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Brussels welcomes Swiss vote to curb executive pay

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(Globalpost/GlobalPost)

The European Commission on Monday welcomed a Swiss vote to curb executive pay as reflecting a change in European attitudes only days after an EU accord to limit bank bonuses.

Sunday's referendum result in Switzerland "is very positive (it shows) ... that there is now momentum on the European level on corporate pay and ensuring transparency," said the spokesman for EU Financial Markets Commissioner Michel Barnier.

"We are going in the same direction as the Swiss," Stephan De Rynck told a news briefing in Brussels, highlighting EU plans for legislation this year to give shareholders more control over corporate pay.

Such oversight is necessary to avoid the excessive risk-taking and short-term approach that are detrimental to the longer-term health of companies, De Rynck said.

Switzerland prides itself on its low-tax, business-friendly environment but in recent years scandals and massive bailouts for its banks have fuelled disillusionment.

Swiss Justice and Police Minister Simonetta Sommaruga said Sunday's vote was "the expression of widespread unease in the Swiss population about the level of salaries paid to top managers."

French Prime Minister Jean-Marc Ayrault meanwhile said France should find inspiration in the outcome.

"It is an excellent democratic initiative in which the Swiss have led the way and, personally, I think we must take inspiration from them," Ayrault said.

The French government has already imposed a ceiling on pay in the public sector of 450,000 euros ($585,000) per year.

But any plans to extend similar legislation to the private sector can be expected to run into stiff opposition from business leaders, who are already at odds with the government over its plans for a top income tax rate of 75 percent.

Paris, backed by Berlin, has also led the charge to introduce a financial transactions tax as a way of raising much needed revenue and dampening the risk-taking culture of the markets which many blame for the 2008 global financial crisis.

On Monday, however, Germany was guarded in its response to the Swiss referendum.

"The referendum has produced an interesting outcome which needs to be looked at closely," German government spokesman Steffen Seibert said.

Seibert said Berlin had taken steps in 2009 to address the problem, adding that excessive pay deals for many people hit their "confidence in our economic system and we do not want that."

Last week, the Irish EU presidency and the European Parliament reached a preliminary agreement on new capital requirement rules for the banking system which included a tough cap on banker bonuses.

Under the deal, a bonus must not exceed a banker's fixed annual salary but it can be increased to twice the amount on condition that shareholders formally approve such a payment.

Bonuses, paid in cash, shares or both, are very volatile but can traditionally be many times a banker's salary -- leading to charges that pay structures encouraged the risk-taking that left banks over-extended and desperately short of funds in 2008.

Britain, home to one of the world's biggest financial markets in London, opposes the EU move and the issue is likely to prove difficult when the EU's 27 finance ministers meet to discuss the plans in Brussels on Tuesday ahead of a full parliamentary vote in April.

Asked whether Britain would block the deal, De Rynck said, "A good compromise was found last week ... now it is up to the finance ministers."

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http://www.globalpost.com/dispatch/news/afp/130304/brussels-welcomes-swiss-vote-curb-executive-pay