Switzerland says Ja and limits “fat cat” salaries
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see also the http://www.cnbc.com/id/100516799 CNBC article by Carolin Roth

With close to 68% of the votes and a winning result in each of the 26 Cantons, Switzerland has voted yes to the referendum to give executives pay binding decision rights to shareholders. The new rules will be part of the the Swiss constitution and will allow shareholders to vote, even electronically, annually on management compensation with veto powers.

It also bans the payment of sign-in and exit bonuses, m&a bonuses and consulting contracts.

The vote highlights the Swiss strong will to enhance transparency and give more power to shareholders. The recent issue with the former Novartis CEO exit package has further underlined the gap between shareholders and population understanding of a fair and competitive compensation to what was seen as an exaggerate exit bonus.
Swiss Competitiveness not in danger
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The main concern for these that lobbied for the referendum proposal to be rejected was that the competitiveness of Switzerland as a place to do business will be impacted, as many multinational companies might opt for other locations where the executives compensation doesn’t have to be decided by shareholders.

I think that this will not be the case and Switzerland will continue to be highly competitive for several reasons. First the WEF competitiveness survey, topped by Switzerland in the last few years, does not consider executive pay as a criteria. Secondly for executives Switzerland remains a highly competitive place to work due to the low taxation (30% on average vs. 48% of Germany and 45% of England) and very high quality of life.

Additionally the fact that shareholders have now the right to vote on executives pay doesn’t necessary mean that they will not approve competitive salaries. It will however enhance transparency and avoid further situation where a top manager, regardless of the effective performance, will receive lavish sign-in and sign-out bonuses.
Transparency in a post-financial crisis economy
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The 2008 financial crisis has left a mark in Switzerland too. The overall perception of the population is that top managers come and go leaving too often the problems behind them. Regardless of several instances of poor performance their paycheck remained unaffected and this is not acceptable. It also tries to end a short term top management mentality by banning sign-in and exit bonuses.

The recent EU decision to cap banking bonuses to one year’s base salary is another signal that this reform might be adopted by other European countries too (Denmark and the Netherlands already have a binding shareholder vote on executives compensation).
In Short
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– Swiss Vote on giving executive compensation voting powers to shareholders passed with a large margin potentially opening a new era in corporate transparency;
– Swiss Competitiveness should be largely unaffected by the change as the criteria that make Switzerland one of the most competitive remain.
– The 2008 crisis underlined the failure of a “hands-off” approach is among the reasons for the need of more transparency and shareholders power;
– Other European countries might implement similar rules, particularly in the banking sector, but will be much slower in doing so.

A New Year, a New Europe
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The ECB decision to keep interest rate unchanged underlines the great improvement in the Eurozone both in terms of Government and banks financing.

With good results from the Spanish auction and the Italian financing costs at the lowest in 3 years we now see confidence getting back to Europe. This will make 2013 a year of slow but firm European recovery.

Given the overall financing improvement the announced OMT, that was certainly very important to reach this point, will probably not even need to be deployed. This is pretty much what investor wants: to know that the ECB will be ready to intervene if needed and ensure a lower fragmentation among the various European Economies.

Financing for banks (e.g. through the recent issues Intesa and Banco Bilbao) has also considerably improved.

Throughout 2012 I maintain a positive outlook for Europe and I can only reaffirm this for 2013.

European Challenges
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Despite the great financial improvements several challengers remains: while Draghi pointed out that full employment is not within the ECB mandates the high unemployment in some European economies (especially youth unemployment) remains a big challenge for some European economies. We have also not yet seen a full improvement in lending which limits the potential of new investments, job creation and consequentially growth.

What European Governments needs to do is implement a set of measures to reduce unemployment and boast growth: a real challenge if combined with austerity !

Opportunities
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With interest rates at record lows and an increase of money supply equities remain among the most interesting asset classes for 2013. In terms of regional focus European companies with exposure and growth in emerging or higher growth markets remain attractive.

I would still recommend some allocation to Gold as a hedge toward the increasing money supply.

In Short
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– Europe will have a slow but firm improvement in 2013
– Lending conditions should improve and support the European recovery
– European-based companies with exposure to higher growth economies are still a good investment opportunity for 2013
– Gold remains interesting as an hedge but volatility is to be expected

Professor Jem Bendell, Director of the Institute for Leadership and Sustainability at the University of Cumbria introduces the online mba program offered in Exclusive Partnership with the Robert Kennedy College. As you can see in the video our students attend a one week compulsory residency at the University of Cumbria. Through this innovative blended learning methods our students can enjoy the flexibility of online learning with a unique residential experience at the University of Cumbria in England.

ECB’s OMT a Much Needed Remedy

In many cases the European crisis was fuelled by a lack of confidence. The OMT programme was a much needed remedy to restore confidence in Europe and in the Euro. The fact that the OMT programme is conditional doesn’t mean that the ECB is now dictating fiscal policy or is outside its mandate.

The announcement of OMT was already a success in the case of Italy: the latest auction of 18 billion was four times higher than expectations allowing Italy to cover all the 2012 financial obligations. For a country with the highest private wealth to GDP ratio of any G-7 country the crisis of confidence is almost over.

Does it mean that the OMT is the solution to all European problems? Of course not. The main issue of some European countries is dealing with high unemployment and lack of competitiveness.

Luxury Slowdown: an Opportunity

From Burberry to Mulberry investors are rightly concerned about a global slowdown in the luxury sector and are taking profits. I think that the first distinction has to be made: while many luxury brands look similar there are substantial differences among them. For instance I see as a crucial competitive advantage where the luxury goods are produced for example in the case of Italian and French Luxury brands (like Brunello Cuccinelli +40% since IPO, Prada +90% since last year, Ferragamo +52% since IPO) is a buying opportunities in a selloff. This because, over the long term, they still maintain a distinct brand advantage vs the competition. This advantage is strongly anchored on where the products are manufactured and France and Italy are likely to remain long term leaders in this field.

In Short

• OMT will boast confidence in Europe and the Euro and is within the ECB mandate.
• Lack of competitiveness in many European countries is the main issue and it cannot be solved in the short term.
• Luxury Slowdown is a buying opportunity for unique brands with a sustainable competitive advantage. Despite the similarities not all luxury brands are the same.

Our University of Cumbria MBA in Leadership and Sustainability graduates will receive their award the upcoming 22 November at the Carlisle Cathedral

Will you be joining our 2013 graduations ?

University of Cumbria MBA in Leadership & SustainabilityMoney Management Class Hangout with Dr David Costa using a new technology in our classed thanks to the simplicity of Google+

Last August we did experiment a new technology to connect live with class members in a Q&A session. Despite some technical limitations I think that the result of our first attempt has been a good one:

As the programme has students from over 130 countries this type of live events is still experimental and not compulsory but we are working to add more of these optional hangouts sessions throughout the MBA.