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Ed Hudgins

Switzerland Votes For Freedom To Earn

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November 27, 2013 -- This week in a national referendum, 65 percent of Swiss voters rejected a measure that would have limited CEO salaries to twelve times the pay of junior employees. In doing so, they showed the world once again why Switzerland remains one of the most prosperous and innovative countries in the world!

Switzerland has one of the world’s freest economies. It consistently ranks in the top ten in both the Index of Economic Freedom and the Economic Freedom of the World Report. In recent years it has been ranked number one on the Global Competitiveness Index. By all international measures Switzerland is near the top of countries in per capita income, and poverty there is not a big problem.

So why is there such concern about top earners in such a prosperous country? And are these concerns valid?

Earning it

The most important question concerning any individual’s wealth is, how did they acquire it? If they produced goods and services to sell to voluntary customers on the basis of mutual benefit, then from the janitor to the company president, they earned it. It’s theirs. And they are entitled to whatever they can earn in this manner.

It is a moral affront for individuals to assert a right to someone else’s wealth, wealth they did not earn, or to demand that government guns should bar the earner from receiving whatever compensation they can acquire through their honest efforts.

Fortunately, when challenged, the people of Switzerland took the moral position.


But there was a context to the Swiss vote that highlights a growing problem in all countries. Sometimes executives are given huge salaries and bonuses even though their companies are being propped up or bailed out by taxpayers. In such cases, taxpayers understandably do not count the money that is involuntarily transferred from their pockets to the pockets of such executives as “earned.”

In 2008 the Swiss government bailed out UBS, the country’s largest bank. Thus, executive compensation became a public matter. But how does one determine compensation for executives in such cases? How much is “too much?”

In the free market there are cases of companies that lose money and then lose even more by rewarding executives of such failing concerns with hefty salaries or bonuses. But in such cases compensation is a matter for the owners and investors of the company. If one owns stock or bonds in such a company and one is outraged by high salaries, one can divest one’s self and dump the company.

And, in fact, earlier this year Swiss voters gave company shareholders a binding vote on executive pay and blocked what might be considered excessive severance packages. One could argue that such a state mandate on corporate governance violates free market principles. But companies that get in bed with government and receive taxpayer funds invite these sorts of measures.

Still free

But the Swiss voters proved themselves sensible and took the moral high ground by declining to allow government to directly cap what executives might honestly earn. And this is no small achievement.

Leftists in Western Europe, America, and the developed world are obsessed with what they conceive of as “equality” or “fairness.” In practice this means empowering governments to redistributed wealth from those who earned it to those who didn’t. Worse, the motivation of such statists is not to raise up the poor but, rather to tear down the prosperous. Their motivation is sheer envy. Winston Churchill was right to say that "socialism is the equal sharing of misery."

Switzerland has been the target of political attacks and pressure by other European countries and the United States because it is still so free. Those who resent having their wealth seized by rapacious statists often resort to Swiss banks or even Swiss citizenship. A solid majority of the Swiss understand their unique position in the world as an island of liberty where individuals can prosper, as the Swiss voters have shown again in the recent referendum!
Hudgins is director of advocacy and a senior scholar at The Atlas Society.

For further information:

*Edward Hudgins, “Switzerland Attacked!” May 15, 2009.

*Edward Hudgins, “France Needs Victims.” August 9, 2012.

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My personal take on executive compensation,

For most of my life I thought that whatever a company pays an individual, whether it is a movie star or a CEO, is completely up to that company which has the means to pay such salary. It has no place being decided by outside individuals and it is none of their business, full stop.

Today, I still believe it to be none of an outside person's business and I still believe a company should be able to pay whatever it would like..... but, I do take personal issue with the practice of outrageous salaries. Not because I envy those folks, not because I think that no one should get paid such "obscene" amounts, not even because I think they should share more of the pay pool with lower level employees. May personal issue (which I would never condone a federal plan to correct) is best told in a quick story.

When I was in college, I and a few students, and the professor were in a discussion about the high salaries of of football stars. I, defending them against my professor, stated that of course the players should get paid as much as they do, after all they are the headliners, they are the reasons why the league makes as much money as it does and to pay them less would be exploitation. The professor gently stated "well, they could lower the ticket prices"

Suddenly I started to think, not of the freedom for athletes to get paid whatever they do, but of my own misery when shelling out $12 dollars for a hot-dog, $70 for nosebleed seats, $20 dollars for a hat, etc. I became very selfish in my take on all high compensation especially when it effects my wallet!

Again, I don't think that salaries should be regulated and I fully understand that those 12 dollar hot-dogs is the price that the market will bear, and supply and demand and all that good stuff but that doesn't mean I have to like it :smile:

p.s. did you hear how Brad Pitt got paid 7 million to film 3 internet commercials for Elizabeth Taylor? That couldn't be more than one days worth of work.

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The Swiss engineers I've met seem like they have their heads screwed on right. I'm not surprised the Swiss people rejected the proposal, wish it was by more than 65% though. The envy factor is quite large everywhere I guess. I have to remember: ~50% of any population has an IQ of 100 or less.

Derek: I'm too am suspicious of some of the high CEO salaries and bonuses especially in the financial industry because of the high degree of regulation going on and the back and forth of people from the agencies and industry. I think people are being paid for who they know not so much what they know. Similarly with immigration. In the past, immigrants came here for opportunity, there were no handouts. Now I believe the lure in many cases is all of the handouts. In general, though, I believe any producer, trader, rights respecter, should be able to freely move wherever they please. Likewise, about population growth, the more people there are the more high IQ creative people there are.

I think $7mil buys a lot more than one days time. It might be more involved making these commercials than you think. Or something else is going on besides the commercials. Money laundering?

Regarding the cost of sports: I love baseball but I don't go to the games. I can only afford the nosebleed section and that's just not worth it when I can watch all the close-ups in real time on a big screen TV at home. I got invited (free tickets!) to a Giants game last year in the season ticket holder area just behind 3rd base. Fabulous! I really enjoyed the game but it seemed like it was over way too fast. And the traffic both getting there and going home was really tedious. I guess I'm not a diehard. But they have no trouble filling up the seats. Whatever the market will bear! More power to them if they can get $100/seat. The traffic's bad enough already. If they lowered the prices they'd probably get a lot of walk ins from locals who wouldn't by all the high priced stuff they sell. There would be fewer fans from farther out, the TV market would be less valuable. I just think all of the ramifications can't be thought of in advance. All you can say is if they still have customers and are filling up the stadium they must be doing something right. The TV coverage is awesome and our local networks offer the games for free. I'd hate to see that go away.


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