Switzerland: The Corporate Governance Review - Switzerland

Last Updated: 8 July 2016
Article by Rolf Watter and Katja Roth Pellanda

Most Read Contributor in Switzerland, November 2017


The main source of law for Swiss governance rules is the company law contained in Articles 620ss of the Swiss Code of Obligations (CO). In the course of the rather fundamental reform of 1991, corporate governance rules, in particular those relating to the improvement of shareholders' protection, became law. A further governance debate was triggered at the beginning of the last decade, in 2000/2001, inter alia, as a consequence of the Swissair Ltd bankruptcy. One of its outcomes was the issuance of the Swiss Code of Best Practice for Corporate Governance (SCBP) by Economiesuisse,2 first enacted in 2002 and revised in 2007 and 2014.3 It contains a range of guidelines and recommendations for boards of directors of listed companies (the board or boards) on how to organise themselves. Notwithstanding its rather far-reaching impact, it is not mandatory and represents a code of best practices, leaving leeway for specific adaptations and modifications by individual companies. On 1 July 2002, the Corporate Governance Directive issued by SIX Swiss Exchange Ltd (the DCG) entered into force; it was revised in 2008 and 2014.4 As stated in the introduction of the DCG commentary, the DCG 'has the objective of obliging issuers to make available to investors in a suitable form certain key information with regard to corporate governance practices within their company'. It applies to companies whose equity securities are listed on the SIX Swiss Exchange Ltd (the SIX) and is largely based on the principle of 'comply or explain'. The enforcement of the DCG lies in the responsibility of the SIX.

A rather fundamental revision of the company law is currently under review by the legislature. One of its main goals is to further strengthen corporate governance rules, in particular relating to shareholders' rights and board and management compensation. While a part of this revision (i.e., the accounting provisions) entered into force on 1 January 2013, the governance provisions are still controversially debated. A preliminary draft5 of the revised CO (the Preliminary Draft) has undergone a public consultation, which concluded on 15 March 2015; the results of this process were published in autumn 2015.

A major part of the revision is the implementation of the 'Ordinance against Excessive Compensation in Listed Companies' (the Ordinance) into formal law. The Ordinance is the result of a far-reaching popular initiative for a constitutional amendment in the area of compensation, colloquially called the 'Minder initiative against fat-cat salaries' (the Minder initiative),6 which was adopted in 2013 by a popular vote with a strong majority of 68 per cent. The transitional provision of the constitutional amendment provided that, until the statutory provisions come into force, the Swiss Federal Council had to issue implementing provisions within one year;7 this was done through the Ordinance, which applies to companies limited by shares with their seat in Switzerland and their shares listed in Switzerland or abroad.8 The Ordinance obliges such companies to annually submit the top management's compensation to the shareholders for a binding vote and contains far-reaching rules on corporate governance with direct effects on boards, executive management, shareholders, pension funds and independent proxies. It also outlaws certain payments, such as certain golden handshakes (but allows a new manager to be indemnified for losses suffered with the former employer) and severance payments. Moreover, the Ordinance implements the principle required by the Minder initiative that certain contraventions to the Ordinance are sanctioned by imprisonment of up to three years and a fine of up to the equivalent of six years' annual compensation. All offences have to be prosecuted ex officio.

On 4 December 2015, the Swiss Federal Council informed that it will submit to the Swiss Parliament a revision of the Preliminary Draft at the end of 2016. The most important changes by the Federal Council to the Preliminary Draft are: (1) no ban of prospective shareholder voting on variable compensation but duty to hold a consultative vote on the compensation report, (2) no duty to set the relationship between fixed and variable compensation in the articles of association; (3) no duty of establishing and operating an electronic shareholder forum and (4) no right for shareholders to institute legal proceedings at the expense of the company. The guidelines on gender representation at senior executive level remain in place but the Federal Council has lowered this requirement to 20 per cent, whereas the level for board of directors would remain at 30 per cent. If a company fails to meet these gender guidelines it will have to disclose the reasons for its non-compliance as well as current and planned actions to meet the targets.

Unlike the Minder initiative, the '1:12 initiative' was rejected by the Swiss voters in November 2013 by a large majority of 65 per cent. This initiative aimed at introducing a salary cap of 12 times the lowest salary within a company. The outcomes of the Minder and 1:12 initiatives show that Swiss voters require a tight corporate governance regime in respect of compensation but desire no governmental intervention regarding the amount of absolute level of compensation.


According to the CO, the board is the executive body of a company limited by shares (i.e., the one-tier board system is the default rule).9 The board is therefore responsible for the management of the company and represents the company in relation to third parties. The board may carry out any legal acts consistent with the company's purpose clause10 and may pass resolutions on all matters not reserved to the general meeting of shareholders (the shareholders' meeting) by law or by the articles of association.11 The relationship between the shareholders' meeting and the board is generally described as a relationship of parity rather than a hierarchy: both bodies have distinct responsibilities and competence by law.12 But Swiss law permits shareholders to dismiss board members in a general meeting at any time.

