The common good takes precedence over individual interests

Interview with Councilor of State Thomas Minder, the initiator of the people’s initiative “against rip-off salaries”

ev./thk. By 28 June, the initiator of the people’s initiative “against rip-off salaries”, Councilor Thomas Minder, has decided not to withdraw his initiative because the indirect counter-proposal of the Federal Council is in fact a toothless tiger. The pressure exercised on Thomas Minder by business circles is enormous. According to the Councilor, he received a call from one of the magnates of the business establishment last week, who asked him seriously if he could answer for jeopardizing Switzerland’s business position in case the initiative was accepted. The poorly developed civic awareness of economic elites is appalling, when the personal financial benefit has priority over the public good. What is more, the sovereign decides at the ballot box about the economic activities in our state, not a single person.
The financial crisis may be far from over, and in many countries people are considering a humane and sensible way of doing business. The initiative is part of this.

It has received so much encouragement in the population, that Thomas Minder was elected into the Council of States in the federal parliamentary elections in autumn 2011 in the first round of voting. The debate about how the world of finance and business could be brought back to a level where it serves the common good and how irresponsible speculation could be restrained is long overdue. Taking this into account, direct democracy is indispensable.

Current Concerns: Dear Councilor of State Mr Minder, what prompted you to launch the initiative and to take upon yourself to do all this work?

Councilor of State Thomas Minder: What triggered it off was the grounding of the Swissair. Our company had a very big purchase order from Swissair. It would have been fatal for us if the successor organisation had not continued. It was about tooth paste and tooth brushes. When we later learned that the then Chairman of the Board of Directors, Corti, had been given several millions in advance, enough was enough.

Who are the members of the initiative committee?

They are family members and friends. I intentionally chose them. I invested almost half a million francs and wanted to make sure that the committee does not begin to doubt about their work. I knew when I have family members and friends around me, I can be sure that this will not happen.

To consider this as a citizen and then launch an initiative is a courageous step.

Today I have a different view. In fact I am considered to be a kind of a classic example but the initiative has not yet been accepted. We have done many things right. On the other hand there are initiatives which are considered to be extreme. In the beginning I was considered to be extreme, too. But in the meantime this has changed. When the counter-proposal was accepted in parliament with 235 to one votes even the biggest opponents agreed. In the meantime I am considered to be moderate even by my opponents – since I was elected to the Council of States – even by Swissmem (Swiss association of mechanical and electrical engineering industries MEM) or by Gerald Bührer (Chairman of économiesuisse).

Which rules have to be complied with when drafting an initiative?

If you want to launch an initiative you will have to preserve a middle course. I knew this from the very beginning. The other aspect is to write a fool-proof text. I was aware that if there was one false word in it, the fuss would start. The text has to be absolutely tsunami-safe. The text has to aim at the centre and must not allow greyscales. In our case one can surely say that the text is excellent, as it has been argued about for four and a half years in Berne.

This is a strikingly long period.

Yes, you might say that. In retrospect, many parliamentarians say: We should have waved this draft through, and then at least something would have been done on this matter. The text is so good that it has caused the entire Federal Council to sway. This has never happened before: an initiative text with 24 items. Normally an initiative text has two lines. The citizens realize that we have really worked very thoroughly.

You mentioned the four and a half years, in which the initiative was discussed in parliament, and you also mentioned the indirect counter-proposal, which would be applied if you withdrew the initiative or you wouldn’t succeed in the vote. Where are the main differences between the indirect counter-proposal1 and your initiative?

The initiative has 24 items. The Federal Council has taken over five of them and some others with certain deviations. For example, they do not want that general assembly to decide on the amount of the management salaries. In contrast it shall be regulated in the statutes if the vote is binding or facultative. This kind of regulation already exists in many statutes today. Of course, the owners i.e. the shareholders decide about the statutes. But if they do not want a binding vote about the management salaries they will not incorporate it in the statutes. The issue of intervening in the management salaries is a bit of a pièce de resistance. Consultative votes exist in many countries, but this has nothing to do with democracy. Asking people about their opinion and then deciding on one’s own ideas has nothing to do with democracy. Despite the huge financial crisis nothing has actually changed, there is no moderation. There is no recovery in sight. Therefore taking a vote on the initiative had made more sense, if we had voted long ago.

People are aware that the whole thing is far from being over. In many countries, the population is sensible of it.

Yes, of course. Now the National Bank requires that no dividend will be paid so that the equity capital of banks can be built up. The tension that already exists between owner and the board of directors gets even higher due to the pressure on the companies, because they need to raise equity, which means that they have to cut the shareholders’ dividend or even cut them. It is difficult to find a solution here. By 2018, the banks have to have appropriate equity capital and this will take its toll on the shareholders. To me, it has not so much to do with the small shareholders but with the pension funds and the OASI (Federal Old-Age and Survivors’ Insurance) compensation fund, which have partly invested into securities of the banks.

The banks play a special role and the derating by the rating agencies, which are completely intransparent, often have devastating effects.

Look at the salaries, and not just those from last year. The money that has been withdrawn from the companies, including Credit Suisse, where Brady Dougan withdrew 70 million francs, although business was already going downhill. But we don’t even know everything. Whilst the government is helping UBS not to go bankrupt huge amounts of bonuses are paid out. Bonuses are actually a variable part of the salary. A bonus may only be granted for successful economic activity. Today all this is upside down: in the case of UBS the state has guaranteed for the losses and for toxic papers to an amount of 60 billion Francs – but UBS shows a profit and pays bonuses as if nothing had happened.

Now everyone is aware that this system will not work. Why do the pension funds not exert more pressure and support you?

