chairman of the board, Urs Rohner, as well as the vice-chairman of the board, Richard E. Thornburgh. Early 2017, the bank was found guilty in the US of having sold toxic financial products in the years preceding the global financial crisis (2005-2007). The two board members were part of the executive management at the time, Urs Rohner as Chief Operating Officer and General Counsel and Richard Thornburgh as Executive Vice Chairman of Credit Suisse First Boston (until end of 2005).

This record fine led Credit Suisse to register new provisions for more than CHF 2 billion between December 2016 and March 2017. Since Urs Rohner has taken over the chairmanship of the board in April 2011, the bank has booked provisions of CHF 10.9 billion and spent CHF 7.4 billion to settle legal cases. In the same time period, Credit Suisse’s share has lost almost half of its value and the number of employees was reduced by 20% to 17’020 at the end of 2016.

In addition, Ethos notes the lack of clarity in the current strategy, in particular as concerns the IPO of the Swiss Bank. Ethos estimates that changes to the board have become necessary to restore investor trust.

Granting the discharge would be premature

The legal cases have multiplied these last years for Credit Suisse and there is no sign of ending  as shown by the recent raids at offices of the bank in Amsterdam, Paris and London end of March. In light of pending legal cases, but also of accusations that the bank’s project finance breached internal standards (by financing companies involved in the Dakota access pipeline project that is planned to cross Native American reservations in Dakota in the US), Ethos considers that granting discharge to the governing bodies of Credit Suisse is premature at this point.

Excessive remunerations and an unreasonable dividend

Ethos also recommends opposing all points related to the remuneration of the executive management and the board. Ethos considers that the executive management should not have received a bonus in 2016 given the disappointing results of the bank. It is excessive to pay a total annual bonus of CHF 26 million to the 12 members of the executive management when at the same time Credit Suisse posts a net loss of CHF 2.7 billion. In addition, the average remuneration of CHF 1.5 million for each of the 939 employees designated as “Key Risk Takers” is unacceptable for Ethos.

Finally, Ethos considers that the board’s proposition to pay a dividend of CHF 0.70 per share (in cash and/or in kind) is hard to justify in a time where regulation demands a reinforcement of the capital ratio. The current capital ratio of the bank remains insufficient especially in terms of the Leverage ratio (CET1) which only stands at 3.2% end of 2016 as opposed to the 3.5% demanded by FINMA until 2019. The capital ratio could yet worsen if shareholders opt for a dividend in cash, corresponding to a maximum payout of CHF 1.46 billion.



30 January 2017

Ethos launches the first Swiss stock exchange index dedicated to corporate governance

In the follow-up to its 20th anniversary, the Ethos Foundation launches a new stock exchange index dedicated to corporate governance at Swiss companies. In collaboration with the Swiss Stock Exchange (SIX Swiss Exchange), Ethos publishes the "Ethos Swiss Corporate Governance Index" (ESCGI) which takes into account the main corporate governance best practice criteria in order to define the weight of the different constituents. This is the first index of this type on the Swiss stock market. The index allows investors to reduce the weight of companies that entail a corporate governance risk.

The new index "Ethos Swiss Corporate Governance Index (ESCGI)" privileges the companies that respect corporate governance best practice. The "Ethos Corporate Governance Principles" serve as a reference for the modification of the weighting of the companies comprised in the classic index of the Swiss market, the "Swiss Performance Index (SPI)". For Ethos’ CEO Vincent Kaufmann, "the innovative methodology of this index allows mitigation of the risks of poor corporate governance that are ignored by the classic indices. This provides investors with a better protection from corporate governance risks."

The expertise of SIX Swiss Exchange allows Ethos to benefit from the best competencies in the construction of indexes and to offer investors a credible and professional alternative to the use of traditional indexes. "The Ethos mandate to establish a corporate governance index confirms our index calculation capabilities and supports the positive development of our proprietary index suite," comments Chris Landis, Division CEO SIX Swiss Exchange.

An innovative approach

The index objectives aim to:

- Reduce the corporate governance risks by underweighting or excluding companies that do not apply best governance practices

- Reduce the carbon impact of the index by underweighting companies with significant carbon emissions

- Avoid overweighting companies that are under a serious controversy

- Avoid overweighting companies that have a weight exceeding 15% in SPI

- Overweight companies that do not fall into one of the above categories.

The criteria which are applied in order to measure the corporate governance risk are evaluated according to "Ethos Corporate Governance Principles," which are founded on current best practice in corporate governance in Switzerland and abroad. The following criteria are notably taken into consideration:

- Capital structure: negative impact when there are multiple classes of shares or an opting out/up clause

- Board: negative impact when the level of board independence is low or when there exists a permanent combination of the chairman/CEO function

- Remuneration: negative impact when the variable component of executive management remuneration is very large or when the board receives options.

"Tailor made" indexed fund

As of 30 January 2017, the new ESCGI index will serve as reference for the management of the fund "Ethos – Equities CH indexed Corporate Governance". This fund is managed by Pictet Asset Management and replicates in detail the ESCGI index. It has the advantage of indexed management in terms of reduced management fees while at the same time integrating the Ethos expertise on corporate governance. The associated voting rights are systematically exercised in accordance with the Ethos voting guidelines. The voting positions are communicated on the Ethos website two days before each general meeting and in a quarterly report especially prepared for this purpose. The fund will be open to private investors very soon (process underway at the FINMA).



8 December 2015

Sika: Ethos supports the board in the ongoing legal procedure at the Court of Zug

The Ethos Foundation was accepted as an accessory party in support of the board of directors in the trial opposing it to the Burkard Family at the Cantonal Court of Zug. The family has demanded the cancellation of the decisions taken at the last general meeting where the board decided to limit the registered voting rights of the SWH family holding to 5% of the total registered shares. Precisely one year after the announcement by the Burkard Family of its decision to sell its holding in Sika to the competitor Saint Gobain, Ethos confirms its determination to support the board in its will to preserve the independence of Sika.

