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Hobnobbing at Very High Levels

Political and Corporate Elite Soak Up Big Ideas at Davos

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January 28, 1997, Section D, Page 1Buy Reprints
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This Alpine ski resort will be the place to be starting Jan. 30 -- at least for the likes of Bill Gates, Microsoft's chairman, and John F. Welch, the head of General Electric. Speaker Newt Gingrich will also be there, rubbing elbows with Boris A. Berezovsky, Boris N. Yeltsin's deputy national security chief and one of the most powerful executives in Moscow, and Kofi Annan, the new United Nations Secretary General.

The snow-covered streets will crunch under wingtips and tasseled loafers instead of ski boots, and famous names will jostle in the corridors of pricey hotels like the Derby and the Belvedere.

The occasion is the six-day annual meeting of the World Economic Forum, a gathering of political and business movers and shakers from all over the world.

The meeting and smaller forums in Africa, Asia, South America and elsewhere through the year have become powerful attractions, with hundreds of business leaders paying $20,000 per company to come to Davos to hobnob.

To many critics, Davos, with its closed-door meetings of executives pursuing contracts and contacts with top politicians and pundits, symbolizes the new economic orthodoxy of the late 20th century. Counter-Davos conferences have been organized to fight the idea that global free-market forces will inevitably triumph over government attempts to regulate, or that the elite who gather here have any claim to set the world economic agenda.

But with the companies represented here doing an estimated $4.5 trillion a year of business, and people like Prime Minister Benjamin Netanyahu of Israel, President Hosni Mubarak of Egypt and the Palestinian leader, Yasir Arafat, all here, the opposition view can seem like a cry in the wilderness.

Hard-core skeptics say that it's all just a lot of talk without a payoff, and that it takes about as much money from the attendees as a global financial pyramid would.

''It's the world's greatest Ponzi scheme,'' said Richard C. Holbrooke, who came last year, when he was an Assistant Secretary of State, to talk about peace-making in Bosnia and Herzegovina. This year, he would probably not be allowed in because he is no longer a top corporate officer or top government official.

That is the rule set by the Swiss business professor who dreamed up the Davos idea, Klaus Schwab, a 58-year-old entrepreneur, who rules over his creation as autocratically as the Wizard of Oz and has made it into a global enterprise.

''The company representatives have to be the actual chief executives,'' he said in a recent interview, though the forum's list of attendees includes some executives of lower rank. ''And we never pay any honorarium to politicians who attend.'' Mikhail S. Gorbachev asked for one, Mr. Schwab said, but was turned down.

As for Prime Minister Viktor S. Chernomyrdin of Russia, Foreign Secretary Malcolm Rifkind of Britain and scores of other Government officials, ''we pay hotel rooms for the political leaders,'' he said, ''but not for their entourage.''

Here in Switzerland, people know Mr. Schwab as ''the Professor.'' Admirers ascribe his success to tireless promotion of the forum, whose main attractions include world-renowned scientists or academic experts, noted authors and well-known journalists invited to serve on panels and attend other events at the forum without paying the $20,000 in fees (including two columnists and a reporter for The New York Times this year). About 150 more journalists usually come to cover the news makers, though they do not have the run of the conference.

As for corporate chiefs, ''the minute they lose their jobs, he tosses them out,'' said Eberhard von Koerber, president of ABB Asea Brown Boveri Europe Ltd., part of the international engineering giant, which pays $100,000 a year for ''partner status'' here.

About 1,000 companies pay an annual membership fee, raised this year to 19,000 Swiss francs -- a little more than $13,000. This entitles them to attend this meeting and the regional ones, and covers the $11.1 million costs of the meetings. Banks and other financial institutions pay more -- about $15,000 -- and all must pay a further $6,000 or so to attend at Davos, plus transportation, hotel costs and meals.

The corporate partners like Asea Brown Boveri contribute even more, Mr. von Koerber said, because ''it gives us a lot of privileged access to important meetings.''

''Membership fees finance the infrastructure,'' he said. ''The partnership arrangements finance our investments in the future.''

Income from membership, sponsoring partners, investments and other sources amounted to more than $26 million last year, the forum reported. After paying $12 million for offices and staff, the forum reported a tidy surplus close to $3 million. This can be reinvested or sunk into projects like an interactive computer communications and video-conference system for members, which will be introduced at this year's meeting.

It was developed by Hewlett-Packard, another corporate partner, and is being offered to members by the forum as a ''hot line for global decision makers.''

To be a member, ''you have to have annual volume of a billion Swiss francs'' -- $700 million -- Mr. Schwab said. Such requirements do not always go down well.

