The Swiss turn on the super-rich

Regardless of which reform plan the Swiss adopt, David Roth,the leader of the youth wing of the Social Democrats, says itwon't do much to address Switzerland's deep inequality ofwealth. Roth, 27, who organized the "Occupy Davos" camp ofigloos in Davos in 2011, is pushing for a much more radicalreform: Limit the annual compensation of top executives to just12 times that of their lowest-paid worker. Both World EconomicForum founder Klaus Schwab and French President FrancoisHollande have called for top pay to be capped at 20 times thatof the lowest pay-tier. "If the shareholders vote on executivepay, it is still the rich voting about the rich," Roth says."This whole cartel needs to be broken." His initiative is likelyto be put to a vote in late 2013.

A separate campaign to end special tax deals for wealthyforeigners who live but don't work in Switzerland has also beendriven by the growing wealth divide and taps into Swisshostility to immigrants. The annual list of Switzerland'swealthiest 300 people published by Bilanz names 131 foreigners,with Ikea founder Kamprad in first place, at $38 billion.

Special tax deals for foreigners were first introduced in1862 by the canton of Vaud along Lake Geneva (where Kampradlives) in a bid to boost the tourist industry in poor ruralregions by encouraging wealthy pensioners to move there. Thedeals were later adopted nationwide in rules dubbed Lex Chaplinafter Charlie Chaplin moved to Switzerland in 1953.

The number of super-wealthy foreigners lured to Switzerlandhas doubled in the last decade, to more than 5,000. Their taxesare based on the rental value of their property rather thantheir income or wealth, on the condition that they do not workin the country. The influx is blamed for pushing up housingprices, particularly in desirable areas around Lake Zurich and Geneva as well as the more glitzy Alpine resorts. Many of thetax exiles come from neighboring France, and more French couldbe scuttling across the border soon due to a 75 percentsuper-tax on income above 1 million euros ($1.29 million)proposed by Socialist President Hollande. Bernard Arnault,France's richest man, was pilloried last year for his decisionto seek Belgian nationality.

The cantons of Zurich, Basel, Schaffhausen and AppenzellAusserrhoden have already scrapped their special deals forforeign tax exiles, but others have upheld the current system,albeit raising the taxes levied on foreigners. Roth's SocialDemocrats are campaigning to force a national referendum on thisissue too. "The system has an extremely damaging impact on thehousing market, on Switzerland's image, and international taxjustice," he says.

The Swiss government, which saw revenues of $716 million in2010 from the special taxes on foreigners, is seeking to headoff the both Minder and Roth fear their campaigns could be scuppered. "It is going to be a battle of money," says Minder. "It's the classic battle between the small guy and the huge Economiesuisse establishment."

He's right to be worried. Zurich economist Kissling says money has increasingly determined the outcome of Swiss referenda, especially since billionaire industrialist Christoph Blocher started funding campaigns by the right-wing Swiss People's Party. He argues that the only way to tackle wealth inequality is to increase the inheritance tax, another issue the Social Democrats want to put to a vote, although that would likely face even more entrenched opposition. Swiss inheritance tax varies from canton to canton but is generally low - another draw for foreigners.

The 1 percent may be outraged by these assaults on their wallets, but they are already adjusting. Back at that UBS shareholder meeting from which Minder got the bum's rush, another chiding stockholder offered Ospel a string of sausages. "In the future you will have to live a little more modestly," he told the UBS chairman. Forewarned of the stunt, Ospel whipped out a tube of mustard, as though he were ready to tuck into them right then. But he got the message. Later that year, Ospel and other ex-board members agreed to return $35 million in bonuses and other payments from the bank. Credit Suisse has not paid top executives any cash awards for the last four years, in favor of stock-based schemes linked to the bank's share price. Dougan's pay was cut in half in 2011 as the bank's stock tumbled, although he still took home $6.2 million.

Ethos, an influential group of shareholders that makes recommendations to Swiss pension funds, says managers' total pay at financial firms dropped 23 percent in 2011, although remuneration in other sectors rose 5 percent.

UBS drew howls of outrage again last year over the $4 million signing-on fee for new chairman Axel Weber, prompting more than a third of its shareholders to reject the bank's pay plans. Weber, who is German, refuses to comment publically on the debate around the Minder proposals. That might be caution, or it might be a smart tactical decision. "It is a matter for the Swiss people," he told the SonntagsZeitung newspaper. "At the moment, we generally see that the more bankers publically wish for something, the less likely it is to be fulfilled politically."