On 8.12.2014 the Burkard Family had announced its decision to sell its stake in Sika which corresponds to 16% of the capital and 52% of the voting rights. Since then, the Ethos Foundation has taken different initiatives to contribute to preventing the takeover by Saint Gobain, which is not in the long-term interest of Sika stakeholders. In particular:

- On 23.12.2014 Ethos and 11 institutional investors filed a shareholder resolution at the annual general meeting of 14.4.2015 demanding removal of the opting out clause.

- On 14.1.2015, Ethos launched a support group for the resolution demanding removal of the opting out clause. The group quickly united 220 institutional and private shareholders. The 12 shareholders who initiated the resolution and the members of this group finally represented 7% of the capital and 4% of the voting rights.

- At the annual general meeting on 14.4.2015 the resolution aiming for the removal of the opting out received 97% support from the shareholders with no tie to the family. It was rejected nonetheless as the Burkard Family opposed it and was able to use all of its 52% of voting rights.

- At the extraordinary general meeting of 24.7.2015, Ethos took position against the proposals of the Burkard Family to modify the composition of the board.

- The 8.12.2015, Ethos announces having been accepted by the Court of Zug as an accessory party (according to Art. 74 of the Civil Procedure Code) to support Sika in the litigation opposing it to the Burkard Family. As accessory party, Ethos has access to all documents in the case file. Ethos may also use all means of prosecution or defence as well lodge appeals.

As a long-term shareholder of Sika, the Ethos Foundation has a clear interest that Sika remains independent and does not come under the control of the competitor Saint Gobain, as would have been the case had the sale of the shares of the Burkard Family actually taken place. In this perspective, Ethos supports the decision by the board to limit the registered voting rights of the SWH family holding to 5% of the total registered shares for certain votes which were held at the last general meetings. This measure was taken in line with the Sika articles of association.

Ethos has a overriding interest that the Court of Zug decide in favour of the board, which explains why the Foundation is now engaging itself as an accessory party in support of the board in the case opposing it to the Burkard Family. The letter addressed by the chairman of the board of Sika to the shareholders on 4.12.2015 clearly presents the different reasons why the takeover by Saint Gobain is not in the interest of Sika. Ethos is confident that the Court of Zug will take into account in its judgement the long-term interests of Sika stakeholders.

  Letter of 4.12.2015 from the Chairman of Sika to shareholders



22 November 2015

Swiss agrochemical/agriculture company Syngenta - Request for comprehensive strategic review

by Dr. Folke Rauscher

As shareholders of Syngenta we believe that Syngenta’s potential to create value for all its stakeholders is being substantially compromised. Board and management of Syngenta have missed several opportunities to increase value creation. Due to the ongoing gradual erosion of market share, and the loss of over CHF 10 billion in market value resulting from the rejection of a takeover offer without meaningful negotiations, we have now organized ourselves through the formation of a shareholder alliance. We demand a full and comprehensive strategic review to thoroughly evaluate all opportunities for value creation and urge the Board of Directors to refrain from selling the vegetable and flower seeds businesses.

The Alliance of critical Syngenta-shareholders has been formed in October 2015 by independent private and institutional shareholders and counts on the support of already more than 130 members.

The Alliance of critical Syngenta-shareholders is concerned that the Board of Directors and management of Syngenta have missed several opportunities to improve value creation and did more than once not reach the targets set by themselves.

We want to ensure that the Board undertakes a full and comprehensive strategic review to thoroughly evaluate all opportunities for value creation that promises are kept, financial targets are met and shareholders are informed in a timely and open matter.

If you are disappointed Syngenta shareholder or if you share our Corporate Governance concerns, please join our Alliance: http://www.critical-syngenta-shareholders.com/en-us/

This email address is being protected from spambots. You need JavaScript enabled to view it.



7 October 2015

Ethos Study on the 2015 Swiss Proxy Season: Mixed picture in terms of implementation of Minder Initiative

At the end of the 2015 Swiss proxy season Ethos publishes a study on the different aspects tied to the implementation of the Minder Initiative and the corporate governance of the companies comprised in the Swiss Performance Index (SPI). Ethos has found that the spirit of the Minder Initiative is often circumvented regarding the vote on the remunerations of the board and executive management. In addition, several principles of good governance are often not respected such as the independence of the board or the equal treatment of shareholders.

Circumvention of the Minder Initiative

At the 2015 annual general meetings of Swiss listed companies, shareholders were able for the first time to vote on the global amount of the remuneration for the board and the executive management respectively. The ordinance against excessive remuneration (ORAb) however allows each company to decide on the vote modalities.

Ethos regrets that only 28% of the companies have decided to request a retrospective vote (at the end of the financial year) on the variable remuneration. The others propose to vote on the amount of the bonus in advance when the annual results are not yet known, which constitutes a blank check and does not accurately reflect the spirit of the Minder Initiative. Ethos fully supports the revision project of Swiss company law which prohibits such a practice.

Limited contestation at the annual general meetings

The average support to the board’s proposals remained stable in comparison to last year at around 96%. Ethos was much more critical with only 84% positive recommendations.

The most contested proposals are the advisory votes on the remuneration report with an average support of 88% (Ethos 45%). The capital increase requests received an average support of 91% (Ethos 61%). Finally, the remuneration amounts were accepted at an average rate of 94% (Ethos 65%), despite the amounts often remaining relatively high. This observation casts doubts on the effectiveness of the Minder Initiative.

