Swiss voters defeat bill seeking to cap executive pay

Swiss voters rejected a proposal on Sunday to cap the salaries of top executives at 12 times that of a company's lowest salary, heeding warnings from industry leaders that the measure could harm the country's economy.

If the measure had been approved it would have meant a big pay cut for business leaders earning millions of dollars more than their employees.

The country voted 66 percent against the so-called "1:12 initiative for fair pay" that was brought forward by the youth wing of the Social Democrats (JUSO). The idea behind the proposal was that nobody should earn more in a month than others earn in a year.

This is the latest of many attempts by JUSO, who obtained the 100,000 signatures necessary to force a nationwide vote, to narrow a growing wage gap in one of the world's wealthiest countries.

"Of course we are disappointed. But I also believe that we have an achievement nonetheless," JUSO President David Roth told Reuters. "A year ago, opponents were defending high salaries," he said, before noting that this was now an unpopular position.

In 2010, the bottom 10 percent of the workforce in terms of salaries earned under 4,000 Swiss francs ($4,400) per month, according to the Swiss Trade Unions Association.

In the failed iniative, top earners' wages would have been capped at around 576,000 francs ($632,000) a year.

Calls to limit the pay of top executives are not restricted to Switzerland. Anger over huge payouts formed part of the protests by the Occupy Movement in the United States after the 2008-9 financial crisis.

In Europe, French President Francois Hollande is pushing ahead with a cap on pay at state-owned firms of 20 times that of the lowest paid employee. Spain's opposition Social Democrats have adopted the 1:12 ratio as part of its economic policy, Roth said.

But the Swiss system of direct democracy – which allows for up to four national referendums a year – means popular outrage can more easily be translated into political action. Outrage over a proposed $78 million payoff to former Novartis chairman Daniel Vasella helped fuel support for a proposal to give shareholders a binding say on executive pay, which was overwhelmingly backed by voters in March.

Some Swiss cantons have also scrapped preferential tax breaks for foreigners, while a grassroots committee is also calling for Switzerland to introduce a basic income of $2,800 per month from the state.

Opponents to the proposal had warned it would harm Switzerland by restricting the ability of firms to hire skilled staff, forcing firms to decamp abroad and resulting in a shortfall in social security contributions and higher taxes.

"It's an important decision for the Swiss business location," Valentin Vogt, president of the Swiss Association of Employers, told Swiss television SRF. "The Swiss people have clearly decided that it's not up to the state to have a say on pay."

The Swiss have a history of voting against proposals they feel could hurt the country's economic success story or threaten competitiveness.

Initiatives to increase workers' annual paid holiday allowance to six weeks from four and to cut the working week to 36 hours from 42 both have failed at the ballot box in the past.

Al Jazeera and wire services