When President Clinton sweeps into a snowy Swiss Alpine village this week, he will be the first sitting president, and thus the biggest star ever, to attend the glittering corporate conference known by the name of its location--Davos.
The meeting is so high powered that Clinton is only one of 33 national leaders going up the mountain this year. Also expected for the meetings starting Thursday are prime ministers Ehud Barak of Israel and Tony Blair of Britain, and King Abdullah of Jordan. Attending as well will be 1,020 senior executives from the world's top corporations, including Bill Gates of Microsoft and Steve Case of America Online.
No one will stand prouder at the six-day conference than Klaus Schwab, the entrepreneurial Swiss business professor who launched the Davos conference on a shoestring 30 years ago. He has turned its plenary sessions and panel discussions into forums for cutting-edge ideas and made the gathering arguably the world's most elite event for schmoozing and making contacts. As this year's promotional material puts it: "By bringing together the most influential business, political and intellectual leaders, the Summit sets the tone, atmosphere and priorities for the start of the century."
It turns out, however, that it is not just the power of ideas, or even the prestige of the participants, that determines who prepares the program and who goes onstage to give talks at Davos. The companies that pay the most money to the Schwab-led foundation that organizes the conference tend to be the ones whose executives run the show, according to a survey of this year's preliminary program and contributors and interviews with current and former conference staffers.
Schwab said the companies represented on the podium are there because they are the best and brightest in the corporate world and not because of the checks they sign. But some participants said the overlap between contributors and speakers casts a shadow of commercialism over the event's lustrous image.
"He's got the people who put up the money chairing the meetings. It's awful; it's gotten too big. I don't know why I'm going," said one private-sector American who has attended several Davos meetings and spoke on condition of anonymity. "Klaus is the world's greatest salesman," he added. "He's sold everything but the squeal."
Four of the five co-chairmen for this year's conference are from corporations that paid between $78,000 and $250,000 to the foundation, called the World Economic Forum. Executives from those companies and other high-spending "partners," as corporate contributors are called, are heavily represented among speakers at the sessions. In addition, partner companies help choose session subjects and suggest participants. Corporations have been involved in the conference for years, but only since 1998 have they paid so much money and played such a large role.
Schwab also has given two start-up companies he created, included one headed by his nephew, favored places at Davos over the years. And the millions of dollars companies pay to belong to the World Economic Forum have helped Schwab build a wealthy institution--so wealthy that it was able to construct a $23 million headquarters on the shores of Lake Geneva and pay for 80 percent of the cost outright.
There is no evidence that Schwab personally has profited from the conference except in the annual salary he receives from the foundation, which he said is in the neighborhood of $225,000. In an interview at headquarters here, he defended the practice of having contributors play major roles as organizers and speakers.
"I would say [critics] would be right if those companies were small companies who have nothing to contribute," he said. "But really, look at our partners. You deal with the best and most knowledgeable service companies in the world. . . . We want to mobilize the internal know-how of a company for those sessions. That is more important than the financial arrangements."
Schwab, 61, is mild-mannered, courteous and fluent in English, French, German and Italian. A native German who later became a Swiss citizen, he lives in an unflamboyant lakeside villa near forum headquarters, drives an Audi and collects antique Bibles. He still teaches business policy one afternoon a week at the University of Geneva.
He is proud of what he has created, and with good reason. The Davos meetings helped advance the cause of German reunification in 1990, South African reconciliation in 1992 and Middle East peace in 1996. At Davos, Schwab predicted a backlash against globalization years ahead of the protests at Seattle last fall and the networking of society long before the Internet took center stage.
He gets help, and nowadays it comes particularly from companies listed as the forum's partners. Of the forum's eight "knowledge partners," mostly accounting and consulting firms, officials of seven take part in two panels or events; a single official from the eighth participates in one.
Knowledge partners and another category, institutional partners, pay $250,000 per year. Eleven of the 19 institutional partners are represented onstage at public Davos events, and of the forum's 24 so-called annual meeting partners, which pay $78,000, representatives of 14 take part in panels or events. "They buy sessions," one former staffer at the forum said succinctly.
Of 11 partner companies contacted about their financial arrangements with the World Economic Forum, nine declined to provide details or did not respond to queries after the subject was specified.