Remunerations still high

In financial year 2014, the global amount of board and executive remuneration of the 206 companies in the SPI Index rose by 4%, while the SPI itself gained 13%. At the 20 largest companies of the SMI index the remunerations nevertheless often remained very high with an average of CHF 2.5 million for the chairman of the board and CHF 8.2 million for the CEO.

Unequal treatment of shareholders

Ethos points out that half of the SPI companies have a shareholder controlling more than 33% of the voting rights. Most of these companies have also introduced one or several protection measures which allow them to have control over the company with a minority share of the capital. 36 companies have multiple categories of shares with different nominal values and 50 companies limit the exercise of voting rights for certain shareholders. In addition, 57 companies have an opting out (or opting up) clause which releases the purchaser of more than a third of the share capital from making a public offer to the rest of the capital.

The possibilities of unequal treatment of shareholders can present a major risk to minority shareholders. For this reason Ethos proposes to limit discrimination of shareholders in the framework of the Federal Council’s modernization project of Swiss company law.

Ethos Study «Annual General Meetings 2015, Remuneration and Corporate Governance at SPI Companies» (French)

Ethos Study «Annual General Meetings 2015, Remuneration and Corporate Governance at SPI Companies» (German)


1 June 2015

Ethos opposes the merger of Holcim and Lafarge at the extraordinary general meeting on 8 May 2015

Ethos recommends rejecting the merger of Holcim and Lafarge at the general meeting on 8 May 2015. Ethos is of the opinion that Holcim on a stand-alone basis is better placed to create long term value than the new entity. Also, the merger will have a negative effect on corporate governance as the new group will have two co-chairmen and a board with less than half independent members. The integration of the decentralised functioning of Holcim and the centralised organisation that is Lafarge entails a major risk of dysfunction.

Ethos analysis of the extraordinary general meeting of Holcim

After having analysed the relevant documents and after several contacts with the representatives of the board and the executive management of the future company, Ethos has come to the conclusion that the proposed merger between Holcim and Lafarge is not in the interest of the shareholders and a majority of the other stakeholders of Holcim. Ethos therefore opposes the share capital increase necessary for the completion of the merger requested at the general meeting on 8 May 2015.

Major financial risks

Ethos is not convinced by the strategic rationale of the merger and is of the opinion that certain assets of Lafarge might have a negative impact on the profitability of the new group. Holcim would be better off delivering value to its shareholders on a stand-alone basis. Lafarge’s goodwill of EUR 11 billion as well as limited investments to improve and renew its infrastructure in the past five years could have a negative impact on the financial results of the new group.

The risk appears even greater when considering that the board of Holcim clearly states not having carried out a detailed due diligence on the quality of the assets of Lafarge. Also, Holcim refuses to publish the two fairness opinions on which the board based its decision to support the operation.

Negative impact on corporate governance

Upon completion of the merger, the new board will have 7 representatives of each company. While five of the 7 representatives of Holcim are independent, this is the case for only one on Lafarge’s side. The new board will thus be far less independent than Holcim’s current one. The chosen solution to appoint two co-chairmen (Messrs. Reitzle and Lafont) constitutes a major risk of confusion and conflict. For example, in case of absence of Mr. Reitzle, it is the vice-president (Mr. Hess) who will replace him and not the co-chairman.

In terms of the integration of the two structures, there exists a legitimate concern regarding the two very different corporate cultures. The decentralised functioning of Holcim stands in contrast to the centralised organisation that is Lafarge. Ethos is of the opinion that there is a major risk of demotivation and departure amongst key employees of Holcim, such as heads of certain markets that will be limited in their autonomy. Finally, no information was given on the impact of the merger on jobs. As synergies are estimated at 250 million Swiss francs by elimination of duplicative functions, it is to be feared that this will lead to several thousand job cuts.


27 December 2014

Ethos and 11 shareholders submit a resolution to the extraordinary general Meeting of Sika to remove the opting out clause

The Ethos Foundation and 11 shareholders (representing 1.7% of the capital, see list below) today filed a shareholder resolution to the agenda of the extraordinary general meeting of Sika, the convocation of which was announced on December 10. The resolution requests the removal of the opting out clause from the articles of association. This provision allows the competitor Saint Gobain to buy from the Burkard Family the company Schenker Winkler Holding, which holds 52% of the voting rights with only 16% of the capital, without making an offer to the rest of the capital. This is very detrimental to minority shareholders and endangers one of the flagships of Swiss industry despite the company currently being well positioned in its market with very good growth perspectives.

The articles of association of Sika currently contain an opting out clause that allows an investor who purchases more than a third of the voting rights to be exempted from the obligation to make an offer to the rest of the capital. This is currently the case with Saint Gobain buying from the Burkard family their Schenker Winkler Holding, a company that controls 52% of voting rights with only 16% of the share capital. The combination of a double class of shares and an opting out clause has allowed the Burkard family to sell its stake with an 80% premium on the share price.

The resolution presented here demands the removal of the opting out clause. This provision strongly penalises minority shareholders in the case of a sale of the shares by a controlling shareholder. After the removal of the opting out clause, the buyer of the shares held by Schenker Winkler Holding will have to make an offer to the rest of the capital. In addition, the offer must be made at equal conditions to all shareholders as the payment of a control premium is prohibited by the Stock Exchange Act (SESTA). It is probable that Saint Gobain will refrain from the purchase under such constraint.

The Schenker Winkler Holding should actually not be allowed to vote on the removal of the opting out clause, as it has a major conflict of interest in this matter. It would thus be only the 48% of voting rights held by the minority shareholders that should have the right to decide on whether to maintain or remove the opting out clause. In case of rejection, Ethos reserves the right to file an appeal with the Swiss Takeover Board (TOB).

