Debate over Switzerland's shareholder-engagement law rages on

SWITZERLAND – The man who initiated Switzerland's new governance legislation and local unions want to widen the scope of the controversial mandatory shareholder-engagement legislation, but for different reasons.

In the wake of the so-called 'Minder Initiative' in Parliament, the government drafted a law obligating pension funds to vote at the annual general meetings (AGMs) of companies in which they hold shares.

After the pensions industry openly criticised the draft law, hoever, the government agreed to water down the rules, accepting a non-voting policy as a legal option.

But now MP Thomas Minder, who first conceived of the shareholder-engagement initiative, as well as a committee he gathered for the parliamentary motion, have decried the latest version of the draft law.

They argue that pension fund trustee boards should be prohibited from adopting non-voting policies.

The costs for shareholder engagement are now relatively low, they claim, as "practically all company information is available online, annual reports are increasingly transparent, and voting proxies can be sent to proxy advisers electronically".

They add that specialised companies are now publishing voting recommendations prior to their AGMs.

Meanwhile, union association SGB has demanded clear exemptions to the mandatory shareholder-engagement rules "under certain conditions" – for example, when a fund is too small, or holds too small an equity share in a company.

It said it was concerned that not taking part in an AGM might be interpreted as a breach of the new regulation, despite the government's acceptance of non-voting policies.

This will increase the administrative burden for Pensionskassen, even if they only take part electronically, it added.

The SGB said it wanted the voting regulations to be widened to include collective investment vehicles such as funds or Anlagestiftungen, a special Swiss investment foundation vehicle for institutional investors.

In a statement, it said: "Swiss Pensionskassen are investing less and less directly into Swiss companies, and almost one-half of all equity investments today is in collective vehicles."

Further, it argued that the power of Pensionskassen and their votes at AGMs should "not be exaggerated", as they only hold 6% of the shares of Swiss companies.

The draft law on shareholder engagement is set to go into force next year.