2002 was the first financial year to which the Corporate Governance Directive ("DCG") of the SWX Swiss Exchange ("SWX") was applicable. The SWX commissioned the Institute for Accounting and Control at the University of Zurich to check the quality of the disclosed information by means of a detailed analysis in order to evaluate how successfully the Directive has been implemented. To meet the requirements of the SWX, the annual reports for 2002 of all companies with their primary listing on the SWX were covered by the study. This includes annual reports published on or before 19 September 2003 from companies whose financial year coincides with the calendar year and those whose financial year does not coincide with the calendar year (but runs, for example, from 1.4.2002 to 31.3.2003). A total of 265 annual reports were examined. In order to reveal developments over time, the annual reports for 2001, which were not prepared in accordance with the DCG, were evaluated according to the same principles. This means that, unlike other studies, this analysis is not limited to selected clusters of companies such as, for example, the issuers covered by the SMI or the one hundred biggest companies.
The evaluation results set out below are based on a detailed analysis of the annual reports of the companies. A total of about 150,000 individual pieces of information were recorded and then checked and evaluated independently by at least two persons in order to achieve a fair evaluation of the data.
The findings of the study
The analysis of how successfully the DCG was implemented reveals the following:
- The average implementation level among the 265 companies is 85 %. 110 companies achieved an implementation level of over 90 %.
- There are differences between the implementation levels of the various sections of the DCG. The lowest compliance was achieved in connection with "Group structure and shareholders" (74 %) and "Information policy" (81 %), the highest in connection with "Auditors" (95 %), "Changes of control and defence measures" (92 %), "Compensations, shareholdings and loans" (91 %) and "Board of directors" (91 %).
- An examination of the individual companies shows that 245 of the analyzed companies achieved values above 70 %, while 11 companies failed to achieve 50 %.
- The implementation of the DCG differs between sectors and listing segments. Relatively low results were achieved by investment companies (80 %) and companies listed in SWX Local Caps (81 %).
- Particularly high results were achieved by SMI companies. They achieved an average implementation level of 92 %; the ten best SMI companies achieved 96 %.
- The ten best companies of individual sectors achieved averages of 96.7 % (industry), 96.5 % (consumer goods industry), 95.8 % (real estate and investment companies), 95.2 % (banks and financial institutions) and 93.5 % (technology).
- The average compensation awarded to the executive members of a given company's board of directors and management board amounts to CHF 4.4 million in total, that awarded to the non-executive members of a given company's board of directors CHF 0.5 million in total.
- The average highest compensation awarded to a member of the board of directors of a given company is CHF 0.8 million (the amount ranges from CHF 3,500 to CHF 20.2 million).
- The average auditing fee is CHF 1.3 million. The total of all auditing fees amounts to CHF 340 million.
- 211 companies required additional auditors' services amounting to an average of CHF 1.2 million and in total CHF 262 million.
An evaluation of the annual reports according to further criteria yields, in summary, the following values:
- The 265 companies have an average of 7 members on their boards of directors and 5 members on their management boards.
- 89 % of the members of boards of directors of the examined companies are non-executive.
- 68 % of the boards of directors of the examined companies implement committees. 54 % of the examined companies have an audit committee.
- The percentage of foreigners on boards of directors is 21 %, their percentage on management boards 32 %.
- The percentage of women on boards of directors is only 4 %, their percentage on management boards a modest 3 %.
- Economists (35 % on boards of directors and 42 % on management boards) and lawyers (20 % on boards of directors and 6% on management boards) dominate the governing bodies of Swiss companies.
- In 21 % of the analysed companies, the chairman of the board is also the CEO.
- With the exception of Section 5 DCG (compensations, shareholdings and loans), the principle of "comply or explain" applies. The explain cause, however, was applied in only two cases.
The disclosure of information relating to corporate governance by companies listed on the SWX has improved noticeably owing to the DCG. It should be noted, however, that in the annual reports for 2001, an average of 52 % of the information required under the DCG was already disclosed.
Quote from Prof. Conrad Meyer, Director of the Institute for Accounting and Control, University of Zurich:
"I was especially pleased to discover that reporting on corporate governance has improved noticeably with the Corporate Governance Directive."
Quote from Dr. Heinrich Henckel, CEO SWX Swiss Exchange:
"We systematically analyze reporting and thereby help to improve transparency at listed companies in Switzerland."
