When Klaus Schwab told trustees of the World Economic Forum last month that he planned to “start the process of stepping down” from the organisation he founded 55 years ago, he reeled off a list of achievements.
The WEF’s annual winter meeting of political and business leaders in the Swiss ski resort of Davos had become a “global village” where common challenges could be addressed, making it “essential to avoid war”, he wrote in an email on April 1.
Schwab’s own “intellectual, political, economic and social contributions to the world” had been recognised with “international and national distinctions”, while “the small non-for-profit foundation” he had created was now an international body granted special status by Switzerland because of its role in the country.
“It is evident,” the 87-year-old said, “that I do not have to strive any more to create a legacy.”
Just a few weeks later, Schwab is working furiously to protect his legacy after a barrage of accusations prompted the WEF’s board of trustees to order its second probe into his conduct in less than a year.
Instead of an envisaged gradual handover lasting until January 2027, Schwab was forced out as chair at the end of April, and investigators are now picking over his financial relationship with the WEF after a whistleblower alleged he and his family received inappropriate financial benefits. Swiss law firm Homburger will lead the internal investigation.
“The process will be carried out thoroughly, diligently, and in a timely manner,” the WEF said. “The Forum does not intend to further comment on this matter prior to the conclusion of the investigation.”
But Schwab, who strongly denies all claims against him, is fighting back, arguing that the WEF underpaid him for decades, benefited from unpaid work by his wife and enjoyed the reflected glory of their personal philanthropic donations.
Some current and former WEF employees view the unfolding events as an inevitable denouement for an organisation and its leader whose identities were so closely intertwined.
“Basically, like many founders he thought the institution was completely inseparable from him,” said one former member of the WEF management board. “He should have left years ago, but he obviously couldn’t. I am sure he’ll fight tooth and nail.”
A current senior staff member said Schwab “couldn’t let go — if these scandals hadn’t happened he would still be here”.
The anonymous whistleblower allegations came on top of claims last year that Schwab had presided over a toxic workplace culture where female and Black employees suffered discrimination, and that his own remarks had made some women uncomfortable — all of which he denies.
That the latest allegations revolved around money came as a particular affront to Schwab. Among the near-dozen claims in the unsigned email to trustees were several accusing him and his family of mingling personal and work expenses. One accused him of reaping personal royalties from books whose ghostwriters were funded by the WEF, based on research by its staff and marketed using the forum’s resources.
A person familiar with the arrangements said the WEF had paid for a ghostwriter but added that Schwab was fully engaged in the development of the arguments in the books.
“The universally accepted practice in universities, think-tanks, media and other organisations is that authors retain all rights and fees,” Schwab said in a statement circulated last month. “Those publications contributed substantially to the intellectual leadership of the World Economic Forum.”
Schwab also denied claims that his wife had carved out parts of a refurbished WEF property for the private use of their family, or charged the forum for holidays on the pretext of a work meeting. Whenever resources were used for private purposes, he said, the money was reimbursed.
“I created the World Economic Forum . . . after having organised the first meeting in Davos on my own entrepreneurial risk,” Schwab wrote in his statement rebutting the whistleblower claims. “Under my leadership the Forum has had over 55 successful years, generating a value of hundreds of millions to be used in the public interest.”
Hilde, his wife and former assistant, stopped being an employee of the WEF not long after she married Schwab in 1971 but continued to play a role in its cultural life and in the development of the organisation’s properties “without asking for any remuneration”. The couple had personally endowed foundations for entrepreneurs, young leaders and the arts whose affiliations with the WEF had contributed to its relevance, he said.
Schwab added that he had never taken a SFr5mn bonus negotiated with the board in 1999 to make up for the low salary he took in the WEF’s early years, or the pay rises to which he was also entitled under the same agreement. In total, he estimated he had foregone about SFr8mn owed to him.
“It is not about money for Klaus,” said one former senior employee. “It was about prestige, being seen at Davos, being important. It was about the status and being at the centre of it all.”
Another of the new allegations, reported by the Financial Times last month, was that Schwab manipulated the WEF’s flagship “global competitiveness report” to curry favour with governments. While Schwab acknowledges that when government representatives contacted him to dispute their country’s rankings there could be debate over methodology and disputes over the data that he would pass on to researchers, he said calling that manipulation was an “insult”.
Schwab, who did not respond to requests for additional comment, gave up his executive role shortly before the workplace culture claims were published last June in the Wall Street Journal. He continued as non-executive chair of the board of trustees while law firm Covington and former US attorney-general Eric Holder investigated on behalf of a committee of independent trustees.
They ultimately did not substantiate any allegations against Schwab, the WEF said, but the process strained the relationship between him and the rest of the board and created consternation among the corporate executives who fund the annual meeting in Davos, according to people familiar with the situation.
It also put a spotlight on Schwab’s son Olivier, who was head of technology at the WEF and was accused of failing to respond properly to an employee’s complaint of sexual harassment by a senior member of staff, and raised questions about the quality of the organisation’s governance more generally. Olivier Schwab left the WEF in April, according to a spokesperson. Another of Klaus Schwab’s children, Nicole, left the organisation last year.
Members of the board’s audit and risk committee decided they could not ignore the latest allegations when they landed on April 16 with, according to Schwab, an ultimatum that if he did not step down by April 23 they would be sent to the press.
The committee is made up of grandees from the world of business including David Rubenstein, co-founder of private equity group Carlyle, and Axa chief executive Thomas Buberl. The wider board of trustees — a Who’s Who of the global elite that includes the heads of the World Bank and European Central Bank, a former US vice-president and the Queen of Jordan among its 29 members — endorsed the audit committee’s decision to launch a second investigation at a hastily convened meeting on April 20.
The WEF now faces questions that go beyond the immediate investigation, namely how far and how fast it might distance itself from the man who created it and dominated it for so many years.
The governance structure set up in 2015 when Switzerland endorsed the WEF’s special status as an “international organisation for public-private co-operation”, giving it tax and other privileges, envisaged splitting the roles of chair of the board of trustees and executive management after Schwab’s retirement, but it also says there must be at least one member of the Schwab family on the board.
More broadly, there is the question of whether the WEF without Schwab will still be able to bring world leaders and business titans to Davos every year.
With Børge Brende, a former foreign minister of Norway, in the executive role as president and Peter Brabeck-Letmathe, the Swiss businessman who used to chair Nestlé and Formula 1, stepping in to be interim chair of the trustees, the WEF is working to present an air of orderly transition. Corporate partners, meanwhile, are quietly trading names among themselves of who might emerge as the next chair, with Rubenstein among those mentioned, along with ECB president Christine Lagarde.
“The place is all panicking about how much they will be tarnished by him,” the senior staff member said, noting “tremors” among corporate partners since the emergence of allegations of poor governance. “That is the biggest worry at the moment. Does it die with him or stick to WEF?”
The WEF said the recent developments had not altered its “steadfast commitment to its mission and values” and that it was dedicated to remaining a “trusted platform” for dialogue and co-operation.
For Schwab, there remains a battle to remove the asterisk to his legacy, the allegations that readers of his April 1 email believed he was alluding to when he thanked those who “shared our spirit of constructive optimism despite a world full with fabricated news creating sometimes challenging circumstances”.
His message concluded that it was time to write his memoirs and the history of the WEF. But now, it seems, there is one chapter still to play out.
This article has been corrected to make clear Børge Brende is a former foreign minster of Norway, not Finland as originally stated
https://www.ft.com/content/011d575b-d594-4c96-a0bd-21e57d682a78
