Switzerland has scrapped a ban on Europeans dominating Swiss corporate boards, easing a long-standing source of irritation for foreign firms.

A recent reinterpretation of corporate regulations means boards no longer require a majority of Swiss citizens to be officially registered.

Business leaders have welcomed the move as a key first step towards a broader liberalisation of corporate governance in Switzerland.

“There is certainly no sense in having people on the board of a company just because they happen to hold a Swiss passport,” Howard Rosen, chairman of the British-Swiss Chamber of Commerce (BSCC), told swissinfo.

“And if you pack your board with people who are not fully au fait with what’s going on, it’s rather dangerous,” he said.

The change also means foreign-owned firms can have greater direct control over their Swiss-registered subsidiaries.

As of August, Swiss-registered firms can have a boardroom majority made up of European Union citizens and European Free Trade Association (Efta) nationals living in Switzerland.

However, the change falls short of allowing non-residents and non-Europeans to dominate boards.

One less headache

Rosen said last year’s bilateral treaties with the EU had made restrictions on board membership – which are governed by article 708 of the Swiss Code of Obligations – discriminatory.

After months of lobbying by groups such as the BSCC, the federal authorities recently issued a circular to all cantonal business registrars ordering them to broaden their interpretation of article 708 to include Europeans.

For many foreign investors, the restrictions have been a long-standing irritant rather than an insurmountable barrier to doing business.

Nonetheless, some international firms with Swiss subsidiaries have been forced to appoint extra board members in order to create seats for their non-Swiss owners.

“Having to put more people on the board of a company, just as makeweights, adds a level of cost which people can do without,” added Rosen.

Non-residents

Hans Peter Brunner, chief executive of the Swiss arm of the London-based Coutts Bank, welcomed the change but said it should be extended to include non-residents.

"It's mainly a practical issue. Our chairman is Lord Hume, and Gordon Pell is the chief executive, [both of them non-residents]," he said.

"And I'd like to have those two on the [Swiss] board because they understand the business very well."

Rosen said the next step was to convince the Swiss parliament to lift restrictions on non-resident board membership.

"The old idea that you have to have a majority of board members resident in Switzerland in today's globalised economy is a nonsense," he said.

Push for diversity

Brunner, a Swiss citizen who has lived abroad, said some business figures could be opposed to a dilution of Swiss control.

“But in my opinion, non-Swiss board members add to the professionalism. We can learn things from other cultures, nations and professions… and vice versa,” he added.

Unlike Britain or the United States, Switzerland maintains tight limits on the make-up of its boards.

This has led to claims that the Swiss business community has become too insular.

Although the situation is changing, a relatively small pool of individuals still dominates Switzerland’s top 20 boardrooms.

And while other countries have problems with “old boy networks” and cronyism, a string of corporate failures, such as the collapse of Swissair in 2001, have prompted calls for reform.

“The new approach to corporate governance, unfortunately somewhat precipitated by events, is reflected in the fact that people are looking for cosmopolitan boards in companies,” said Rosen.

swissinfo, Jacob Greber in Zurich

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