Not all that many generations ago, the idea of an income floor for working Americans—a minimum wage—seemed impractically utopian. Today we have mandated state and national minimum wages, and the vast majority of Americans want these minimums kept at meaningful levels, as voters made clear most recently in New Jersey.
But what about the notion of a “maximum wage,” a ceiling on the income any one individual can grab from the marketplace? Could a wage maximum ever become as central to our sense of social decency as a wage minimum?
The results from the November 24 Swiss referendum on a proposal to cap CEO pay—at twelve times the wage of a company’s lowest-paid worker—don’t at first glance seem to bode well for that prospect. The Swiss pay cap failed, by a 65-35 percent margin.
Activists in the youth wing of Switzerland’s Social Democratic Party had spent four years working on behalf of the “1:12 Initiative for Fair Pay.” They had collected the 100,000 signatures needed to get on the ballot and enlisted the support of Swiss labor unions and the country’s two largest left-of-center political parties.
The 1:12 vote, despite all this noble effort, still fell disappointedly short.
Do Swiss voters simply not care that top executives at world-famous Swiss brands like Nestlé and Swatch are making well over 100 times more than their workers? Hardly. They care plenty.
The 1:12 initiative was running dead even in the polls into October—until Swiss corporations unleashed a lushly financed fear-mongering ad blitz. If the 1:12 initiative passed, they argued, Swiss-based multinationals would shift their operations to friendlier locales, Switzerland’s tax receipts would plummet and the nation’s social safety net would tear into tatters.
Swiss corporate leaders, interestingly, made little attempt to advance the arguments that American apologists for excessive CEO pay so routinely trot out: that high executive compensation acts as an incentive for high executive performance, and that no modern corporation can compete globally without rewarding execs at “competitive” levels.
But the debate over the 1:12 proposal exposed the emptiness of the corporate rationales for executive pay excess. Back in the 1980s, backers of the initiative pointed out, Swiss businesses competed quite effectively without lavishly compensated executives. In those years, the Swiss think tank Denknetz notes, Swiss CEOs averaged only six times Swiss worker pay. And at least one major Swiss company is still compensating—and succeeding—at that pay ratio level. Victorinox, the 129-year-old company that makes those iconic red Swiss army knives, pays its top execs no more than a half-dozen times what workers make.