Euan Baird, the head of Schlumberger Ltd., finds Mr. Schwab's advances easy to resist and will not be attending this year. Nor will Antonio Garrigues Walker, a prominent corporate lawyer in Madrid, who said: ''I prefer the Trilateral Commission, which is a better opportunity for me to have lunch and breakfast with important people. Davos has become more a status symbol than a real opportunity to make contacts, and I found I was wasting my time.''

There are hundreds of individual meetings and seminars during the conference, which this year focuses loosely on the effects of global communications and computer networks -- and with the likes of Mr. Gates to spur them. The huge supporting cast includes European and Asian government ministers. Under Secretary of State Timothy E. Wirth is leading the Clinton Administration contingent.

The forum's managing director, Claude Smadja, tells planning to attend, ''Contacts ultimately mean contracts,'' though Davos is not a trade fair.

''It's an information market,'' Mr. von Koerber said, explaining why Asea Brown Boveri plays such a big role; Percy Barnevik, the parent company's president, is one of 12 board members.

''We see a lot of very important clients -- governments and state organizations, especially from emerging markets with high growth rates, and all in a relaxed, confidential atmosphere,'' Mr. von Koerber explained.

Ronald L. Skates, president of the Data General Corporation, said the attraction was ''talking to a lot of people you do business with in a nonbusiness setting.''

''If you went over solely for the purpose of making deals, I'm sure you'd be a social pariah,'' he said. ''It's like playing golf with customers, only much more sophisticated.''

To preserve the impression of exclusivity, Mr. Schwab and his staff also organize closed gatherings -- for information-technology people, for example, or energy executives.

''The private meetings are more focused,'' said Charles J. DiBona, president of the American Petroleum Institute, who plans to attend this year. ''In recent years, the energy ministers from countries like Tajikistan, Iran, Saudi Arabia and Tunisia have come,'' he said. ''I learn what the company people are thinking about, how the Europeans think about things, and talk to people I can't see anywhere else.''

Two hundred American companies are members, and forum executives would like to see more.

''We're just shy of 50 percent European companies,'' said Paul Smyke, a dual United States-Swiss citizen, who is the staff member in charge of recruiting new corporate members. ''We have a philosophy -- we call it the global thousand. Once we determine that a company has a global presence in sales or sourcing, we go after it.''

The forum and its board are organized as a private foundation, not publicly accountable under Swiss law. Mr. Schwab is president, and his son, Hans Joerg, is a member of the board, but the founder says he no longer makes all decisions.

Exactly how well he makes out financially he does not disclose, though he says his forum activities have landed him paid corporate board seats with companies like Vontobel Holding, owner of a big Zurich bank, and made him vice chairman of SMH, the Swiss company that makes Omega, Tissot, Swatch and Longines watches. He also teaches one day a week at the University of Geneva, where he has been professor of business policy since 1972.

With his university income, board memberships and salary, he said, he had an income comparable to that of the president of the International Monetary Fund or the World Bank, which would give him upward of $200,000 after taxes.

The forum has a staff of about 80 former journalists, diplomats, economists and other academics. Except for the period around the annual meeting, they all work out of a crowded residential building in Cologny, a hilltop suburb of Geneva overlooking the lake, for salaries ranging from $48,000 to $173,000.

The idea got started when Mr. Schwab, then a 32-year-old Swiss university graduate with doctorates in engineering and economics, went to Harvard in 1965 to study government and business. He came back with the idea that Europeans, preoccupied with the rising American economic challenge, would probably pay good money to learn about the management methods taught at Harvard Business School.

''I got John Kenneth Galbraith, Herman Kahn and a few other people I had met in Cambridge to come and explain,'' he said, and with a staff of two secretaries and an assistant he later married, he organized the first European Management Symposium in 1971. It attracted 444 business leaders, each paying a substantial fee.

But it was the oil shock of 1973 that jolted European and American executives and politicians into an awareness of the global connectedness of things. Seeing an opening to organize a new kind of business-political symposium no one had thought of before, Mr. Schwab relentlessly went after contacts in China, Latin America, North Africa and Central Europe.

This year, his main regret is that the number of people attending from the Middle East may be lower than usual. The conference falls during Ramadan.

A correction was made on 
Feb. 3, 1997

An article in Business Day on Tuesday about the meeting of the World Economic Forum in Davos, Switzerland, misidentified the company developing an interactive video communications network for the forum. It is Advanced Video Communications Inc., the commercial arm of the forum, not Hewlett-Packard.

How we handle corrections

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