12. SWIPRA Corporate Governance Survey: Aligning Governance Practices with Strategic Ambitions pay?
Zurich, 28th November 2024 – The 2024 SWIPRA Governance Survey underscores the importance of aligning governance practices with emerging challenges and stakeholder expectations. Enhancing transparency on board development, aligning on an understanding of sustainability report voting, considering reputation risks in compensation decisions, and broadening stakeholder engagement are key to driving long-term value creation and build a stronger reputation.Board elections continue to stand out as the most important AGM agenda item. But shareholders still have very limited understanding of how boards assess themselves and their performance, how they develop their composition over time and how they align it with their company’s strategy. Improving this understanding would increase a board’s credibility and allow shareholders to better understand a board’s work and its strategic ambitions.
The newly introduced votes on sustainability reports had a positive impact on disclosure quality but shareholders need a better understanding of the vote’s objectives to make this say on sustainability meaningful. The currently high AGM approval levels are not reflecting shareholders judgement of companies’ sustainability efforts and achievements.
In shareholder votes on remuneration reports, Switzerland leads Europe in shareholder opposition, driven mainly by comparably high pay levels and insufficient pay-for-performance transparency. Poor peer group selection, performance assessment transparency or incentive structures are particularly critical issues. The survey further shows that high executive pay not only has a negative spillover to corporate reputation but also adversely impacts the credibility of boards and in particular of the executives receiving these compensation packages.
Finally, the views regarding the governmental push to align Swiss sustainability disclosures with EU standards are split. Swiss companies and shareholders prefer to not align, contrary to non-Swiss shareholders. Their reasons seem clear, that this may provide easier comparability, not taking into consideration other aspects.