This week in a national referendum, 65 percent of Swiss voters rejected a measure that would have limited CEO salaries to twelve times the pay of junior employees. In doing so, they showed the world once again why Switzerland remains one of the most prosperous and innovative countries in the world!
Switzerland has one of the world’s freest economies. It consistently ranks in the top ten in both the Index of Economic Freedom and the Economic Freedom of the World Report. In recent years it has been ranked number one on the Global Competitiveness Index. By all international measures Switzerland is near the top of countries in per capita income, and poverty there is not a big problem
So why is there such concern about top earners in such a prosperous country? And are these concerns valid?
The most important question concerning any individual’s wealth is, how did they acquire it? If they produced goods and services to sell to voluntary customers on the basis of mutual benefit, then from the janitor to the company president, they earned it. It’s theirs. And they are entitled to whatever they can earn in this manner.
It is a moral affront for individuals to assert a right to someone else’s wealth, wealth they did not earn, or to demand that government guns should bar the earner from receiving whatever compensation they can acquire through their honest efforts.
Fortunately, when challenged, the people of Switzerland took the moral position.
But there was a context to the Swiss vote that highlights a growing problem in all countries. Sometimes executives are given huge salaries and bonuses even though their companies are being propped up or bailed out by taxpayers. In such cases, taxpayers understandably do not count the money that is involuntarily transferred from their pockets to the pockets of such executives as “earned.”
In 2008 the Swiss government bailed out UBS, the country’s largest bank. Thus, executive compensation became a public matter. But how does one determine compensation for executives in such cases? How much is “too much?”
In the free market there are cases of companies that lose money and then lose even more by rewarding executives of such failing concerns with hefty salaries or bonuses. But in such cases compensation is a matter for the owners and investors of the company. If one owns stock or bonds in such a company and one is outraged by high salaries, one can divest one’s self and dump the company.
And, in fact, earlier this year Swiss voters gave company shareholders a binding vote on executive pay and blocked what might be considered excessive severance packages. One could argue that such a state mandate on corporate governance violates free market principles. But companies that get in bed with government and receive taxpayer funds invite these sorts of measures.
But the Swiss voters proved themselves sensible and took the moral high ground by declining to allow government to directly cap what executives might honestly earn. And this is no small achievement.
Leftists in Western Europe, America, and the developed world are obsessed with what they conceive of as “equality” or “fairness.” In practice this means empowering governments to redistributed wealth from those who earned it to those who didn’t. Worse, the motivation of such statists is not to raise up the poor but, rather to tear down the prosperous. Their motivation is sheer envy. Winston Churchill was right to say that "socialism is the equal sharing of misery."
Switzerland has been the target of political attacks and pressure by other European countries and the United States because it is still so free. Those who resent having their wealth seized by rapacious statists often resort to Swiss banks or even Swiss citizenship. A solid majority of the Swiss understand their unique position in the world as an island of liberty where individuals can prosper, as the Swiss voters have shown again in the recent referendum!
Hudgins is director of advocacy and a senior scholar at The Atlas Society.
For further information:
*Edward Hudgins, “ Switzerland Attacked! ” May 15, 2009.
*Edward Hudgins, “ France Needs Victims. ” August 9, 2012.