Top managers and executives have felt the pinch of the economic crisis on their pay packages, which have fallen by around one quarter, a study says.Debate has been raging in Switzerland about executive salaries, which despite the drop remain high. Nevertheless, the survey rejected caps on compensation packages as counterproductive.
The third survey of Executive Compensation and Corporate Governance by consultants PricewaterhouseCoopers of Switzerland was based on figures from 2008 and released in Zurich on Wednesday.
It said that the average chief executive compensation for the 20 companies on the Swiss Market Index (SMI) of blue chips dropped by about 25 per cent to SFr6.9 million ($6.7 million).
It noted that the reduction was caused by a decline in variable compensation. For example, in SMI companies bonuses dropped by 50 per cent.
The average total payout for board chairmen or women of SMI companies also dropped by 29.6 per cent to SFr844,723.
In addition, as a consequence of plummeting share prices, some members of boards of directors and executive boards have suffered "significant losses" in wealth on their company shares.
« I think it's important that we have standards on how compensation should be structured. » Reto Schmid, PricewaterhouseCoopers No overregulation
Despite that, some managers are still pocketing very generous financial rewards. It was recently reported that Novartis CEO Daniel Vasella had taken home a salary plus benefits totalling SFr40.3 million last year.
But PricewaterhouseCoopers nevertheless warned against overregulation in Switzerland.
"I think it's important that we have standards on how compensation should be structured... If we have rules limiting the company in designing their compensation structure, then I think that would be a risk for the future of the company and industry," PricewaterhouseCoopers partner Reto Schmid told swissinfo.ch.
He added that it was time for a rethink. "It starts at the top. What is the strategy? What does it want to achieve? Based on that a compensation system that is a "best fit".
"There's no one-size that fits all. It's a of having the right people on board to achieve the goals for the future. It's strategic and less opportunistic."
The study notes that with the advent of the financial crisis, the political debate on compensation of top executives has become increasingly heated.
Where is the blame?
But it states that compensation can hardly be blamed as the main cause of the economic crisis.
The study also puts the blame on other factors such as high expectations of shareholders, corporate cultures encouraging excessive risk taking and inadequate regulatory frameworks.
While the main target of public criticism is the amount of compensation for top executives, it is only one part of the equation, the study finds.
"More important than that, however, is the structure and the combination of the different elements in total compensation," the survey says.
These include equity programmes, bonuses, base salary, pensions and social security, as well as fringe benefits.
Robert Brookes in Zurich, swissinfo.ch
