3.2 Say-on-pay rules

With the adoption of the constitutional amendment on say-on-pay rules in 2014, Swiss listed companies became subject to a number of additional obligations (cf. Art. 732 et seq. CO). As the name suggests, these say-on-pay rules govern the approval of compensation paid to the members of the board of directors and executive management (and the advisory board, if applicable) of a Swiss listed company. The CO also requires the publication of a remuneration report disclosing the payments to members of the board of directors and executive management, which has to be audited. In addition, the rules prohibit certain payments to members of the board of directors and executive management, such as severance payments, payments related to mergers and acquisitions (M&A), and advance payments if these do not compensate for lost benefits. 

Despite the name, the Swiss say-on-pay rules regulate more than just compensation. For example, they require Swiss listed companies to elect the chairperson and each member of the board of directors each year and also appoint an independent proxy and members of a remuneration committee each year. Among other obligations, the CO requires listed companies to include provisions on the maximum number of permitted external board mandates and the maximum term and termination period for employment agreements of the members of the board of directors and executive management. Furthermore, the principles of performance-based remuneration for the board of directors and executive management are only valid if they have been defined in the articles of association (company bylaws); the same rule applies to principles underlying the allocation of equity securities (including equity-linked and option rights relating to equity securities) to the board of directors and executive management. A compensation committee is mandatory for listed Swiss companies, unlike other committees such as the audit or nomination committee. However, the latter are commonly found in practice.

The say-on-pay rules include provisions that criminalize certain conduct, such as any payment of remuneration prohibited under these rules.