This three-part study comprises the years from 2007 to 2017 and investigates board and executive compensation at the largest 100 listed Swiss companies. Moreover, for more recent years, one part of our study also provides a comparison with the largest 130 listed German companies.
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Our data allow a wealth of further analysis, and these are just a few of the key points. Feel free to contact us if there are other aspects of compensation you would particularly like to talk about.
Executive compensation in Switzerland has, in the last 11 years, exhibited elements of both stability and change. The total aggregate amounts of compensation paid to boards and executives combined have hardly changed, but the distribution across firms of different size brackets and within firms (between executives and the board; between different roles) has shifted significantly. The structure of compensation has also undergone some change. It is critical for decision-makers to keep abreast of these developments.
In the next volume of this publication, we consider the international dimension. Although the legal and governance system of Germany differs markedly from that of Switzerland, the two markets are close enough to merit comparison. Are Swiss board members and executives paid more or less than their German counterparts? Are there structural differences? How has this changed over time? Find out in PwC Insights 2018, part 2, to be released in October.
Overall, these results show – once again – that common wisdom regarding board and executive compensation needs to be challenged now and then. Some observers have highlighted the higher pay of board members in Switzerland, but the fact that pay levels of executives in the two countries are quite similar has received far less attention. By and large, where differences between Switzerland and Germany exist in the relative levels of board and executive compensation, they can be traced back to differences in the governance systems. In both countries – and in others – the design of effective compensation systems is a challenge.
To drive this discussion forward, Insights 2018, part 3, released in November 2018, presents a new idea for linking equity-based (long-term) compensation with a focus on the achievement of strategic targets. This versatile method can be adjusted to the circumstances of each firm but is sufficiently general to allow straightforward communication to shareholders and other stakeholders.
Simplicity is a virtue for compensation systems. Managers prefer simpler incentive systems; by contrast, they heavily discount the value of complex systems. At the same time, incentive systems should explicitly incorporate the often neglected dynamic component in disclosure and discussion of outcomes. The STARS model achieves both of these aims.
A rational and long-term focused remuneration system is a necessary, rather than a sufficient condition for value-generating corporate governance. The board and executives together must take a holistic view that tightly links the design of the remuneration system, the composition of the board and the executive, shareholder engagement, and value reporting.
Presents a new idea for linking equity-based (long-term) compensation with a focus on the achievement of strategic targets. This versatile method can be adjusted to the circumstances of each firm but is sufficiently general to allow straightforward communication to shareholders and other stakeholders.
Partner, People and Organisation, PwC Switzerland
Tel: +41 58 792 46 08