CEO compensation increased at SLI companies

A CEO's salary actually includes various forms of compensation - the fixed basic compensation, the bonus (paid out directly or deferred), and the long-term variable compensation. The average expected direct compensation of corporate leaders in the SLI is CHF 5.88 million in 2016, an increase of 5.0 percent year-on-year (2015: CHF 5.60 million).

Compared with other companies in Europe, Swiss CEOs are compensated to a relatively high degree via long-term variable salaries. On the one hand, more than a third of the total package is granted in the form of so-called long-term incentives. Their payment depends on the long-term performance of the company and is only made after a period of at least three to four years. On the other hand, the deferred payment of bonuses also contributes to the long-term nature of the variable compensation. This results in a total of more than 50% of direct compensation being of a long-term nature.

Individual top performers

However, there are clear differences between the companies. As in 2015, the CEOs of UBS (CHF 13.4 million) and Novartis (CHF 11.8 million) lead the field in terms of expected direct compensation in the past financial year. The CEO who joined Credit Suisse in 2015 displaces the top Group executive of Roche (CHF 11.0 million) from third place with CHF 11.2 million. At the end of the compensation comparison is the CEO of Swisscom with CHF 1.5 million. Companies whose CEO has been in office for less than one year are not included in the average values.

Compared to 2015, the EBIT of the SLI companies increased by an average of seven percent to CHF 2.55 billion (2015: CHF 2.38 billion). Here, too, the differences within the SLI companies are large. Adecco is the frontrunner with an increase of 261%, while Swatch Group's EBIT almost halved to -45%.

Overall, the company results are in line with the level of compensation. At eleven of the SLI companies under review, both EBIT and direct compensation are increasing, while at four companies earnings and compensation are decreasing. Five companies reduce their compensation as EBIT rises, one maintains it and only two companies increase their compensation, although they report lower EBIT than in 2015.

International development

An analysis of the Dow Jones STOXX Europe 50, the share index of the 50 largest companies in Europe, shows that the top Swiss companies continue to pay their CEOs significantly more than in other European countries. For example, the CEOs of the Swiss "big players" (who were in office for the full year in 2016) received an average of CHF 10.6 million (2015: CHF 10.7 million), significantly more than their counterparts at the non-Swiss companies in the index. Their average direct compensation was CHF 6.8 million, an increase of 3% year-on-year (2015: CHF 6.6 million). However, a comparison with the US also puts these heights into perspective. Here, far higher CEO compensation than in Switzerland or Europe is common and culturally justified.

 "Say on Pay" is further strengthened
With regard to regulatory developments defining the framework conditions for the compensation of the Group Executive Board, Europe is on a uniform path. A major milestone in this context is the Shareholders' Rights Directive, which will lead to more transparency and greater shareholder influence ("Say on Pay"). The compensation policy and the compensation report will be voted on at regular intervals. The so-called proxy advisors will play a special role here. They support institutional investors in developing their voting recommendations. Small and medium-sized investors can even outsource the entire voting process, including the election decision, to proxy advisors. "The pressure on the level and structure of executive compensation will thus continue to increase," explains Olaf Lang, of Willis Towers Watson.

More information about the comprehensive study will be available soon here