Referendum on limiting bosses' pay to 12 times that of lowest-paid staff follows vote on 'golden hellos and goodbyes'

Swiss voters on Sunday decisively rejected a proposal to cap "fat cat" pay, in a ground-breaking referendum on the issue.

Final results showed that votes against carried the day by 65.3% to 34.7% in favour. David Roth, the president of Switzerland's Young Socialists and the referendum's leading sponsor, said: "We're disappointed [we] lost today."

His proposal would have meant executives would have been unable to earn more in a month than their lowest-paid workers in a year. The so-called 1:12 referendum was the second ballot this year in traditionally conservative and business-friendly Switzerland on the subject of executive remuneration.

In March, voters approved a measure that boosted shareholders' power over managerial salaries and banned one-off bonuses – so-called "golden hellos" and "golden goodbyes".

Roth blamed Sunday's defeat on "scare tactics" by his opponents. Employers had mounted a vigorous counterattack, claiming approval of the initiative would undermine Switzerland's competitiveness, slash tax revenues and breach a taboo on giving the state a role in relations between employers and employees.

Christian Keuschnigg, professor of public economics at the university of St Gallen, said a study he had carried out for the employers found the cost to the state would have ranged from "close to zero to as much as Sfr4bn [£2.7bn]", depending on the reaction of business. The proponents of the scheme, backed by the Socialists and Greens, argued that the savings in top executive pay would be redistributed among the lower paid.

But, said Keuschnigg, companies might have increased their dividends or relocated to other countries. "Multinational corporations could easily switch their headquarters elsewhere," he told the Guardian. "That danger in our view was quite real."

Both the government and parliament had called for a "no" vote.

Claude Longchamp, head of the polling group gfs.bern, said that, unlike the sponsors of the March referendum, "the Young Socialists were unable to convince older voters".

Deborah Warburton, a partner in London-based executive search firm Hedley May, highlighted the radicalism of what voters had been asked to endorse.

"The Swiss proposal was much stricter even than the 20 times ratio that the TUC is calling for in the UK, so it's perhaps not surprising that it was rejected," she said. "Even though it was a 'no' vote, the question of how to make executive pay fairer is still very much a live issue, with the UK having implemented a law giving shareholders a binding vote on executive pay only last month, France and Germany also considering such measures, and the EU working on potential draft legislation to give shareholders voting rights over executive pay."

Nor will Sunday's verdict dispel concerns over pay imbalances in Switzerland. A separate initiative by the trade unions, aimed at the introduction of a minimum wage, is expected to go to a national vote next year.

Roth said: "Our fight will continue against 'fat cat' salaries and an unfair pay system. This system has no future. We succeeded in mobilising many people and launching a broad debate."

The issue leapt into the headlines earlier this year after the Swiss drug group Novartis agreed to pay its outgoing chairman Daniel Vasella SFr72m (£49m). The payment, which the firm scrapped, was aimed at preventing Vasella from using his knowledge to help rival pharmaceutical firms.

The young Socialists claimed during the 1:12 campaign that the ratio of the average salary among Swiss CEOs to the average wage had leapt from six to one in 1984 to 43 to one in 2011. Calculations based on figures compiled by the trade union Travailsuisse indicate that the biggest pay imbalance is at another drug company, Roche, where the salary of the best-paid executive is 236 times that of the lowest-paid worker.

Other firms where the ratio was in excess of 200 to one were ABB, Novartis and Credit Suisse. They were followed by Nestlé, UBS and Lindt & Sprungli.