Limiting CEO salaries would be a strong symbol of fighting income inequality

In Opinion
Source: Bloomberg  Mike Trujillo / Daily Titan
Source: Bloomberg
Mike Trujillo / Daily Titan

It’s safe to assume that a CEO of any company is usually the one getting the biggest paycheck, but in Switzerland, those paychecks are taking on epic proportions.

Switzerland is voting on a law that would limit a CEO’s pay to be no more than 12 times that of the company’s lowest-paid worker. Twenty-five years ago, Swiss CEOs made six times more than the average worker. Now, they earn more than 40 times as much.

The movement is being led by the youth wing of the Social Democratic Party. They needed to obtain 100,000 signatures from voters in order to turn the measure into a national referendum. In order for the measure to succeed, it would need to win a majority in all 26 of the country’s cantons as well as the popular vote nationally.

The Swiss have taken the lead in ensuring their country doesn’t go down the same road as their capitalist counterparts who are less benevolent. As income inequality continues to grow each year in the United States, policymakers in Washington, D.C. should pay attention to the situation in Switzerland before the middle class disappears. Perhaps the Swiss grew increasingly concerned with income inequality after they noticed what was happening stateside.

If passed, Switzerland would be following in the footsteps of France, who has already set a law limiting CEOs of French state firms to be no more than 20 times what the lowest-paid employee earns. Recent data from the United Nations shows that the Swiss also have the highest gross average monthly wage in Europe, at about $7,766.

Capping executive pay within a company would not only help alleviate the imbalance between an executive and his workers, but would also send a strong message to society that income inequality will not be tolerated.

An alternative solution being proposed is for the minimum wage to be raised. Although this would bring more income to lower-paid workers, it is likely that the salaries of CEOs would also increase, which ends up doing nothing to solve the crisis of income inequality. Tying executive pay to the lowest-paid employee is a far more balanced approach.

There are claims of this plan being socialist, but the plan itself is not calling for all workers to be paid the same. It is simply making salary differences fairer by ensuring that both the executive and his workers are getting rewarded for the company’s productivity.

If an executive’s workers are largely responsible for the success and well-being of his or her company, it would be nothing more than capitalistic to compensate these workers for the work that they have put in to the company’s success. At some point, it ceases to become hyperbole when you ask an executive if he or she really needs that sixth yacht.

It is admirable for a country to be concerned with sustainable wages within its workforce. Switzerland should be able to pass laws that will benefit the entire community and be used as an example for other countries to do the same.

After working for four years, the young activists were able to obtain the necessary signatures to get the measure on the ballot. With support from Swiss labor unions and the country’s two largest left-of-center political parties, activists pushed for the initiative’s approval. Unfortunately, the law did not get the votes needed on the election in Nov. 24. It failed with only 35 percent of voters supporting it.

There are about 8 million people living in Switzerland, but 400,000 workers don’t make a sufficient amount to live on. It is unsettling to live in a country where the monthly salary of a CEO is an exponential amount of what the average worker makes in a year. Switzerland’s 1-to-12 initiative, as it is being called, should be given another chance to become a law and benefit the country in numerous ways.

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