However, the legal default concept of the board directly managing the company no longer corresponds to the reality of today's medium-sized to large companies, and in particular of listed companies. As Swiss company law is very flexible, different governance structures are possible, as will be explained below.

i Board structure and practices

In terms of board structure, Swiss company law allows the board to delegate significant parts of its responsibilities to the senior management. However, certain responsibilities cannot be transferred and are considered inalienable duties of the full board.13 Depending on the size and the needs of the company, the board may therefore assume the entire responsibility for management (this system is adopted predominantly by smaller non-listed companies) or it may delegate all transferable responsibilities to one or several board members or the senior management, subject to an authorisation by the shareholders in the articles of association and the establishment of organisational regulations by the board.14 Thus, it is possible to create a two-tier structure, which is what listed companies typically do and which the SCBP recommends, by requesting a majority of non-executive board members. Such a two-tier structure is mandatory for banks and insurance companies.

A board must consist of at least one individual.15 In reality, most companies have several board members. Where there are different classes of shares, the articles of association must stipulate that the holders of each share class are entitled to elect at least one representative to the board.16

The board is responsible for the representation of the company towards third parties. Unless the articles of association or the organisational regulations stipulate otherwise, all the members of the board have an individual authority to represent the company.17 It is, however, common practice, at least in medium-sized to large companies, that only joint signatory power, of any two board members, is granted. The board may also delegate the authority of representation to members of management or to other employees. At least one member of the board, or two board members in cases of joint signatory power, must always be authorised to represent the company and at least one authorised representative, either a board or a management member, must be domiciled in Switzerland.18

The CO provides the following catalogue of non-transferable and inalienable duties that cannot be delegated to the management (but for which the management often does the preparatory work):19

  1. determination of the strategy and the definition of the means to implement it (e.g., budget process, establishment of a business plan, issuance of all necessary directives and establishment of a risk control and management system);
  2. determination of the organisation (e.g., decision on the governance structure of the board and management and the organisation of the business along business lines);
  3. structuring of the accounting system, the financial controls and the financial planning (including monitoring the liquidity of the company);
  4. appointment, removal and succession planning of the members of the management team and the persons authorised to sign on behalf of the company (the appointment of the top executive management must remain with the board, whereas the appointment of the lower hierarchical levels may be delegated);
  5. supervision of management (including, inter alia, the implementation of a state-of-the-art internal control system and clear reporting lines), in particular with respect to compliance with the law, the articles of association and the directives issued by the board;
  6. preparation of the annual report consisting of the financial statements (which have to include, inter alia, the significant shareholders and their shareholdings)20 and a narrative business report;
  7. preparation of the shareholders' meeting (which has to be held within six months after the end of each business year)21 and the implementation of its resolutions; and
  8. notification of the court in the event that the company is over-indebted. The Ordinance requires the board to prepare a compensation report that replaces the disclosure of board and senior management remuneration in the notes to the statutory financial statement.22 The preparation of the compensation report is also a non-transferable and inalienable duty of the board.23

Where there are several board members the organisation of the board requires the nomination of a chair and of a secretary, but the latter does not have to be a board member.24 The chair was customarily appointed by the board; however, the articles of association could also provide for a direct appointment by the shareholders' meeting.25 Now, the Ordinance provides that, in listed companies, the shareholders' meeting has to elect and dismiss him or her.26 The role of the chair is not defined in detail by Swiss company law and few duties are explicitly assigned. In reality, the chair's function is key to the proper functioning of the entire board and to an adequate working relationship between the board and the management. The chair, inter alia, (1) keeps direct contact with the senior management (typically represented by the CEO), (2) communicates and engages with important shareholders and stakeholders (in general together with the CEO), (3) organises and conducts the board meetings and sets their agendas, (4) is, together with or subsidiarily to the CEO, the outside 'face' of the company and (5) takes the lead in crisis situations. The chair has a deciding vote if not prohibited by the articles of association. Cumulative voting within the board is not possible under Swiss law.

The question of combining the roles of the chair and the CEO in the same person has been the subject of significant debate in Switzerland. Although not explicitly excluded by the SCBP, the majority opinion nowadays, voiced in particular by proxy advisers, is that such a concentration of power does not represent best practice. However, a certain tradition of these combined roles exists,27 which is in general justified by efficient communication and faster decision-making that might be particularly important in crisis situations. The SCBP provides that, as a principle, 'a balance between direction and control should apply to the top of the company' and if the board decides that the roles of the chair and the CEO are combined, adequate control mechanisms should be implemented, including the appointment of an experienced non‑executive board member as independent lead director. One of the roles of an independent lead director is to convene and chair meetings of the board without the chair when necessary.