An exception was Sun Microsystems Inc., an institutional partner of the World Economic Forum. It is among those paying $250,000, plus the $12,500 membership fee and $6,250 for the right to send executives to the Davos meeting, which all 1,000 forum members pay. Of all the companies on all the panels, Sun Microsystems, with six appearances at public Davos meetings this year, is the leader.
"I'd hate to think we are buying our way onto panels," said Sun's chief researcher John Gage, who said he was surprised to learn of the overlap between partners and panel participants. "I'd better say some good smart things" at his two panels, he said.
Schwab said partners agree to a code of conduct forbidding them from exploiting their forum connection commercially. The code includes the phrase: "Co-chairing an event is not a privilege of partnership."
The management consulting firm A.T. Kearney, which is a knowledge partner, helped set up two panels for this year's meeting and has officials on them and on one other. But vice president Paul Laudicina said the company is not running the show. "The forum reserves the right to say yea or nay, and I can tell you they don't just accept whatever a partner proposes or recommends," he said. Asked why the company bought partnerships, he said: "I don't have any way to comment on that. I don't have any insight into their funding base. I'm looking at it with a telescope, not a microscope."
Davos has arrangements with other enterprises as well, including Newsweek, which is owned by The Washington Post Co. This year, the magazine produced a special 118-page issue in collaboration with the World Economic Forum. The preface page features an introduction by Newsweek chairman Richard M. Smith and a second one by Schwab, headlined: "A note from our friends in Geneva."
Several articles in the issue are written by members of a World Economic Forum group called Global Leaders of Tomorrow, and the edition also includes a Q&A with four of the members and Newsweek International editor Michael Elliott.
Elliott said in a telephone interview that the issue "has done very well. . . . It sold very well on newsstands, and it's stuffed full of advertising." He said none of the revenue from the issue was shared with the World Economic Forum and that Newsweek maintained full editorial control.
According to the World Economic Forum's annual report, it had $32 million in revenue in the 1999 fiscal year, 57 percent more than in 1995. Most of that came from the conferences it organized around the world, including about $10 million directly from Davos. Expenses were about $31.4 million; the difference was added to the foundation's capital.
Over the years, some Davos staff members have helped create private-sector start-up companies initiated by Schwab. He said he hopes one of them will eventually make enough money to help him create an international award similar to the Nobel Prize.
The first company was a video conferencing enterprise called AVC Inc, which used technology developed at the World Economic Forum starting in 1987. It was headed by Hans-Joerg Schwab, Klaus Schwab's nephew. The nephew was selected because "he was the person at hand to do it," Klaus Schwab said.
AVC's technology was displayed at Davos--normally, companies do not advertise there--in 1997 and 1998, and promoted in press releases issued by the World Economic Forum. The company did not succeed on its own and was eventually sold.
In 1998, Schwab set up a personal foundation with his own funds, and it financed the start-up of a company called Industry to Industry, which specializes in selling used industrial, construction and other equipment to businesses on the Web.
Its Web setup was designed and installed by World Economic Forum's online director in 1998 and 1999, Bruno Giusanni. I2I, as it is called, became a private company last year and is co-owned by Schwab's foundation and the German software company SAP.
A forum press release heralded the start-up of the company at Davos last year. This year, its president and CEO, Michael W.G. Fix, who also was present at Davos last year, is scheduled to attend two private industry sessions and to speak at two public events.
Fix said in a telephone interview that the fledgling company is "in no way affiliated with the World Economic Forum." Asked if his invitation to Davos gives the firm a competitive advantage over other small firms, Fix said: "Of course. Having someone of Klaus Schwab's nature allows I2I to get moving faster in a highly competitive environment . . . but any CEO's job is to create shareholder value."
Schwab said he hopes I2I can offer stock to the public later this year. He told Wired magazine in an interview published in December that he hopes the offering will bring in $70 million to $100 million.
With those and other funds, Schwab has a grand vision--to create three prizes--in education, environment and social development--of $1 million each that will rival the Nobel Prizes. Down the road, he wants to add prizes in civic and cultural development. He plans to launch the project in 2001.
CAPTION: Klaus Schwab says that the companies featured at Davos represent the best and brightest of the corporate world.