SWITZERLAND Law and Practice Contributed by: Lorenzo Olgiati and Pascal Hubli, Schellenberg Wittmer Ltd
tors. Shareholders’ actions can be direct or indirect (ie, as a derivative suit), if they seek to act on behalf of the company due to indirectly caused damages (ie, damage to the value of their shares resulting from damage suffered by the company). However, formal actions against board members are rather rare in prac - tice. Many conflicts end with out-of-court settlements, frequently facilitated (and financed) by D&O insurers. 3.9 Other Claims/Enforcement Against Directors/Officers The members of the board or the executive manage - ment of listed companies may be subject to criminal sanctions pursuant to the Swiss Criminal Code, if they pay or accept prohibited remuneration (see 3.10 Pay- ments to Directors/Officers ). It follows that decisions on remuneration for the board and executive man - agement and their subsequent payment or receipt, respectively, have to be carefully prepared in compli - ance with Swiss company law and related criminal law. As a general principle, companies cannot validly pre - clude the liability of directors and executive manage - ment in advance. The annual shareholders’ meeting may, however, grant discharge to the directors and the executive management for the preceding business year. As a result, the company and any shareholders who voted in favour of the resolution are precluded from bringing an action against the directors and executive management for any facts that were known to the shareholders’ meeting at that time. Sharehold - ers who did not approve the discharge resolution remain entitled to bring claims, subject to the statu - tory requirements. Often, companies seek D&O insurance coverage for their members of the board of directors and executive management. 3.10 Payments to Directors/Officers For private companies, the board exclusively deter - mines the remuneration of its members and the exec - utive management. The Swiss Federal Supreme Court has consistently stated that remuneration must be justifiable relative to the company’s overall financial situation and the indi -
vidual contributions. However, the board’s discretion is broadly respected and the Swiss Federal Supreme Court exercises restraint in reviewing remuneration decisions. Say-on-Pay Swiss listed companies must annually submit the board’s proposal on executive compensation to the shareholders for a binding vote (binding say-on-pay). The shareholders’ meeting has to vote separately on the proposed aggregate amount of compensation for each member of the board of directors, the executive management and, if any, the advisory board. However, Swiss law does not provide for statutory maximum amounts (cap) for the individual compensations. Companies are required to specify the details of the vote on compensation in their articles of associa - tion. Models can vary, eg, shareholders may vote on fixed compensation for the term until the next ordi - nary shareholders’ meeting (prospective vote) or on performance-based compensation for the previous financial year (retrospective vote). Many Swiss-listed companies include in their articles of association a provision for a vote on a compensation cap, whereby the shareholders vote in advance on the maximum amounts of compensation for the respective govern - ing bodies for the upcoming business year (prospec - tive vote). If variable remuneration is approved pro - spectively, the remuneration report must be submitted for a consultative vote. According to the revised SCBP, the board may link variable remuneration to specific compliance and oth - er sustainability objectives. Furthermore, the remuner - ation system should be designed in such a way that total compensation is reduced if certain objectives are not achieved (“malus”). The remuneration system may also include a provision in the contracts with top exec - utives that, beyond the legal requirements, reserves the right to claw back compensation that has already been paid under certain conditions (“claw-back”). Specific types of executive benefits and compensa - tion – such as loans, credits and pension benefits out - side the occupational pension scheme – require an explicit basis in the company’s articles of association. This also applies to the maximum terms and notice
680 CHAMBERS.COM
Powered by FlippingBook