How Klaus Schwab built a billionaire circus in Davos

Schwab pretends to be unhappy and mourns the supposed dilution of the experience while Davos is filled with private parties.

“We do not welcome them,” he once said. “They degrade what we do.”

But he does not complain about the accompanying perks.

Despite the forum’s status as a not-for-profit organization, Schwab and his wife, Hilde Schwab– the organization’s co-founder – has cleverly positioned itself to take advantage of the cash flow that moves through it. Audi has long served as the Forum’s exclusive shuttle partner and has used Davos as a showcase for its latest vehicles, while supplying Schwabs with cars at high discounts. The forum budget covers his globetrotting and catering and security services in his palatial home in the Cologny district of Geneva – Beverly Hills in Switzerland – where Schwab often hosts extravagant dinners.

Over the years, the Forum has spent almost 70 million Swiss francs (almost $ 80 million) on buying land in the area, including two plots that build a bridge between Schwab’s home and the Forum’s headquarters, making them cohesive. Even in the 1990s, when the forum employed only a few dozen staff, Schwab’s salary was tied to the salary of the UN Secretary-General, giving him about $ 400,000 a year.

But Schwab was not content with ordinary wealth. He confided in his nephew, Hans Schwab, with the construction of a number of for-profit companies that use the Forum as a venture capital fund.

His nephew had overseen the logistics of Forum events when, in the mid-1990s, he teamed up with a contractor to create a new company, Global Events Management, which raised Forum for half of the start-up capital. From the beginning, the new company has had a contract from Forum to manage all its events, an agreement worth several million dollars a year. Klaus Schwab was so delighted with the success of the business that he told Hans that he was entitled to 5 per cent. His nephew asked if he should draft a legal document making this official. His uncle waved him away. “We are family,” he said.

Klaus Schwab rejected repeated requests for an interview. According to a spokesman for the Forum, he was angry that interviews were given to other publications about his book, Stakeholder capitalism, had provided disappointing coverage. Through a spokesman, Schwab denied his nephew’s account. “Hans has been alienated from his family for many years,” Klaus Schwab said in a statement sent by the spokesman. “He has sought attention by making unfounded allegations.”

Schwab was aware that running a for-profit business on the side of a nonprofit could bring unwanted control from the authorities. Still, he was so proud of his entrepreneurial accomplishments that he pressured Erskine, the communications manager, to write about the event industry in the Forum’s annual report. When she refused, suggesting that this would constitute an admission that the forum was taking liberties with its nonprofit status, Schwab was not grateful for her advice.

“He was furious,” Erskine told me. “He sat me down and said, ‘Look, I want to be considered a businessman.’

Schwab soon sent his nephew to Boston to run his new crew – Advanced Video Communications, a startup that was building a video conferencing system. Following Schwab’s directive, Forum invested about $ 5 million in the company.

For two years, Hans Schwab oversaw the refining of the product while raising several funds. He negotiated a deal, after which a listed technology company, USWeb Corp., bought the video startup and handed over shares, valued at about $ 16 million.

The company raised Klaus Schwab to its board of directors while granting him stock options worth as much as $ 500,000. As USWeb’s shares rose in value, the Forum’s initial investment of $ 5 million became worth at least $ 20 million.

Just before the merger closed, Klaus Schwab called his nephew and demanded a last-minute change. The forum’s shares in Advanced Video Communications had been transferred to a new entity – the Schwab Foundation for Social Entrepreneurship. The fund was to receive the profits.

Hans Schwab was surprised. A last-minute change of ownership threatened to derail the transaction. But his uncle was steadfast.

“He said, ‘This has to be done right now,'” Hans Schwab told me. “I had never heard of the Schwab Foundation and I suddenly had to change all the contracts. I knew it was his little thing he was doing. Suddenly, in the last hour, he could see that there would be huge sums of money involved, the kind of money he had never seen before and he wanted to put it in a structure that he had 100 percent control over. ”

According to its website, the foundation promotes small businesses that address issues of social importance – expanding the reach of clean water and electricity in developing countries and creating opportunities for women. Where the money has gone is actually ignorant. Swiss authorities require minimal disclosure.

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