Ethos invites the Burkard family to assume its social responsibility by reconsidering the sale of the Schenker Winkler Holding to the competitor Saint Gobain, by committing to not oppose Ethos' resolution and by refraining from removing three current board members.

Ethos calls on all shareholders to support its resolution. It is important that a large majority of minority shareholders approve the removal of the opting out clause. To give a signal to the market and also to contribute to the success of the resolution, Ethos and the other co-filers invite all institutional shareholders of Sika to join the Group of support for the resolution to remove the opting out clause. The list of members of the Group will be published on the following website: www.ethosfund.ch.

Shareholders co-filing the resolution at the extraordinary general meeting of Sika:

 Ethos  Swiss Foundation for Sustainable Development

 Aargauische Pensionskasse, Aarau

 Anlagestiftung der Migros Pensionskasse, Zurich

 Bernische Pensionskasse, Berne

 Caisse Inter-Entreprises de Prévoyance Professionnelle (CIEPP), Geneva

 Complan (Swisscom Pensionskasse), Berne

 Luzerner Pensionskasse, Lucerne

 Pensionskasse Basel Stadt, Basel

 Pensionskasse Stadt Zürich, Zurich

 Pictet Funds SA (Ethos), Geneva

 Raiffeisen Futura Swiss Stock, St Gallen

 Vontobel Fund CH  Ethos Equities Swiss Mid & Small, Zurich


4 December 2014

Ethos' 2015 voting guidelines: A guarantee for good corporate governance

The Ethos Foundation publishes the voting guidelines which it will apply at the 2015 annual general meetings. In particular, this new edition specifies the expectations regarding the application ordinance of the «Minder» initiative. A new appendix concerning the maximum number of external mandates has thus been included. A negative vote recommendation will now be issued when certain governance rules are not respected. In the future, Ethos will systematically oppose the discharge if the board of directors does not include at least four members and it will refuse the election of the chairman if he also serves as CEO.

The Ethos voting guidelines are revised annually in their entirety in light of the latest developments in corporate governance. In particular, the 2015 edition respects all the demands of article 22 of the ordinance against excessive remuneration which stipulates that Swiss pension funds must exercise their voting rights in the interest of their beneficiaries in such a way as to assure the prosperity of the pension fund in a sustainable manner.

Re-enforcement of the rules of good corporate governance
A number of requirements regarding corporate governance were specified. In particular, the voting guidelines now contain the following new rules:

The discharge will be refused if the board of directors continues to have less than four members in a permanent manner.

The election of the chairman of the board of directors will be refused if the candidate is simultaneously CEO and this combination of functions is permanent.

The total amount of remuneration for the executive committee can be refused if the amount requested is significantly higher than that of a peer group.

A maximum number of external mandates is set respectively for the members of the board of directors and of the executive committee.

To be considered independent, a member of the board of directors may not receive variable fees or fees paid in options.

Voting recommendations for 3.5% of the Swiss market capitalisation
The voting guidelines allow Ethos to define voting recommendations according to rules which are clearly and transparently established. These recommendations are used by the Ethos funds as well as the institutional clients of Ethos Services, in particular a large number of Swiss pension funds. The total amount of Swiss shareholdings advised by Ethos stands at approximately CHF 40 billion which corresponds to 3.5% of the Swiss market capitalisation. The Ethos voting positions are communicated online to the public 48 hours before each general meeting.

Ethos 2015 voting guidelines


8 October 2014

Implementation of the Minder initiative: Vote modalities in contradiction with the spirit of the initiative

Ethos simultaneously publishes its first report on the implementation of the Minder initiative and its 2013 board and executive remuneration study. In general, the companies have become more transparent with regard to their remuneration systems. However, the ordinance of application of the Minder initiative (ORAb) leaves it to the board to propose the modalities of the vote on the remuneration amounts. These modalities are often in contradiction with the spirit of the Minder initiative. In particular, Ethos and many other shareholders cannot accept prospective votes on variable remuneration without adequate safeguards set in the articles of association. This explains why the votes on the statutory modifications related to the ORAb were often the cause of much debate this year.

The 2014 general meetings of Swiss listed companies were dominated by the entry into force on 1 January 2014 of the ordinance against excessive remuneration (ORAb), following the approval by the Swiss people of the Minder initiative in March 2013. The ORAB requires that by the end of 2015 at the latest, the companies must have streamlined their articles of association and submitted the amounts of board and executive remuneration to a binding vote of the shareholders. Halfway to the deadline, Ethos publishes a survey on the implementation of the ORAb by the 150 largest Swiss listed companies.

Of the 136 companies subject to the ORAb, 96 (70%) have already put to the vote various amendments to the articles of association, namely those that fix the vote modalities for board and executive remuneration. However, only 29 companies (21%) have already proposed at the 2014 AGM a binding vote on the amount of board and executive remuneration.

Circumventing the spirit of the Minder initiative

The average rate of approval of the amendments to the articles of association was only 88%, due to the fact that several companies have proposed amendments that circumvent the spirit of the Minder initiative which is not always well perceived by the investors. In particular:

- The vote modalities often stipulate prospective votes for the variable remuneration. A maximum amount is put to the vote at the beginning of the period, instead of retrospectively, at the end of the period, when the results of the companies are known.

- Following the prohibition of severance payments, almost half of the companies have foreseen the possibility to include in the executive contracts remunerated non-compete clauses.

- More than 33% of the companies could pay to their board members performance-based fees instead of solely fixed fees.

The transparency of the annual bonus and incentive plans should be improved

Ethos also published its annual report on board and executive remuneration in Swiss listed companies. In 2013, the remuneration in the 100 largest Swiss listed companies slightly increased (+2%). This is mainly due to the financial sector where the remunerations were up 8%. It is interesting to note that this increase is slower than the increase in both the market cap and the net income of the companies reviewed.

