* Swiss to vote on limits to executive pay on March 3
* Business lobby warns initiative will harm economy
* Low taxes, stability, quality of life could offset curbs
* Shareholder opposition to voluntary pay votes low so far
By Caroline Copley
ZURICH, Feb 21 (Reuters) - The year is 2026. Switzerland is in a state of anarchy. Droves of refugees are fleeing the war-torn country; the once affluent nation brought to its knees because in 2013 its people voted to impose the world's tightest limits on executive pay.
It is an extreme vision made into a short film commissioned by leading Swiss business lobby Economiesuisse to try to persuade people to vote "no" in on an upcoming referendum on whether to allow shareholders a final veto on executive pay.
"It is a worst-case scenario," the film's director, Michael Steiner, said. "Just to show what can happen if you make the wrong decision on laws governing the economy."
Economiesuisse has cancelled the film's release, worried it could alienate voters ahead of a March 3 referendum asking the Swiss whether shareholders in public companies should have a binding vote on pay. Economiesuisse wants non-binding votes.
Polls show 64 percent of Swiss plan to vote in favour of a binding vote, angry at lavish bonuses and a high-risk banking culture than nearly felled Swiss stalwart UBS.
Economiesuisse says pay curbs could push Swiss companies to move business abroad, cut jobs and hurt smaller firms which supply larger listed groups.
But even these more modest concerns seem unlikely. Executive pay in Switzerland is higher than in many other countries, some of which are considering their own restrictions, and business leaders value other factors - like the stability and quality of life in the country - as well as their pay packets.
It is also far from clear shareholders, keen to attract the best managers, will exercise any new powers they are given.
"I wonder whether voters are not being too optimistic about their ability to prevent abuses," Rolf Soiron, chairman of cement maker Holcim and drugs industry supplier Lonza told Reuters.
"I think if a company wants to pay a top executive 25 million, then they will find a way to do so regardless of the initiative."
Switzerland's 250 listed companies make up less than 0.1 percent of all firms, but contribute one fifth of the country's economic output and employ 10 percent of the workforce, according to a study by the Swiss Institute of Entrepreneurship.
Some of their leaders say the pay vote would decrease the attractiveness of Switzerland but when asked whether they would leave if the proposals pass, their responses are guarded.
"We are a global company, but we like Switzerland as our base," said ABB Chief Executive Joe Hogan, who earned 9.4 million Swiss francs ($10.2 million) in 2011.
"There's been a great relationship between the government and universities, so we'd like to stay here. I hope the initiative doesn't hurt us."
Stacking Swiss pay against other countries suggests there is some way to go before a mass exodus is on the cards, although the cost of living is mostly higher in the mountainous nation.
Swiss CEOs earned an average of 8 million euros in 2011, compared with 6.7 million in Britain and Germany, according to a study by consultancy Hostettler Kramarsch & Partner.
Swiss taxes help too, with top earners taxed at 30 percent, versus 48 percent in Germany and 45 percent in the UK, giving the average Swiss CEO 5.6 million euros net while his British and German counterparts get 3.7 and 3.5 million respectively.
Switzerland is also one of the steadiest jurisdictions in the world, winning it the top place in the World Economic Forum's competitiveness survey for eight years in a row.
Moreover, Switzerland is not alone in looking at pay curbs. Britain plans to bring in binding votes on pay in late 2013 and the European Union is looking at measures to give investors a ballot on companies' compensation policies.
Companies worry about being able to hire top talent and that managers will not want to wait for the annual shareholder meeting to know what they will earn.
Roby Tschopp, head of activist shareholder group Actares, says firms might get around this by letting shareholders vote on a compensation system in advance.
Tschopp thinks shareholders will continue to sign off on salaries in the 7-10 million franc range, but believes sky-high pay like the 40 million francs given to Daniel Vasella, when he was CEO and Chairman of Novartis, will no longer be possible.
This week, a public outcry forced Novartis to cancel a $78 million golden goodbye for Vasella.
The brains behind the "fat cat" vote, Thomas Minder, says the plan was never to cap salaries, but to end a culture of short-termism and rewards for managers of badly-run companies.
However, it is far from clear investors will pick fights.
Despite some angry shareholders mauling biotech group Actelion and UBS over pay deals last year, there would not have been enough opposition to block pay proposals at any of the top 100 listed firms, even if votes had been binding.
Typically over 50 percent of shareholders would have to vote down pay proposals for them to be rejected.
Ethos, an influential group that advises Swiss pension funds, found that while investor opposition to pay deals doubled between 2009 and 2012, it remained low at about 14 percent.
"At the end of the day, shareholders will get more rights and the possibility to say 'no.' We will have to see if they will use that right," said Axel May, senior partner at Hostettler Kramarsch & Partner.
$1 = 0.9237 Swiss franc Addtional reporting by Katharina Bart; Editing by Mark Potter