* Swiss to vote on curbing executive pay on March 3
* Could give Swiss some of tightest controls on fat cat pay
* Firms say proposals restrictive, damage competitiveness
ZURICH, Oct 24 (Reuters) - Swiss business is rallying to arms to defend top managers' pay as the government set a date on Wednesday for a referendum that may impose the world's first law forcing companies to accept any limits shareholders place on executive rewards.
Coming after the near wreck of banking giant UBS was blamed on a lavish bonus culture that drove its managers to take too many risks, the initiative's opponents say that, far from rescuing Switzerland's reputation for financial success, it will drive away investment and cause an exodus of talent.
The government confirmed the referendum for March 3. Voters can adopt a measure that will ensure shareholders have a binding vote on compensation and ban practices like golden handshakes for new hires and golden parachutes for departing managers.
``This initiative is not workable,'' said Christian Stiefel from SwissHoldings, a grouping of industrial and service firms. ``How much a manager is paid should be an operational decision.''
The proposal was long campaigned for by small businessman-turned-politician Thomas Minder, who was first outraged by payoffs for managers at failed airline Swissair in 2001. It is symptomatic now of a global backlash against corporate excess since the financial crisis struck four years ago.
Firms in Germany and the United States now must hold 'say on pay' votes, but these are not binding; directors in Australia must stand for re-election if a quarter of shareholders vote against their pay at two consecutive meetings.
From late 2013, Britain plans to give shareholders a binding vote on pay and leaving payments at least every three years.
In Switzerland, even if voters reject Minder's initiative, other legislation already adopted in parliament will come into force - though its effect is less sweeping than Minder's law. Polls however show voters may favour the tougher proposal.
Many of the biggest Swiss companies already offer investors a say on pay, though these have not been binding, and only a few have delivered defeats for management proposals.
Alongside a binding vote on the pay of managers and board members, the Minder initiative would force pension funds to vote at shareholder meetings and disclose their voting records.
It would also let shareholders stipulate the number of additional positions board members can hold outside the company and allow shareholders to vote online - something that could saddle smaller firms with high costs, argues Stiefel.
Joe Jimenez, the American chief executive of Swiss-based global drug giant Novartis', has been a vocal opponent of the measure. He is also the highest paid executive on the Swiss bourse, earning nearly $17 million last year.
``The Minder initiative would limit the flexibility of Swiss companies to attract the best employees,'' Jimenez told Swiss newspaper SonntagsZeitung this month. ``Only with first-class employees can we stay competitive abroad.''
While he stopped short of threatening to move Novartis' headquarters out of Switzerland if the vote succeeds, Jiminez said the drugmaker could not rule out any eventuality.
Peter Gysel, spokesman for Swiss cement maker Holcim , also agreed the initiative would bring ``enormous practical difficulties''.
HEADS IN SAND
Stiefel said companies were in no rush to adapt as they do not expect new rules to come into force before Jan. 1, 2014 as the government will have draw up legislation after the vote.
However, Ernst & Young senior manager Justin Szwaja urges companies to wake up to the changes, with polls pointing to a good chance that Minder's initiative will win.
``The companies that are burying their heads in the sand, assuming it's better to do nothing because we don't know what the changes will be, will be at a disadvantage,'' Szwaja said.
Some firms have already made overtures to placate shareholders, voluntarily introducing non-binding votes on pay, improving transparency and showing willingness to enter into dialogue about their compensation framework.
Of the top 100 listed Swiss companies, 49 held a vote on pay in 2011, according to Ethos, an influential group that makes recommendations to Swiss pension funds.
Pay of executives at financial firms dropped by more than a quarter in 2011 after a string of scandals drew shareholder ire. But compensation rose by 5 percent in other sectors. Those might now face growing scrutiny, says Ernst & Young.
Data from Ethos shows the average percentage of shareholders voting against remuneration policies in Switzerland more than doubled from 6.7 percent in 2009 to 14.4 percent in 2012.
Swiss banks have been given the bloodiest noses, not least UBS, which need a taxpayer bailout after running up big losses in the U.S. sub-prime mortgage market in 2008.
Against a backdrop of sub-par 2011 profit and a $2 billion rogue trading scandal, more than one third of UBS shareholders voted against its pay plans in May, including a 4 million franc signing-on fee for new German chairman Axel Weber.
As the referendum nears, big business is expected to reach deep into its pockets to campaign against Minder, whose family firm produces traditional toothpaste and cosmetic products.
Economiesuisse, a business lobby group, has been reported to have up to 12 million francs ($13 million)to convince voters to back the parliamentary counter proposal, which they say is a lot less restrictive on corporate action.
But Minder, 52, argues his initiative should actually make the country more attractive as it should help prevent a repeat of corporate failures like UBS:
``Switzerland would be the country where the money is the safest and the shareholders would have the most say; so that is where the investors would bring the money.''