It appears that the obligation to submit the remuneration to shareholder vote is an incentive for many boards to increase transparency and become more vigilant with regard to their remuneration structure. There is however still much room for progress. For example, approx. 40% of the companies under review still refuse to publish the maximum bonus. With regard to long term incentive plans, half of the companies do not publish the precise performance targets for vesting.

In the long term interest of the companies, Ethos recommends that all investors, and in particular institutional investors, exercise their new rights given by the Minder initiative in a systematic and responsible manner.


18 July 2014

Consultation by economiesuisse on the revision of the Swiss Code of best practice for corporate governance: Ethos' response

The Ethos Foundation commends the decision to carry out a revision of the Swiss Code of best practice for corporate governance. In the current Code dating back to 2002 (with an appendix added in 2007), several points do not reflect international best practice anymore.

An ambivalent project

In general, Ethos is satisfied that the «Comply or explain» principle was introduced in the new version of the Code. This principle is now established in most codes of best practice abroad. Another positive amendment to the Code is the stipulation that the board of directors should pursue the sustainable development of the company.

It is however regrettable that the new version of the Code neither makes mention of the principle of equality of treatment of shareholders (a single class of shares), nor of the “one share one vote” principle (no registration or voting rights limit). These concepts are recognized as fundamental in all international best practice documents.

Numerous exceptions to best practice allowed

Following detailed analysis of the articles of the new Code project, Ethos regrets that several exceptions remain possible (see Ethos' response to the consultation). In particular, point 27 of the project stipulates that the rules of the Code of best practice can be adapted to small or medium sized companies. This concerns approx.180 out of 200 companies included in the SPI index. By allowing these companies to fix other governance rules (e.g renouncing the establishment of key board committees) the Code becomes practically meaningless for 90% of the targeted companies.

Regarding the external auditor (point 28), the project leaves a broad margin to the external auditor firm when ensuring its independence and organization. The code should, on the contrary, promote the alignment with the new EU regulation issued on 27 May 2014. Ethos is of the opinion that audit firms should respect at least the following two rules:

- Non audit fees shall not exceed audit fees.

- The maximum mandate length should not exceed 7 years for the lead auditor and 20 years for the audit firm respectively.


VIPsight Archives Europe - Switzerland

2011 2012 2013


15 June 2014

Ethos opposes the discharge and executive remuneration at the UBS and Credit Suisse Group general meetings

The Ethos Foundation recommends to oppose the discharge, as well as the remuneration report at the general meeting of UBS (7 May) and Credit Suisse Group (9 May). In 2013, an increase in the variable remuneration of the employees of the two banks took place, while both had to book new litigation provisions of respectively CHF 1.8 billion (UBS) and CHF 2.1 billion (Credit Suisse Group).

In 2013, new provisions amounting to the double of the dividend were booked both by UBS and Credit Suisse Group (CSG). New evidence was also revealed in relation to the sale of financial products and the management of tax issues in the United States. Several investigations are pending on possible manipulation of foreign exchange rates (UBS). All this demonstrates that the two boards of directors have difficulty controlling the banks' operations, prompting Ethos to recommend opposing the discharge of board members.

In parallel, the aggregate amount of the variable remuneration of employees was CHF 3.2 billion at UBS (+28% on 2012) and CHF 3.6 billion at CSG (+6% on 2012). In particular, the “risk takers”, that is approximately 550 persons at UBS and 500 at CSG, received an average remuneration of CHF 1.9 million each at UBS and CHF 2.6 million at CSG, of which 80%is variable. While at the same time, the European Union has implemented stringent rules with regard to variable remuneration, in order to limit the risks taken by these people. In light of all this, Ethos recommends to oppose the remuneration report of the two banks.

UBS: For the implementation of the Minder initiative, no to the re-appointment of the external auditor

At UBS, Ethos supports the amendments to the articles of association in order to implement the Minder initiative. The bank will propose a prospective vote on base salaries and a retrospective vote on variable remuneration, in light of achieved results, which Ethos commends.

Ethos however recommends to oppose the re-appointment of Ernst & Young who have been the bank's external auditors since 1997 and invoiced total fees of CHF 116 million in 2013. Ethos is not satisfied by the quality of the audit, as the auditor did not detect any of the recent scandals that have hit UBS.

Credit Suisse Group: No to the amendments to the articles and to the conditional capital increase for the employees

In the context of the implementation of the Minder initiative, the amendments to the articles of association stipulate that the vote on executive remuneration can either be prospective or retrospective. Such vote modalities are too vague. In particular, Ethos cannot approve in advance a maximum amount for the variable remuneration without knowing in detail the performance targets that have to be achieved to receive this remuneration.

CSG also requests an increase of conditional capital for the employees. This pool of capital (2.57% of issued capital) can be used for the employee incentive plans that allocate more than 3% of the issued capital each year to the employees. In light of the potential dilution that this amount entails and the excessive number of shares reserved for the plans, Ethos recommends to refuse the proposal.

Vote recommendations for UBS

Vote recommendations for Credit Suisse Group


31 March 2014

Political and philanthropic donations: Swiss listed companies lack transparency

Based on a survey of the 100 largest Swiss listed companies published today by Ethos, only 50% of companies disclose information on political and philanthropic spending. Few companies explain their policy with regard to donations. Only Mobimo, a real estate company, submits the global amount of donations to an advisory vote of the shareholders at the annual general meeting.

Of the 21 companies that make political donations and disclose related information, only 4 publish the amounts. For philanthropic donations, 14 of the 36 companies disclosed their donations.

Ethos' recommendations

In light of the risks in terms of cost and reputation of these donations, Ethos recommends that listed companies:

Establish a policy with regard to political and philanthropic donations that includes the approval process.