There has already been some criticism. But if the pension funds invest their money in a company, they need to check it, which faced some resistance in certain funds. They invest in companies without checking on them. This is really incredible.

That is why the initiative is so important. If we do not stop it now, we do not know what the development will be. However, all pension funds are involved.

Yes, in this sense, we are all shareholders ...

... but not by our own choice.

The pension funds do have an obligation, as well as the OASI compensation fund. The Swiss population must yet be informed where the billions of the funds go. I believe the owner (shareholder) should keep a close eye on the companies. Perhaps one or the other pension fund would then have invested in other companies with greater transparency.

I would like to come back once again to the indirect counter-proposal. And you write in the argumentary, that the Federal Council still pursues a neo-liberal policy. Could you substantiate this a little more?

Fully liberal ideas are prevailing in the government in Bern saying for example that you should not offend the big banks. I would develop the too-big-to-fail idea even further and include COOP and Migros or the Swisscom etc., which are all companies with a strong position on the market. As for the UBS nobody had ever thought that something could happen, as it was such a well-managed bank. The separate banking system has to be introduced at the banks. We do have to prevent a second case like the UBS.

You mentioned earlier, that the Federal Council is always keeping back doors open with regard to the indirect counter-proposal. Could one say, that the Federal Council continues to leave itself a way out to continue neo-liberal policies?

I just feel a constant back and forth in the Federal Council. They had one and a half years to decide whether they wanted or not to make a counter-proposal. The first Message of the Federal Council came just a few weeks after the “grounding” of the UBS, when Federal Councilor Ms Widmer-Schlumpf publicly announced that they needed to do something. However, she took over a single point of the initiative only, namely that a Board of Directors may not contract with itself. She wanted to fix it with an equity law revision, i.e. with an indirect counter-proposal. Actually, this has already been prohibited by the Swiss Code of Obligations. First statutory reserves must be accumulated, and only in case something is left and profits are distributed, the shareholders can award remunerations to the Board of Directors at the annual general meeting.

So the individual shareholder already has a say here?

Yes, certainly; only when the legal reserves and the shareholders’ profits have been distributed, the Board of Directors is entitled to get something. A perfect approach, isn’t it? And Federal Councilor Widmer-Schlumpf took over this regulation, although it has already been included in the law. However, it is not applied. For tax reasons, there is no company where a discussion on compensations takes place at the general assembly. That practice was cancelled: The board of directors is awarded a fixed fee, which is totally wrong. Even when the UBS was “grounded”, all members of the Board were still awarded a fixed fee of 525,000 Swiss francs.

Idea-wise these remunerations clearly represent a variable amount, which has to be taken out of the profit and for which the owner has the final say. He determines how much he wants to give to the Board of Directors. Now I go even further and say: If you had correctly interpreted the remuneration model, nothing would be paid in case of loss, because it is nothing but a share in profit. The situation today is so weird that fixed remunerations are paid even in companies in which losses incur and which get financial support from the government. Actually, the owners should say that they can only grant 10%, because they have done so badly.

The Federal Council has shown quite a miserable attitude on this issue. Federal Councilor Widmer-Schlumpf said in Parliament: It is good, there should be a direct counter proposal, and then there is a second ballot paper in the envelope. And in the Council of States, she said: no, no, it is good that you do not want to make a direct counter proposal, one should fix that in the law on stock companies. She spoke differently in one Council and in the other, she knew, the one would prefer a direct and the other one would prefer an indirect counter-proposal. That was 2010, when she was still Head of the Federal Department of Justice.

If but one point among your 24 points is included in the indirect counter-proposal, it becomes obvious that something is wrong with it …

That was in the first Message by the Federal Council; afterwards it issued uncountable supplementary messages. And in the end, Federal Councilor Ms Sommaruga even supported the bonus tax. Just imagine it! My initiative does not take any Swiss franc from a company. I want the money to stay within the enterprise. The things that figure in the diverse proposals made by the Federal Council are absolutely confused. No common thread, no vision. Of course the parliament was no way better; even there a slalom course, a complete confusion prevailed.

Then we contacted Professor Linder, who is very experienced with people’s initiatives. He said that he saw only two possibilities to escape the chaos: Either the federal Council abandoned the bonus tax, that is to say the direct counter proposal, which would be the simplest thing to do. Or the people were allowed to vote on the indirect proposal, which has never been done before. You put four ballot papers in the envelope, one for the initiative, one for the direct counter proposal, the bonus tax, the third paper for the indirect proposal, and the fourth for the tie-breaker question. Thanks God, National Councilor Martin Bäumle (Green Liberal) has come to his senses. The Conservative Democratic Party of Switzerland (BDP) and the Green Liberals have stated that the bonus tax is nonsense because it deprives the companies of their money and because the bourgeois parties actually should have an eye on small tax payment of the enterprises.

Which are in short the most important points that make the difference between your initiative and the indirect proposal?
The most important point is the back doors that you have to close. The second important point is the pension funds, which were omitted in the indirect counter-proposal, and the third important point is the penal provisions. The penalty that is planned in the initiative should also hurt. I am very strict regarding this point. The penal provisions article has not been discussed in Switzerland for four years now, only within the last year when everything has become a bit tighter. It is really quite peculiar.

Councilor of State Mr Minder, thank you very much for the interview.    •

^{1 Indirect counter-proposal: amendment to the law which is only subject to a facultative referendum. In this case it is an attenuate version of Article 95 Par. 3 of the initiative, in which the catchy parts were abandoned.}

^{Direct counter-proposal: amendment to the constitution that deviates from the initiative text which is submitted to the voters together with the initiative. In this case the intended direct counter-proposal included the introduction of a bonus tax.}