Global investors have greatly expanded their power at major Swiss banks and companies.
Global financial institutions are increasingly dominating the shareholders of major Swiss companies, according to the Sunday editionexternal link of the Neue Zürcher Zeitung (NZZ).
The German-language newspaper points to Swiss banking giant Credit Swiss as a prime example of a financial institution where traditional shareholder democracy is eroding fast.
Credit Suisse shares are broadly anchored in the Swiss population with 99,500 people acting as co-owners of the bank.
But at the upcoming annual general meeting of Credit Suisse in Zurich, Swiss private shareholders will barely be able to have a say as they hold only a measly 10% of the capital.
In contrast, the seven largest Credit Suisse investors alone hold a 35% stake, according to NZZ.
They bear names such as Harris Associates, Olayan Group, Dodge & Cox or Silchester – so-called institutional shareholders who manage enormous wealth and are practically unknown to the public.
At Credit Suisse, 82% of these professional investors come from abroad, while only 18% are domestic, according to the report.
The phenomenon is not limited to the financial sector. In most corporations, major global investors have greatly expanded their power.
For the first time, consulting firm Ernst & Young examined the ownership structure in Switzerland’s top 30 companies.
It determined that only 39% of the shares are still in Swiss ownership, with the remaining 61% of the capital belonging to foreign owners. North America, with a 33% share, ranks ahead of Europe (24%).
“The strong commitment of foreign investors shows the attractiveness and global networking of our economy,” says Tobias Meyer, the person responsible for the study at Ernst & Young.
Meyer considers these to be mostly stable participations and considers the slogan “sell-out out of the economy” to be wrong.
“In addition, these shareholders take entrepreneurial risks, from which the entire economy ultimately profits,” he says. “The open capital market is a competitive advantage for the country.”
But how does the dominance of global investors change the management culture in corporations?
The Anglo-Saxon influence on corporate governance is clearly noticeable, says Vincent Kaufmann, Director of the Ethos Investment Foundation, which represents the interests of some 220 Swiss pension funds.
This applies to the sensitive issue of manager salaries.”Excessive bonuses are judged much more critically by domestic shareholders. In principle, we reject salaries above CHF10 million ($10 million) because they do not reflect the spirit of our social partnership,” he said. For foreign major shareholders, the wage level is usually secondary provided formal processes are observed.
Kaufmann’s assessment is supported by scientific studies. The more the company is owned by institutional investors, the higher manager salaries will be, according to a 2016 study by the universities of Yale and Barcelona.
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