SWITZERLAND Law and Practice Contributed by: Lorenzo Olgiati and Pascal Hubli, Schellenberg Wittmer Ltd
compensation is reduced if certain objectives are not achieved ( “malus” ). The remuneration system may also include a provision in the con - tracts with top executives 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 com - pensations – such as loans, credits and pen - sion benefits outside the occupational pension – require an explicit basis in the company’s articles of association. This also applies to the maximum terms and the maximum notice periods for ser - vice or employment agreements with members of the board of directors and of the executive management. In any event, notice periods or fixed contract terms exceeding one year are not permitted. Certain types of compensation to members of the board and executive management – eg, sign-on bonuses that do not compensate for an actual financial disadvantage, non-statutory severance payments ( “golden parachutes” ), undue advanced compensation ( “golden hello” ) or certain types of transaction bonuses – are not allowed. The payment or receipt of such impermissible compensation by members of the board of directors, executive management, or advisory board (if any) is punishable by imprison - ment and fines. Special Requirements During Public Bids Following the launch of a public takeover offer, any amendments to executive agreements with executive management members may qualify as defensive measures and as such may not be altered subject to the approval by the sharehold - ers’ meeting and a review and approval by the TOB. Even in a pre-bid phase, the TOB may, as case law demonstrates, declare changes to
agreements of executive management null and void if fundamental principles of company law – in particular, the duty to act in the company’s best interests – are disregarded. 4.11 Disclosure of Payments to Directors/Officers Privately held companies are not required by law to specifically disclose the remuneration, fees or benefits payable to their directors and executive management. For publicly held com - panies, however, Swiss company law requires the disclosure of the respective aggregate remu - neration amounts for both the board and the executive management, the total compensation of each of the board members as well as the highest total compensation among the members of executive management (but not the specific compensation of the other members of execu - tive management). All this information is to be disclosed in a separate audited compensation report to the shareholders. The SIX Directive Corporate Governance extends the above-mentioned requirement to all issuers with a primary listing at the SIX Swiss Exchange (ie, with no other main listing) whether incorporated in Switzerland or not. In addition, it requires disclosure of information on the basic principles and elements of compensation and share-ownership programmes as well as of the method of its determination. For banking entities, insurances, funds and branches thereof, FINMA has issued rules in its circular “Remuneration Schedules” . These rules contain the basic principles and general elements of compensation with regard to all employees, directors and officers of the com - pany. However, implementation of these rules is only compulsory for larger banks and insurance companies.
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