To this date, no common understanding or uniform definition of corporate governance exists anywhere in the world.
In Switzerland, the preamble of the Swiss Code of Best Practice for Corporate Governance which has been in place since mid-2002 can be consulted for a description:
“Corporate governance encompasses the full range of principles directed towards shareholders’ interest seeking a good balance between direction and control and transparency at the top company level while maintaining decision-making capacity and efficiency.”
In Switzerland, three primary thematic clusters are discussed in connection with good corporate governance:
- the appropriateness of remuneration given to members of the board of directors and executive management and the disclosure thereof
- joint functions involving the head of executive management and the chairman of the board of directors
- the “correct” composition of the board of directors and executive management in terms of diversity-related factors (with regard to the knowledge, experience, gender, age, origin, etc. of the members)
So far the principles of corporate governance have not only been incorporated into a few individual regulations in the Swiss Code of Obligations but Swiss companies, as well, within the scope of stock exchange and self regulation.
- In 2002 economiesuisse published a Swiss Code of Best Practice for Corporate Governance, which was revised in 2014 after an initial adjustment in 2007. It sets guidelines for public limited companies with listed shares or bonds that can be adhered to on a voluntary basis.
- Also in 2002, the SIX Swiss Exchange issued a “Directive on Information Relating to Corporate Governance”. This directive obligates issuers to publish important aspects of their company’s top level of management (or to provide substantiated justification why this information is not published = “comply or explain” principle). Similar to the Swiss Code of Best Practice for Corporate Governance, this directive was revised in 2007 and 2014.
- The Ordinance against excessive compensation in listed companies (VegüV) entered into force on 1 January 2014. The provisions of VegüV are applicable to all Swiss corporations whose shares are listed on a stock exchange in Switzerland or abroad. The ordinance mainly strengthens the rights of the shareholders. Thus, the general assembly approves annually the total remuneration to the board of directors, the executive management and the advisory board. Further, there will be annual elections of each member of the board of directors, the chairman, the members of the compensation committee and the independent voting proxy. VegüV also covers what kind of compensations for members of the board of directors, the executive committee and the advisory board are permissible. Furthermore, the board of directors of companies concerned must additionally provide a compensation report to the General Assembly.
While the corporate governance framework is largely determined by the legislator and a company’s owners, its concrete structure is the responsibility of the board of directors. The board must ensure that equilibrium exists between the owners and the management, regardless of whether this equilibrium is achieved through regulations designed for that purpose or the tone at the top.
Find out more about corporate governance in other countries