By Isabelle Amschwand – Chair of swissVR
As the economic, regulatory and societal environment becomes increasingly complex, the board of directors is emerging as the forum where an enterprise’s decisive trade-offs are made. Its members shoulder broad responsibilities, a high standard of due care and a real personal legal risk. In this context, their remuneration is a key governance tool, supporting board effectiveness, independence and responsible corporate management.
Contrary to a widely held belief, Swiss law does not grant board members any automatic entitlement to remuneration. That said, compensation is justified by the scale of the mandate and the risks attached to it. In principle, the board sets its own pay. But in practice, the issue cannot be separated from governance: once shareholders entrust a mandate to the board, they must also be able, in one way or another, to take part in defining its remuneration.
In SMEs, this link is often direct, especially when the main shareholders also sit on the board. In listed companies, by contrast, the framework is much stricter, with a binding annual vote at the general meeting, a compensation report and, most often, a dedicated committee. This difference explains the wide range of practices observed in SMEs. Without transparency requirements comparable to those applicable to listed companies, they enjoy greater freedom to adapt their system to their own reality.
Board compensation should above all reflect the realities of the mandate. According to swissVR’s survey, the most decisive criteria are the scope of the role, in terms of time committed, expertise and network mobilised; the company’s complexity and financial strength; and the ability to justify the remuneration to shareholders. Personal risk exposure and the need for fairness within the board are also among the key factors.
This reflection nevertheless requires a clear distinction between remuneration levels. In many SMEs, the roles of shareholder, board member and executive still overlap. Yet dividends remunerate invested capital, board fees compensate a governance mandate, while a management salary corresponds to an operational function. Confusing these logics blurs responsibilities and weakens the clarity and credibility of the system.
This relative simplicity does not exempt companies from a transparency imperative. Internally first, because board members’ knowledge of their peers’ remuneration is a minimum standard of good governance (for example, by adopting a remuneration policy). Externally next, because even without a disclosure obligation comparable to that of listed companies, clarity towards shareholders is increasingly becoming a marker of credibility. When it comes to board compensation, what is readable inspires more trust.
Board compensation raises not only questions of amount, but also of social security, pensions and liability. As a rule, directors are treated as employees for AHV purposes, even if they are not employees in the conventional sense, which requires the board to ensure that contributions are properly accounted for. The situation can become more complex when the mandate is carried out on a secondary basis, through a company, or in an international context. LPP coverage must also be assessed on a case-by-case basis.
To this must be added coverage for personal liability risk: in a context where directors may be exposed to civil or criminal proceedings, D&O insurance is becoming an increasingly important layer of protection. In other words, board compensation is not simply a sum paid out; it also requires a solid social, legal and insurance framework.
Ultimately, the question is not only how much a board should be paid, but according to which logic and with what safeguards. That is precisely the value of the guide published by swissVR in collaboration with PwC: beyond governance principles, it offers target values drawn from the survey, highlights differences in practice between SMEs and listed companies, and provides a practical checklist of the elements to review when setting remuneration. Enough to turn this sensitive topic from a blind spot into a fully assumed governance matter.
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