Be transparent with regard to the policy as well as the donations made in the financial year under review.

Submit the maximum potential amounts for spending in the year for approval at the AGM.


10 December 2013

Ethos and the Committee on Workers Capital have launched Global Proxy Review 2013

Ethos and the Global Unions Committee on Workers Capital (CWC) announce the launch of Global Proxy Review 2013, a report and interactive website that encourages investors to take an active role in proxy voting oversight for global equity portfolios.

The votes profiled in the report encompass ESG issues at companies in 15 economic sectors. They include votes held at multinational corporations such as: Wal-Mart, News Corporation, Barrick Gold, Heineken, Standard Bank, Telefonica, UBS and Glencore-Xstrata. Approximately one third of the votes selected related to executive compensation, reflecting a continued preoccupation toward excessive executive pay one year after the ‘shareholder spring’ of 2012. National regulatory contexts are also evolving to facilitate active ownership by shareholders; ‘say-on-pay’ votes are now mandatory in all countries featured in the report except Canada and the results are binding in Australia, the Netherlands, the UK (starting in October 2013) and will become binding by 2015 in Switzerland. In addition to governance issues, the votes profiled also include significant social issues such as reporting on human rights related risks.


14 November 2013

Soon a new Swiss referendum on the CEO's pay

Following the success of the of Minder initiative in early 2013 another new Swiss initiative named "1:12" presented by the Young Socialists will be submitted to the citizens vote on November 24.

This new proposed rule requires that the gap between the lowest and the highest salary of a firm should not exceed the factor 12 while the first Swiss groups pay 200 times the lowest salary.

Thus, an employer could not receive more than CHF 600,000 a year if the lowest paid employee receives only CHF 50,000 a year. Is this initiative a threat to the competitiveness of Swiss group or the only way to end excessive multinational salaries?

Wait and see !


23 June 2013

Ethos co-signs investor statement following deadly fire in garment factory in Bangladesh

Ethos is among 123 global investors that have published a joint declaration on 16 May 2013 deploring the loss of 1'300 lives in several accidents in garment factories in Bangladesh. In the wake of the most recent fire that took place on 8 May, socially responsible investors reacted rapidly calling on industry leaders in Europe and the United States to implement humane working conditions at the garment factories of their subcontractors in Asia. According to the signatories of the declaration, these incidents are an illustration of the failure of global companies to assure humane working conditions to the employees of their subcontractors.

According to the signatories of the declaration, the business model which provides cheap clothes in Western countries incentivizes corruption and lax oversight, as there is fierce competition at low-cost producing nations for garment manufacturing contracts. The local governments turn a blind eye to audit oversight in global supply chains, hoping to attract investments to stimulate their struggling economies. In light of the indecent wages and unacceptable working conditions, the signatories of the declaration call on brands and retailers to implement the internationally recognized standards of the International Labour Organisation.


17 March 2013

Mobimo - advisory vote on political and charitable donations

Ethos Foundation commends Mobimo's decision to request an advisory vote of the shareholders on political and charitable spending. This is the first time that a Swiss listed company implements such a vote allowing shareholders to give their opinion on a very sensitive issue.

Ethos Foundation recognises the pioneer step of Mobimo's board which has decided to propose two advisory votes on political spending at the forthcoming annual general meeting. The first vote is on CHF 30'000 spent on charitable donations and CHF 38'000 spent on political donations in 2012. The second vote seeks to allow the board to spend up to CHF 100'000 in political and charitable donations in 2013. Very few Swiss listed companies are transparent with regard to political and charitable donations, which is why Mobimo's decision is particularly commendable.

The question of political and charitable donations by listed companies is an increasingly sensitive issue to which Ethos will pay particular attention as of this year. The Ethos Engagement Pool, the dialogue programme of 90 Swiss pension fund members of Ethos with Swiss listed companies, has made political donations a central topic in 2013. In this context, Ethos Académie, a forum open to the general public launched by Ethos Foundation, will organise a debate on this matter and will contribute to a study on current practice in Switzerland and abroad.


3 March 2013

Enhanced rights for shareholders – Ethos’ position following the approval of the Minder initiative by the Swiss people

Ethos Foundation is satisfied that, in the future, the shareholders of Swiss listed companies will have rights with regard to board and executive remuneration. Both the Minder popular initiative and the parliamentary counter-project were pursuing the same objective. Ethos will now weigh in for the introduction of the most important provisions of the counter-project in the law of application of the initiative that will be elaborated by the Swiss parliament.

Dominique Biedermann, Ethos' managing director, said: “we are pleased that, in the future, shareholders of Swiss listed companies will have rights with regard to board and executive remuneration”. According to the Ethos Foundation, the Swiss Parliament's indirect counter-project was globally better aligned with shareholder interests and more efficient than the popular initiative. Ethos however accepts the Swiss people's decision and will weigh in so that the most important provisions of the counter-project are included in the application law.

In particular Ethos will insist on:

· The introduction of a binding vote of the shareholders on the remuneration system described in a comprehensive manner.

· The possibility for shareholders holding 0.25% of the share capital to place an item on the agenda of the general meeting, in order to amend the remuneration system.

· The possibility to clawback remuneration deemed excessive with regard to the results achieved.

· The obligation for the independent representative not to vote on behalf of shareholders if not specifically instructed.

· The obligation for the companies to disclose the minutes of the general meeting within 20 days after the meeting, including the precise results of the votes.

· The obligation for the board of directors to draft an annual remuneration report that must be audited by the company's external auditor.


3 February 2013

A new stewardship code for investors

A group of institutional investors, proxy advisors and business representatives have presented in Zurich this morning the “Guidelines for institutional investors governing the exercise of shareholder rights in Swiss listed companies”. They thereby give a clear signal in favor of self-regulation.

