Corporate Law Overhaul
The Federal Council opened on November 28 2014 a consultation on a major modernisation of Swiss corporate law. The draft bill aims, on the one hand, to implement on a statutory level the requirements of article 95 (3) of the federal constitution resulting from the so-called fatcat initiative that was adopted. On the other, it aims to re-initiate a series of reforms that were launched in 2007, but that were put on hold shortly after to focus on the fat-cat initiative. As the consultation period closes, we consider the key proposals of the draft bill.
Overall, the draft bill on the modernisation of Swiss corporate law is a vast one, covering a diverse range of issues; some pundits have called it a mammoth bill.
The draft bill deals with the corporate governance of listed and non-listed companies, including compensation policy, and diversity requirements on the board and management. It proposes to step up the requirements set out in the Ordinance of the Federal Council against Abusive Compensation in Listed Companies, by requiring all companies to define in their articles of incorporation a maximum ratio of fixed compensation to variable compensation. It also requires a retrospective shareholder vote on executive compensation with a binding effect, to prevent companies from submitting executive compensation to a prospective vote on the budget followed by a consultative vote on the actual pay-out. Further, the draft bill proposes to set a statutory cap to the duration of non-compete arrangements and requires sign-on bonuses to be granted only in the compensation of a loss incurred by the incoming employee. This aims to prevent the avoidance of the blanket prohibition of golden parachutes and golden hellos (advance payments of executive compensation) both barred by the fat-cat initiative.
In parallel, the draft bill also seeks to encourage female representation in listed companies. It will require companies where the board of directors and executive management have less than 30% female members to explain why they were not able to reach this threshold and what measures they are taking to encourage the promotion of female executives more generally.
The draft bill also proposes the facilitation of the exercise of shareholder rights in the general meeting and shareholder actions. In particular, it proposes to lower the shareholding requirements to convene a general meeting or put an item to the ballot. It also contemplates a demand procedure. This...
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