Davos Forum’s Global Elite Damaged by Year of Scandals

Jakarta Globe, Simon Kennedy, January 24, 2012

Employees install a sign for the World Economic Forum on the Congress
 Center in Davos, Switzerland, on Monday. Some 1,600 economic and political
 leaders, including 40 heads of states and governments, will converge at the chic
ski town for the 42nd edition of the five-day forum that opens today. (AFP Photo)

              

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Davos Man is approaching his annual Alpine get-together with humility after spending the past year getting fired, arrested, belittled and occupied.

When the World Economic Forum’s conference gets under way in the Swiss ski resort today, several past stars will be missing from the swirl of policy debates and cocktail parties.

News Corp. chairman Rupert Murdoch is embroiled in a phone hacking scandal. Oswald Gruebel quit as chief executive officer of UBS after a $2.3 billion loss from unauthorized trading. Philipp Hildebrand left the Swiss National Bank in a furor over his wife’s currency transactions. Dominique Strauss-Kahn resigned as International Monetary Fund managing director after sexual-assault charges, later dropped, were filed against him.

As “OccupyWEF” protesters build igloos under the eye of Swiss security forces, the leaders of this year’s Davos may try to profit from the mistakes of their predecessors by embracing transparency and ethics.

Citigroup CEO Vikram Pandit, a co-chairman of the meeting, is calling for the financial industry to be more open amid panel discussions with such titles as “Is 20th-century capitalism failing 21st-century society?”

“Davos Man has taken on the lessons of recent years and is asking how to do things differently,” said Richard Edelman, president and chief executive of public relations agency Edelman, who is attending the conference. Businesses and policy makers are having to “process accurately the vox populi.”

The need for them to do so is demonstrated by Edelman’s annual poll on trust, released on Monday in conjunction with the Davos meeting. Trust in government fell a record 9 percentage points to 43 percent, while faith in business slid to 53 percent from 56 percent.

The credibility of CEOs slid 12 points to 38 percent, the largest drop in nine years, and banks and financial services remained the two least trusted industries. The online survey questioned a total of 30,600 people in at least 25 countries from Oct. 10 to Nov. 30 last year.

“Davos Man is not this caricature of the rich and powerful person,” Klaus Schwab, founder of the forum, said on Monday.

“Davos Man is a person who, as I define it, should be concerned with the present state of the world and who should be ready to engage and contribute so that the state of the world is improved.”

The term “Davos Man” was created by the late Samuel Huntington, a professor at Harvard University in Cambridge, Massachusetts, to describe those with international visions who view governments’ only use as easing “the elite’s global operations.”

The 42nd annual meeting of the World Economic Forum embodies the “1 percent,” to use the phrase popularized by the young protesters who spent more than eight weeks occupying New York’s Zuccotti Park last year.

Among scheduled attendees are bank CEOs such as Pandit and Jamie Dimon of JPMorgan Chase and corporate chiefs Peter Voser of Royal Dutch Shell and Cisco Systems’ John Chambers. At least 70 billionaires are to be present, including investor George Soros and Microsoft founder Bill Gates. They will join about 2,600 other delegates discussing the world outlook.

The image of financial, corporate and governmental powers have taken a hit as the “occupy” protests, the Arab Spring uprisings and recent marches in Moscow highlighted rising unemployment and income inequality, said Tina Fordham, senior global political analyst at Citigroup and a member of the forum’s Global Agenda Council. It helps shape the forum’s work.

There is “a reduced willingness to tolerate the perceived excess of elites and the old social order, and heightened potential for protests to cause disruption, violence and pressure to alter the legislative agenda,” she said.

Not everyone has gotten the message. Three years after he used the Davos stage to pledge Russia wouldn’t turn toward “isolationism and unbridled economic egoism” and as he seeks to return to the presidency, Prime Minister Vladimir Putin is facing the biggest protests against his rule in 12 years. They were sparked by alleged fraud in the Dec. 4 parliamentary election, in which his United Russia party retained power.

In the financial world, Davos Man took a pay cut. Morgan Stanley CEO James Gorman, who is scheduled to attend the forum, had his 2011 pay reduced by 25 percent from a year earlier. Goldman Sachs cut average compensation and benefits expenses 21 percent in the same period.

Ian Bremmer, president of Eurasia, a New York-based investment consultancy, detects a generational transition. While Murdoch, 80, began posting on Twitter last month, it’s executives less than half his age who will be more alert to the demands of consumers and to accepting less privacy given the rise of social media, he said.

As younger leaders “start taking a role and grow in influence and importance, then you’ll see a different sensibility in terms of how they interact with the global public,” Bremmer said.

There will be plenty of room for them.

Murdoch is absent again. A year ago, he canceled his participation in a panel discussion at the forum as British police stepped up an investigation into phone-hacking allegations by News Corp. newspapers.

News Corp. spokesman Jack Horner said Murdoch was busy this year.

Gruebel, who two years ago was privately huddling in Davos with counterparts to discuss how to reassert their influence with regulators and governments, quit in September after UBS fell victim to a rogue trader.

High-profile locals are also missing from Davos this year. Hildebrand, who as a student worked in the resort as a bell boy and limousine driver, is a no-show after he resigned as SNB president this month. His credibility was questioned following the disclosure his wife bought $504,000 in the days before the SNB imposed a currency cap on the franc.

Two former Davos stars have been incarcerated in the past year. Strauss-Kahn, who as IMF chief used a Davos debate four years ago to push governments to ease fiscal policy, is back in Paris after being arrested in New York and charged with attempted rape and sexual assault.

Saif al-Islam Qaddafi, the son of the former Libyan dictator, was named a Young Global Leader at the forum in 2006. He was captured by rebels in November while trying to flee to Niger a month after his father was killed in Libya’s overthrow.

Some of the falls from grace reflect the aftershocks of the recent credit crisis and the resulting pushes for greater income and democratic equality, said Nariman Behravesh, chief economist at Englewood, Colorado-based IHS and a Davos delegate.

“Severe income disparity” was cited as one of the greatest threats to global prosperity over the next decade in the forum’s annual review of risks published on Jan. 11.

Organizers have made some nods to the emerging theme. The opening panel on capitalism in modern times will involve Bank of America CEO Brian Moynihan and Sharan Burrow, general secretary of the International Trade Union Confederation. Later in the week, the role of business in society will be discussed, as will whether banks are a cure or curse for the world economy.

“The focus on ethics and responsibility and social justice will be much greater this time around,” said Behravesh.

Bloomberg

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