Ethos is satisfied that this project which it has contributed to initiate is being realised today. For many years, Ethos has constantly reminded institutional investors of the necessity to adopt common rules of good conduct with regard to stewardship. It is their duty towards the beneficiaries that they represent to exercise their participation rights in a systematic and transparent way.

In this context, Ethos is committed to exercising its own participation rights in Swiss listed companies systematically and transparently and to escalating its activities when appropriate. This not only consists in exercising its voting rights, but also in carrying on a constructive dialogue with the board and management, acting collectively with other investors and, if necessary, submitting shareholder resolutions at general meetings.

Guidelines for institutional investors


7 September 2012

Remuneration decreases in the financial sector

In 2011, the aggregate board and executive remuneration in the financial sector companies fell by 23% while it grew by 5% in the other sectors. Overall, remuneration was down 6% compared to 2010.

The chairmen of the board received on average CHF 1.1 million in 2011 (down 17% on 2010). The other members of the board received on average CHF 210'000 (-4%). The CEO's 2011 average pay was CHF 3.2 million (-6%), while the other executives received on average CHF 1.8 million (-7%). Despite these decreases, the levels of remuneration remain high: The top 20 highest paid in executive management received more than CHF 5 million each, while the top 20 highest paid chairmen received more than CHF 1 million each.

Positive impact of «Say on Pay» on transparency and dialogue

Progress was slow in terms of "Say on Pay votes": In 2012, only 49 companies implemented such a vote, which is only four more than last year. However, the contestation rises year after year. In 2012, the average opposition to the remuneration report was 14.4%, up from 13.6% in 2010. At the same time, Ethos notes an improvement in the transparency of the remuneration reports, as well as a more open attitude toward dialogue in the companies that submit their remuneration report to shareholder vote.

Popular initiative «against excessive remuneration»: Ethos supports the counter-project of the Swiss Parliament

Convinced that regulation is necessary to enhance shareholder rights, Ethos supports the counter-project of the Swiss Parliament which was established in response to the popular initiative «against excessive remuneration».

Only the counter-project requires listed companies to prepare a remuneration report that should be submitted to the shareholder vote. This allows to have a say, not only on the amount of executive remuneration, but also on the remuneration system, including the bonus and incentive plans which are often the sources of high payouts for executive management. In addition, the shareholders can submit resolutions on the agenda of general meetings to amend the remuneration system.

Rapid entry into force

The counter-project proposes a balanced distribution of competences between the board of directors and the shareholders. The shareholders' general meeting will have a binding vote on the envelope of board fees. The remuneration of the executive management will be of the board's remit and described in the remuneration system that will have to be approved by the shareholders in an advisory manner. Following amendment of the articles of association, however, the shareholders' vote could become binding.

Eventually, the counter-project will lead to a rapid enhancement of shareholder rights with regard to board and executive remuneration, as it will be enacted immediately by force of law. On the contrary, the initiative sets a series of principles to be included in the Swiss Constitution, which will subsequently have to be converted into a set of regulations following a long process of elaboration of new laws.


3 May 2012

UBS: The shareholders vote with Ethos and oppose the capital increase for the incentive plans of the employees

At the UBS annual general meeting today, shareholders refused the proposed capital increase for the employee incentive plans, demonstrating that they do not agree with an excessive remuneration system. The remuneration report was also not approved by 40% of votes while 47% of the shareholders did not discharge the board and executive management. Ethos had recommended to oppose the UBS remuneration report, the proposed capital increase as well as the discharge.

For the fourth consecutive year, a significant number of shareholders have opposed the remuneration report, a sign that shareholders have become more determined and critical toward the board over this issue. Dominique Biedermann, Executive Director of Ethos said: "The UBS remuneration system should be amended; in particular, the variable remuneration should be limited and tied to the base salary".

Refusal to increase the capital for the incentive plans of the employees

The proposed capital increase to finance the employee incentive plans was refused by the shareholders. This proposal only received 62% approval that is less than the 66% affirmative votes required for a capital increase without pre-emptive rights. This demonstrates that the shareholders are no longer willing to support an excessive remuneration system.

Disputed discharge

Furthermore, 47% of the shareholders did not grant discharge to the board and executive management as they want to maintain the board's liability with regard to the CHF 1.8 billion loss due to the non authorised trading activities in the investment bank.


2 February 2012

General Meetings of Swiss Companies: More Say on Pay and Increasing Opposition

48 of the 100 largest Swiss listed companies will propose an advisory vote of their executive remuneration at their 2012 annual general meeting (up from 45 in 2011). This progress is the result of long term constructive dialogue between Ethos and Swiss listed companies. However, the corporate governance of many companies still falls short of best practice, which results in more opposition at general meetings and puts pressure on management to initiate a continuous improvement process.

Institutional investors are increasingly interested not only in general meetings of listed companies, but also in long term dialogue with investee companies. Such engagement leads to positive results.

Progress in Terms of Best Practice

In the context of its dialogue with listed companies, Ethos recently sent a letter to the chairmen of 56 listed companies that were not in line with certain best practice standards with regard to general meetings. Notably to companies that do not propose an advisory vote of the remuneration report, or that do not put their minutes with the exact results of the vote for each item on the agenda on their website, or do not use electronic voting. The answers of the 31 companies that responded to Ethos' letter give the following picture for 2012:


48 companies will propose an advisory Say on Pay (2011: 45)


94 companies will put the minutes of the general meeting on their website (2011: 89)


86 companies will publish the exact results of the vote for each item on the agenda (2011: 80)


51 companies will use electronic voting at their general meeting (2011: 49)

This trend is confirmed in the Ethos Engagement Pool 2011 summary results, which also include additional information. For example, 76 companies had adopted and published a code of conduct in 2011, up from 42 at the beginning of the engagement in 2006. As of today, the Ethos Engagement Pool includes 76 Swiss Pension Funds with total assets under management of approximately 110 billion Swiss franks. On behalf of its members, the pool engages the dialogue with Swiss listed companies with the aim of improving the companies' corporate governance, as well as their environmental and social responsibility.

