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Blogs - The M&A Perspective

Executive Compensation – A New Playing Field for Shareholder Activists?

04.03.2014 – On 1 January 2014, the ordinance against excessive compensation in listed joint stock companies (VegüV, ORAb) entered into force. The ordinance brings far-reaching new rules on the corporate governance of Swiss public companies with direct effects on executive management, shareholders, pension funds and independent proxies. In particular, the ordinance provides for the election of the chairman of the board and the members of the compensation committee by the shareholders, a mandatory one-year term of office for board members, and, from 2015 onwards, for a binding say-on-pay vote by the shareholders on the compensation of the board and executive management. Furthermore, the institutional voting representation by governing bodies of the company itself and/or custodians is henceforth abolished and the role of the independent proxy is strengthened. Last but not least, as of 2015, pension institutions will be subject to certain voting and disclosure obligations in respect of the shares held by them in Swiss public companies.

These new rules will to some extent change the voting behavior of shareholders, in particular pension institutions. It is expected that as a result, proxy advisors will become more influential in Swiss listed companies. All these well-intended changes also give activist shareholders additional means to "shake up" a listed Swiss company, its board of directors, and/or its management.