Looking at 2009 data published by the US government (IRS) on what the source of the top 400 wealthiest citizens income is, it’s a fair statement to say that salaries don’t account for a big slice of wealth generation:
[table]Source, % Salaries/Wages, 8.6 Interest, 6.6 Dividends, 13 Partnerships and corporations, 19.9 Capital gains, 45.8 [/table]
Judging by this there is a large likelihood that any legislation limiting salaries will just lead to a restructuring of incentives/rewards. Example: Capital gains are for the most part not taxed in Switzerland (except at legal entities).
The question now arises though: Will the proposed legislation, which speaks of including non-cash benefits and services as part of salary, be unattractive for shareholders.
Should the legislation make it impossible or difficult for owners, shareholders to generate tax-free or lightly taxed capital gains, the impact of a yes vote would be substantial. Capital is a very mobile commodity that can easily find an alternative and more accomodating tax domicile.
If the 1:12 legislation doesn’t make life for shareholders generating capital gains harder it may help reduce the agency problem and would thus benefit shareholders as a group, as it reduces the incentive for the agent (top management) to milk the company and thus damage the principal.
What happens in SMEs where management (agents) and owners (prinicipal) are identical will be interesting/crucial.