The revelation at the weekend that Swiss pharmaceuticals giant Novartis will pay its outgoing chairman $78m to keep his mouth shut has angered shareholders and the public on the eve of a referendum to impose stringent new curbs on executive pay.

“We don’t approve of this sort of payment in general, and this one to [Daniel] Vasella is an absolute outrage,” said Roby Tschopp, head of shareholder group Actares.

“Even if you did accept the rationale for such payments, this one is completely over the top.”

The payment is in exchange for continuing advice and a pledge not to offer information to competitors, and Mr Vasella stresses he will give the money away philanthropically.

But in less that two weeks Switzerland is to hold a referendum on executive pay controls that are bitterly opposed by the country’s business establishment. The bumper payout to Mr Vasella is threatening to further inflame the debate.

On the table are 24 changes to Switzerland’s corporate laws that include giving shareholders a binding vote on total board and management pay; banning golden hellos and golden parachutes for management and board members; restricting the terms of board members to one year; and making pension funds reveal how they vote at annual general meetings.

Taken together, the proposals, which would apply to all listed companies, would sharply tilt the balance of power from Swiss boards to shareholders. For good measure, they include criminal penalties for non-compliance.

The proposals are the brainchildren of Thomas Minder, a Swiss politician and entrepreneur who lost money on contracts with Swissair when the debt-plagued airline was forced to ground its fleet in 2001 – a year in which the company’s failed chief executive was paid millions.

Arrayed against his small team are a host of Switzerland’s political parties, business lobby Economiesuisse and many of the country’s top companies, ranging from banking giant Credit Suisse to the engineering conglomerate ABB and Nestlé, the world’s largest food company.

In the face of such clout, Mr Minder’s proposal ought to have little chance. While his six-strong organising committee has around SFr400,000 at its disposal, Economiesuisse alone has up to SFr8m to spend on its counter-campaign.

Yet despite this mismatch, recent opinion surveys suggested that the initiative has a good chance of being accepted. In the latest poll, 57 per cent of those questioned backed the proposals.

The initiative appears to have touched a nerve among a public wearied by a string of corporate misadventures – from the collapse of Swissair to UBS’s multibillion writedowns during the financial crisis – that have bruised shareholders but done little to curb executive pay. According to Bloomberg, five of Europe’s 20 best-paid chief executives work for Swiss companies.

“Achievement should be rewarded, but failure should not,” says Brigitta Moser-Harder, an activist shareholder and co-founder of the initiative. “Managers have to prove themselves. If they do well, of course, they deserve a bonus. But afterwards. Not before.”

Opponents of the Minder campaign concede that the mismatch between executive pay and performance has become a problem – but they argue that the impact of Mr Minder’s proposals ranges far beyond the problem they are ostensibly addressing, and would damage Switzerland’s reputation as a place to do business.

The first “poison pill”, says Meinrad Vetter, head of competition and regulation at Economiesuisse, is the possibility of criminal charges. This, he argues, goes far beyond what is necessary to bring pay back into kilter, and conflicts with the Swiss tradition of resolving such issues through civil, rather than criminal, law.

The second is the binding vote on pay. “No one else is doing this. We would be putting ourselves out on a limb,” he says, adding that the move would also create a damaging degree of legal uncertainty. “You can’t hire someone with the caveat that you may have to change their salary.”

The proposals also risk undermining the role of the board, adds Paul Bulcke, chief executive of Nestlé. “The board is responsible for overseeing the management of a company, but the Minder proposal is taking away its powers,” he says. “It is basically saying: ‘You are in charge, but we don’t trust you’.”

Other chief executives have also voiced concerns. “Switzerland is so well placed competitively, it would be too bad if Swiss voters did anything to damage diminish that competitiveness,” says Brady Dougan, head of Credit Suisse.

Like many other chief executives, Mr Dougan favours the government’s counterproposal – which will be adopted if Mr Minder’s initiative is rejected – and which provides instead for a consultative vote on executive pay.

Ms Moser-Harder rejects a consultative vote as toothless and suggestions that the Minder initiative could cost Switzerland jobs as “scaremongering”.

“Switzerland has so many advantages as a location for companies – its infrastructure, its education system, low taxes, stable politics – there is no need to fear they will leave,” she says.

And for the moment, at least, voters seem to agree.

“It’s a difficult topic,” says a man watching Mr Minder debate his ideas at a political gathering in Frauenfeld, a small town in north-eastern Switzerland.

“There are some gaps in both plans, but the Minder proposal is a start. It is clearer than the counterproposal, and I think it has a better chance of working.”

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