With the entry into force of the Corporate Governance Directive on 1 July 2002, the SWX assumed a pioneering role in Switzerland regarding the transparency of compensation, shareholdings and loans of members of the Board of Directors and members of the Senior Management of listed companies. Meanwhile, as compared to other European countries, Switzerland is a leader in terms of transparency. In a 2005 study on corporate governance in Europe conducted by the management consulting firm "Heidrick & Struggles", Switzerland was accorded second place behind Great Britain. Two years before, Switzerland had only ranked sixth in the same study.
In its role as a self-regulator, the SWX monitors issuers’ compliance with the Corporate Governance Directive. If an issuer violates those rules, the SWX has the authority to impose sanctions ranging from a reprimand through to the delisting of the issuer. The fact that the transparency of issuers in corporate governance matters has improved dramatically in recent years is not least of all thanks to the enforceability of the Directive and the enforcement activities of the SWX.
On 7 October 2005, Switzerland’s parliament enacted Art. 663bbis of the Swiss Code of Obligations. This article requires that listed companies provide transparency regarding the compensation paid to their members of the Board of Directors and members of the Senior Management. That information is now to be included in the notes to the financial statements, i.e. in the audited part of the annual report.
Chapter 5 of the Corporate Governance Directive also stipulates that the compensations, shareholdings and loans of members of the Board of Directors and members of the Senior Management of listed companies are to be disclosed, however in a separate corporate governance section of the annual report. Thus in order to avoid redundancies in the disclosure of those details, the Admission Board decided on 29 March 2006 to cancel the relevant provisions of the DCG. At the same time, the opportunity was taken to adapt other provisions of the Directive. The corporate governance report will now be more streamlined and concise, and the application of the Corporate Governance Directive will be considerably easier for issuers.
Information on compensations, shareholdings and loans
As of 1 January 2007, the corporate governance report must only disclose information on the content and method of determining the compensation and share-ownership programmes, because those details have not been incorporated in the new CO provision. Because in principle the Code of Obligations is applicable only to companies domiciled in Switzerland, an additional rule has been adopted for foreign companies listed on the SWX that do not have a listing in their home country. Those issuers must apply Art. 663bbis CO analogously.
"Comply or explain"
The fundamental principle of "comply or explain" will now apply also to Chapter 5 Compensations, shareholdings and loans. If an issuer does not wish to disclose certain information, it nevertheless must still justify that decision specifically and substantially in the annual report. Within the scope of its supervisory activities, SWX will also examine the adequacy of that substantiated justification. This is intended to prevent issuers from avoiding their disclosure obligations by merely using blanket justifications as a way to "explain".
Informational instruments pertaining to the external audit
The external auditors are an independent body of the issuer. The title of Point 8.4 DCG will therefore be changed accordingly. The minimum requirements for the informational instruments of the external auditors, which have been developed on the basis of actual practice and legal rulings, will be incorporated in DCG for the reason of better understanding. The new provision requires that, in particular, details on the auditors’ means of reporting to the Board of Directors, as well as the number of meetings the full Board of Directors or the audit committee has had with the external auditors, must be disclosed.
Cross-involvement
The obligation to indicate any interlocking directorates among listed companies (cross-involvement) will be abrogated. The indication of cross-involvement as prescribed in Point 3.3 DCG offered the reader little additional information, because already under Point 3.2 a) DCG it must be disclosed whether individual board members hold seats on the board of any other listed company. Hence the relevant information will still be publicly disclosed.
The changed Directive is available on the Internet at: http://www.swx.com/download/admission/regulation/guidelines/swx_guideline_20070101-1_en.pdf
