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Business Ethics

Swiss referendum fans executive pay debate in Germany

After Swiss citizens voted Sunday to impose controls on executive pay, a similar debate has started in Germany. While politicians have largely welcomed the Swiss decision, economists are skeptical.

Aimed at imposing strict controls on executive salaries, the Swiss referendum might serve as a model to work out similar legislation Germany this year, Rainer Brüderle, the parliamentary leader of the pro-business Liberal Free Democrats (FDP), said on Monday.

Brüderle, the former economics minister for Chancellor Angela Merkel's conservative-led governing coalition, said that the FDP was in favor of strengthening shareholders' rights and would work to draft legislation even before the general election in September.

Michael Fuchs, the economic affairs spokesman of Merkel's Christian Democratic Union, raised a similar sentiment.

"Corporate pay decisions will then be made by the owners and not by the state," he told the German mass-circulation daily Bild, adding that shareholders knew better how much they could afford to pay.

Swiss vote spurs German executive pay debate

On Sunday, about 68 percent of Swiss voters backed a popular initiative allowing shareholders to veto executive pay proposals as well as banning big rewards for new and departing managers.

Support across the political spectrum

Joachim Poß, the parliamentary leader of the opposition Social Democratic Party, told the daily Neue Osnabrücker Zeitung that the outcome of the referendum was an important step towards restricting the money-grabbing prevalent in corporate management,

He noted that the referendum was encouragement for an initiative at the EU level, and added that "people do no longer accept perverted bonus systems, neither in banks nor in the real economy."

Gerhard Schick, a senior member of the Green Party, urged the government to take the signal seriously and impose curbs on corporate pay excesses in Germany, too.

Academic concerns

The corporate pay debate was also welcomed by Michael Hüther, the head of the Institute of Economic Research in Cologne.

Hüther noted, however, that instead of more regulation it would be better to have more supervisory board members and managers who really felt a responsibility of their own for ethical pay standards in their businesses.

Thomas Straubhaar, the director of the Hamburg-based Institute of International Economics, expressed similar skepticism in an interview with Neue Osnabrücker Zeitung,

Arguing that the curbs were wrong, he said that both the public and government must stay away from meddling in the wage policy of private businesses as this would upset market forces.

uhe/mkg (Reuters, dpa, AFP)

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