The board is required when fulfilling its tasks to observe the duty of care and loyalty, the duty of confidentiality and the duty to treat shareholders equally.28 The principle of equal treatment of shareholders does not require the board to provide identical treatment to all shareholders; it must, however, make sure that shareholders are treated equally in comparable circumstances. This principle is of particular significance in relation to the communication with and information provided to shareholders. Therefore, Swiss company law provides for relative rather than absolute equality, meaning large shareholders might under certain circumstances receive more information than small investors. Whereas company law specifically takes into consideration the circumstances of the specific case, capital market law and stock exchange regulations, namely rules prohibiting insider dealing and ad hoc publicity rules, provide for a stricter understanding of a 'level playing field' and aim to ensure that price-sensitive information is disseminated on an equal basis; but even there, large (institutional) shareholders often get more information than retail shareholders, which is permissible as long as this information is not price-sensitive or is mitigated by confidentiality undertakings and contractual agreements not to trade on information received.

The organisational flexibility of the board is rather far-reaching; it may allow for executive and non-executive board members, committees, delegation of management duties, etc. Furthermore, the CO provides for the possibility of assigning responsibility for preparing and implementing resolutions of the board, or monitoring transactions, to board committees or individual board members. As a matter of principle and according to the SCBP, the overall responsibility for non-transferable and inalienable duties delegated to committees or third parties remains with the board. In all instances, appropriate reporting to the (full) board has to be ascertained. Under the previous law the creation and revocation of board committees was in the sole discretion of the board. Article 7 of the Ordinance now provides that the members of the compensation committee, who need to be members of the board, have to be elected by the shareholders' meeting. Even though the wording of the Ordinance does not explicitly state that a compensation committee is required for listed companies, there is, according to legal scholars, an affirmative duty to establish one. This view is confirmed by Article 733 I of the Preliminary Draft, which states that the shareholders' meeting has to elect a compensation committee. The basic principles of the duties and responsibilities of the compensation committee have to be determined by the articles of association and, therefore, by the shareholders; still, details may be stipulated in the organisational regulations (i.e., by the board). The SCBP also recommends the creation of an audit and a nomination committee. It is recommended that the audit committee should consist of non-executive, preferably independent members only, and that a majority of its members should be financially literate, whereas a majority of the members of the compensation committee should consist of non-executive and independent members. No independence requirements are provided by the SCBP for the nomination committee. Other committees, such as a finance committee, a strategy committee, a risk committee, an independent committee consisting of independent board members and established for special situations where a conflict of interests arises (for example, in the event of going private or takeover situations), or other ad hoc committees may be constituted when needed for an efficient functioning of the board.

To continue reading this article, please click here.


1 Rolf Watter is a partner with Bär & Karrer AG and Katja Roth Pellanda is head of corporate law at Novartis AG.

2 Economiesuisse is the largest umbrella organisation representing the Swiss economy (www.economiesuisse.ch/en/pages/default.aspx).

3 Available at www.economiesuisse.ch/en/Documents/swisscode_e_web.pdf.

4 Available at www.six-exchange-regulation.com/admission_manual/06_16-DCG_en.pdf. See also the DCG commentary available at www.six-exchange-regulation.com/download/ admission/regulation/guidelines/swx_guideline_20070820-1_comm_en.pdf.

5 Available at www.admin.ch/ch/d/gg/pc/documents/2499/OR-Aktienrechte_Entwurf_de.pdf.

6 Available at www.admin.ch/ch/d/ff/2006/8755.pdf.

7 See Article 197 X of the Federal Constitution.

8 Article 1 I of the Ordinance.

9 See Article 716 II of the CO.

10 Article 718a I of the CO.

11 Article 716 I of the CO.

12 See, inter alia, the decision of the Swiss Federal Supreme Court BGE 100 II 384, consideration 2.a).

13 Article 716a I of the CO.

14 Article 716b I of the CO; Article 6 of the Ordinance.

15 See Article 707 I of the CO.

16 Article 709 I of the CO.

17 Article 718 I of the CO.

18 Article 718 II, III and IV of the CO.

19 Article 716a of the CO.

20 Article 663c of the CO.

21 Article 699 II of the CO.

22 Article 13 I of the Ordinance.

23 Article 5 of the Ordinance.

24 Article 712 I of the CO.

25 Article 712 II of the CO.

26 Article 4 I and III in connection with Article 29 I of the Ordinance; boards could also suspend a chairman but then have to call a shareholders' meeting (Article 726 of the CO).

27 The CEO is in seven out of 20 SMI® companies a member of the board.

28 Article 717 of the CO.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions