Governance and remuneration

From the old board to shareholder value

The consolidation of the 1990s transformed the governance of Swiss big banks. The boards of the old banks had been composed largely of Swiss industrialists, politicians and officers who represented the interlocking elite sometimes described as “Switzerland Inc.” Their role was as much to connect the bank with the economy and the state as to control the management. The new groups that emerged in the late 1990s were run by professional managers who spoke the language of the capital market, set themselves targets for return on equity and were measured by the price of their shares. Ebner’s campaign against the Bankgesellschaft, the takeover of Winterthur and the targets published with the merger of 1997 all belong to this transition.

The change had a legal counterpart. On 25 March 2002 the business federation economiesuisse adopted the Swiss Code of Best Practice for Corporate Governance, a set of recommendations addressed to listed companies. At the same time the Swiss Exchange issued a directive on information relating to corporate governance, which came into force on 1 July 2002 and required listed companies to disclose, among other things, the aggregate remuneration of the members of the board and of the executive management. The Code stated that remuneration should be demonstrably linked to the sustainable success of the company and should avoid perverse incentives.¹ The two documents were the Swiss response to the corporate scandals of the early 2000s and to the demands of international investors. They codified the idea that the board of a listed company must control the management in the interest of the shareholders, an idea that Ebner had defended against the Bankgesellschaft a decade earlier.

The pay question

The remuneration of bankers became a political issue in Switzerland in the wake of the consolidation. The acquisitions of O’Connor, Warburg, Dillon Read, PaineWebber and DLJ imported Anglo-American pay structures into Swiss groups. Investment bankers and traders expected bonuses that often exceeded their fixed salaries many times over. The Swiss managers who led these groups aligned their own pay with the levels of their American and British subordinates and competitors. The disclosure rules of 2002 made the total pay of top executives visible. Public figures for the remuneration of the chairmen and chief executives of UBS and Credit Suisse, which in some years reached tens of millions of francs, provoked indignation that the Swiss press captured in the word “Abzocker”, the rip-off managers.

This debate belongs mainly to the following decade. It culminated in the popular initiative “against rip-off salaries” launched by the Schaffhausen entrepreneur Thomas Minder, which the voters accepted on 3 March 2013 and which introduced binding shareholder votes on board and executive pay into the Federal Constitution.² Its roots, however, lie in the 1990s. The consolidation created two banks whose size, profitability and international staff justified, in the eyes of their boards, pay levels that had no precedent in Swiss business. It also created a public that watched these two banks with growing mistrust, because their failure would affect the whole country. The debates on remuneration after the rescue of UBS in 2008 and after the collapse of Credit Suisse in 2023 were rooted in this combination of private reward and public risk.

Supervision of the two big banks

The consolidation changed the task of supervision as well. In 1998 the Federal Banking Commission introduced a specific form of supervision for the two remaining big banks, UBS and Credit Suisse.³ The small secretariat in Bern, which had been built to supervise hundreds of mostly domestic banks through the external auditors, now faced two global institutions whose activities extended to every major financial market in the world. The special big bank supervision was an attempt to meet this challenge with dedicated staff, closer contacts with the management and cooperation with foreign supervisors, above all in the United States and the United Kingdom. Its limits became apparent in 2007 and 2008, as the FINMA report of 2009 on the financial crisis and financial market supervision acknowledged.

Notes

1. economiesuisse, “Swiss Code of Best Practice for Corporate Governance”, 25 March 2002, German version, https://www.ecgi.global/sites/default/files/codes/documents/swisscodeofbestpractice_german.pdf, including the reference to the SWX Directive on Information relating to Corporate Governance in force since 1 July 2002. ↩
2. Federal Council, “Bundesratsbeschluss über das Ergebnis der Volksabstimmung vom 3. März 2013”, 30 April 2013, https://fedlex.admin.ch/filestore/fedlex.data.admin.ch/eli/fga/2013/646/de/pdf-a/fedlex-data-admin-ch-eli-fga-2013-646-de-pdf-a.pdf, declaring the initiative accepted by 1,616,184 votes to 761,975 and by all cantons; Federal Council, press release of 20 November 2013, https://www.admin.ch/de/nsb?id=51029, on the implementation of Article 95 paragraph 3 of the Federal Constitution by the Ordinance against Excessive Remuneration (VegüV) from 1 January 2014. ↩
3. FINMA, “Finanzmarktkrise und Finanzmarktaufsicht”, as cited above. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.