Why Swiss voted to maintain huge pay disparities

The questions raised by Switzerland’s 1:12 campaign are worth thinking about

Mon, Dec 2, 2013, 01:00

Some stories are hard to swallow. Take the one last week about the 17 Irish bankers who each earned more than a €1 million in 2012, with an average of €1.4 million apiece for those lucky few. Extend the remit to include the whole EU and the number earning seven-figure sums last year rises to 3,529, an astonishing 77 per cent of whom were British.

Then we have the HSE – site of many a tough budget cut over the last five years – where several senior management figures were having their sala- ries “topped-up” with private funds, hospital shop profits or even charitable donations.

While several chief executives were being paid in excess of €300,000 a year, some nurses and doctors further down the pay scale were pull- ing “sleepovers” almost every other night, for €3 an hour.

At least we’re not as bad as British bankers though – or Swiss bankers, for that matter.

Last year, the heads of the UBS and Credit Suisse banks each earned more than 190 times what their lowest-paid employees did. That UBS has had substantial financial assis- tance from the Swiss government in recent times seems not to have affected their executive pay scale, something we Irish can surely relate to.

Daniel Vassela, chief executive of Swiss pharmaceutical giant Novartis, was paid 219 times as much as his lowest paid employee in 2012. To put it another way, the person at the bottom of the scale would have to work their whole professional life five times over to make as much as their boss does in a single year.

The incredible level of income inequality in Switzerland was highlighted this year by the 1:12 campaign, which proposed a national pay cap to limit executive earnings to no more than 12 times their company’s lowest salary.

After campaigners collected 100,000 signatures in support of the idea, the Swiss people had the opportunity to vote this limit into law. Last Sunday, by a margin of two to one, they rejected it.

It is easy to understand this outcome. The government had argued effectively against the proposal, saying it would devastate the state’s tax revenues, drive employment elsewhere and ruin Switzerland’s reputation as an easy place to do business.

Large businesses in Switzerland also urged people to vote No, echoing the government in their concerns.

Only the extremely naïve would assume that the threat of mass corporate emigration from the Alpine state was a bluff. A Yes vote would have meant huge changes to the payment structure at lots of Swiss companies, changes considered untenable in many cases. Plus, Switzerland has managed to avoid most of the recessionary effects plaguing its European neighbours, with a skilled workforce enjoying a generally high standard of living and almost full employment. Why rock the boat?

The economic consequences of an alternative result could have been disastrous for a country with no pressing need to take risks. However, while the initiative itself always seemed doomed to fail, the questions raised by the campaign are very much worth thinking about.

The argument that businesses will simply go elsewhere if their freedom is imposed upon highlights the skewed balance of power between the state and the private sector.

In the context of the very generous help our State has given to that sector in recent times, the question of what the state and its people can ask for in return is very important.

When the average person’s take-home pay stagnates behind increasing profits in the corporate world, we have to ask if there’s a better balance to be achieved between the sacrifices made to get multinational industry – the likes of Google, Intel and Pfizer – to put down roots here, and the public reward for having them.

How much should these companies be putting back in to the countries that generate their wealth? Is mere employment, on the employers’ terms, enough, or should the state, as the people’s collective bargaining apparatus, be involved in making sure that any rising tides lift all boats fairly?

We also need to think about how can individual states work together to achieve this goal. With the mobility of modern capital in mind, we need fewer nations in competition with each other for corporate enterprise and more in solidarity against exploitation.

As we begin to hear talk of a supposed recovery, the ques- tion of how the health of the economy is measured is vital. Will it be by the well-being of business leaders or the people working for them?

More than ever, we need balance between what is good for shareholders and what is good for everyone else. The 1:12 referendum has at least got Swiss people thinking about these things.

If we are to avoid repeating the mistakes of decades past and ensure a better standard of life for those at the bottom as well as the top, then the Irish people and our Government will have to think long and hard about them too.