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Election Law @ Moritz

Election Law @ Moritz


What We Could Do With a National Citizens' Initiative: Control Pay!

The Swiss voters on March 3rd demonstrated the power of a national citizens’ initiative right. Sixty-eight percent of Swiss voters voted in favor of something formally called the Minder Initiative, named after Thomas Minder, the politician who created it, that puts heavy controls on executive salaries at Swiss companies. Informally the Initiative was named the “Rip-Off Initiative.”

Switzerland has a national constitution that enables citizens to amend the Swiss constitution by the initiative process. Both federal and cantonal (state) initiatives are common in Switzerland. The initiative process in Switzerland is surprisingly sensible, and a model for some state constitutions in the United States (notably Mississippi’s). But we do not have a national initiative process.

Any 100,000 Swiss citizens may propose a constitutional amendment. The Swiss federal legislature may agree with the proposal and submit a redraft to the citizens or adopt legislatively a version of the proposal on the condition that its proponents withdraw it. If the legislature rejects the proposal, the Swiss government submits the proposal to the citizens with an official statement in opposition and may submit a counter-proposal to the voters. An initiative must receive a “double” majority, a majority of the votes of those voting and a majority of the votes of those voting in a majority of the twenty-six cantons.

In practice, fewer than three percent of the initiatives reach Swiss voters with the legislature’s official blessing. Close to one-half of the initiatives never reach the ballot, as the Swiss assembly takes action that satisfies the initiative’s sponsors. The assembly has offered the voters a counterproposal in about one-quarter of the votes, and voters usually adopt the counter-proposal over the citizens’ proposal. Citizens may vote yes on both citizen and government proposals; the proposal with the most votes wins, even though both may have achieved a legal majority.

The advantage of the Swiss national initiative process was on display in early March of this year. Mr. Minder proposed a twenty-four item measure that, among other things, makes shareholder votes on executive pay required and binding, bans golden-handshake and golden parachute severance agreements, and requires disclosure of loans and retirement packages for senior executives and directors. The government had proposal a milder plan of non-binding shareholder votes, such as we have under the Dodd-Frank Act in the United States.

Such a proposal could not pass in any state in the United States that has an initiative process because the leaders would argue, persuasively, that corporations would simply leave the State and incorporate in others that had not passed such a plan. It has to be a national rule. In other words, we need a national initiative process to do this and we do not have one.

The Swiss business community is apoplectic. But their misbehavior led to the initiative. Swissair took bankruptcy but managed to pay its disgraced CEO $9.6 million in severance money that same year. And the fallout may not be over.

Emboldened by Minder’s success, the Young Socialists have collected a sufficient number of signatures to put the “1:12 Initiative for Fair Play” on the next ballot. The proposal limits executive salaries to 12 times the salaries of a company’s lowest paid employee.

Do not get too giddy, however. In 2007, Swiss voters passed a national initiative banning the construction of new minarets in Switzerland. 57.5% of the citizens and twenty-two of 26 cantons supported the initiative. The initiative sparked international condemnation.


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