Increasing Opposition at General Meetings

The 2012 general meeting season is now underway. As in 2011, Ethos expects increased opposition, notably on issues of executive remuneration, discharge of the board as well as capital increase requests. In 2011, the average approval rate was 86.9% for capital increase requests, 87.3% for executive remuneration and 96.3% for the discharge.


1 November 2011

Swiss companies’ planning for climate protection is short-term

Thirty-four of Switzerland's 100 largest listed companies have set CO2 emissions reduction targets. For most of the companies concerned, the targets extend no further than 2012 – long-term strategies remain the exception. This is one of the important results of the recent questionnaire conducted by the Carbon Disclosure Project (CDP), the Ethos Foundation and Raiffeisen Switzerland, who asked the 100 largest listed Swiss companies about climate change-related opportunities, risks and strategies; 59 per cent responded.

On behalf of the Carbon Disclosure Project (CDP), Ethos and Raiffeisen have asked Switzerland's 100 biggest listed companies about their climate strategy. The rating agency Inrate wrote the report. The responses reveal that only 34 of those companies report to the CDP on their greenhouse gas emissions reduction targets. Most of the companies have relative reduction targets, for example a drop in proportion to production or staff numbers. The emissions of a company that has relative targets can nonetheless rise in absolute terms, should the company step up production or increase its staff.

Lack of a clear political framework prompt most companies to plan no further than 2012

The absence of a national and international legal reference frame for private sector emissions reductions is a source of uncertainty. This is reflected in the questionnaire results: over 60 per cent of the reduction targets indicated extend no further than 2012. Many companies are reluctant to include long-term reduction targets in their strategies in the absence of a clear political framework. In addition, 58 per cent of the companies anticipate regulatory risks with regard to climate change – a substantial increase since the previous year, when only 38 per cent anticipated such risks. This trend reflects the increasing uncertainty about future regulations.

Improved quality of reporting

In all, 66 per cent of the participating companies decided to make their replies public (2010: 60 per cent). Overall, the transparency and quality of the responses to the CDP information request improved, as revealed by the average disclosure score, which rose from 47 to 55 points (out of a possible total of 100). Disclosure scores assess the quality and completeness of a company's response.

The list of companies with indications of their participation, whether they published their responses and their disclosure scores may be consulted on page 37 of the study: Carbon Disclosure Project 2011: Switzerland 100 Report


29 June 2011

Ethos Survey on Executive Remuneration: Pay Raises in the Financial Sector

The total remuneration paid to the boards and the executive management of the Swiss listed companies included in the financial sector rose by 8%, while it remained stable in the other sectors. The 2010 executive remuneration survey of Ethos Foundation also shows that 56% of the companies under review implemented an advisory vote on their remuneration report at their 2011 annual general meeting, up from 38% in 2010. Despite this increase, self-regulation does not seem to function adequately. Ethos therefore considers that Swiss company law, the Swiss code of best practice and the Corporate Governance Directive of the SIX Swiss Exchange should be urgently revised.

Ethos Foundation published its survey of the 2010 board and executive remuneration in the 48 largest Swiss listed companies (comprising the SMI and SMIM indexes).

Variable remuneration is not always variable

In 2010, the members of the executive management of the 48 largest Swiss listed companies received on average CHF 3.1 million. The chairmen of the board received CHF 2.4 million, while the other members received CHF 300'000. The aggregate remuneration of the boards and executive management of the companies included in the survey was CHF 1.29 billion (+ 2% on 2009). There was a 8% increase in the financial sector, while the remuneration in the other sectors remained globally unchanged. The evolution of the total remuneration during the past six years shows a link between remuneration and performance in the financial sector, but not in the other sectors (see graph).

Significant raise in base pay

The remuneration paid in the financial sector is twice as high as the one paid in the other sectors. In the companies of the financial sector included in the survey, the members of executive management received an average remuneration of CHF 4.7 million, compared to CHF 2.5 million for the other sectors.

A key feature of the 2010 executive remuneration is the general increase of the base salaries of the companies operating in the financial sector. On average, base salaries rose by 15% reaching CHF 900'000 per person. For the CEOs in particular, the increase is 66% on average. The base salaries remained however stable in the other sectors. Generally, the variable part of remuneration largely exceeds 50% of total remuneration. The highest variable remuneration (78% of total on average) was observed in the SMI companies of the financial sector.

Say on Pay: More negative votes

56% of the companies under review (27 companies) have proposed, at their 2011 annual general meeting, an advisory vote of their remuneration system or report, up from 38% in 2010. The rate of opposition rose to more than 16% in 2011 (up from 11% in 2010). For the first time in Switzerland, a remuneration report was not approved. In fact, the remuneration report of Weatherford International received only 44% approval. The remuneration became the most contested issue at the 2011 general meetings of Swiss companies.

Swiss law and the Swiss code of best practice should be urgently revised

Despite the increase in the number of companies that have established a “Say on Pay”, many still refuse to do so. This shows that self regulation in the field of executive remuneration does not function adequately. Most companies argue that they do not want to change their practice as long as this is not imposed by law. According to Dominique Biedermann, executive director of Ethos Foundation, “Our laws, codes and directives are no longer adapted to the current situation with regard to executive remuneration. It is therefore urgent to proceed with the revision of Swiss company law, the Swiss Code of best practice, as well as the Directive on Corporate Governance of the SIX Swiss Exchange.”