The Sunday Telegraph (United Kingdom):
November 17, 2002
WHAT HAS gone wrong in Switzerland AG? Hardly a day goes by without there being yet another disclosure of losses or a management crisis at one of its huge international companies.
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Here is a short roll call:
ABB, once Europe's most admired manufacturer, is close to bankruptcy;
Credit Suisse, the first European bank to make a serious impression in global investment banking, is generating near-disastrous losses;
Swiss Air, thought to be one of the most conservatively managed national carriers in the world, nicknamed the "flying bank", fell out of the sky;
Swiss Life, the country's biggest life insurer, is having to raise more than pounds 500m to restore its balance sheet, which was overstretched by foolish acquisitions.
In fact, precious few of Switzerland's world-beaters are not in some kind of difficulty. Only Norvartis, in pharmaceuticals, and Nestle, in foods, seem more or less untainted.
Now the important point is that for a couple of decades this tiny country, of just 7m citizens, produced a disproportionate number of global giants. At the last count, it had about 12 of the 500 biggest companies in the world - which is pretty impressive.
But the success brought its own problems. There just were not enough top class managers to go around. So they all sat on each others' boards. And the members of this elite became connected in a more personal sense, by marrying into each other's families.
The result was that there was no scrutiny or challenge of powerful executives by independent directors because almost no one was independent. And shareholders were unable to exercise any effective influence because the accounts of Swiss companies have been terrifyingly opaque.
In the words of an international business executive who was briefly the paid servant of one of these businesses: "The elite saw the problems coming for years but were too arrogant to do anything about them; and everyone else was kept in the dark".
Is there any way back for corporate Switzerland? Well, the economy still has some fearsome advantages, such as a well-educated and dedicated workforce. But I am not sure the elite has yet acquired the requisite humility.
What on earth, for example, motivated UBS - still a relative success in international banking - to lob its famous "Warburg" brand into the trash can of history?
Its investment banking business, UBS Warburg, has been doing remarkably well in appalling market conditions. And its success relies on the surprising number of its senior executives who have been with the group for 20 odd years, ever since it was an independent business called SG Warburg.
Perhaps naively, these bankers take pride in their Warburg history and name. Forcing them to abandon that looks petty and vindictive to me.
Anyway, UBS's manifestation of its ownership of these people is piquant because in September it held a swanky dinner in Lincoln's Inn to celebrate the centenary of the birth of Sir Siegmund Warburg, the remarkable German Jewish emigre who shook up business practices in the City of London.
I chuckled into my claret sotto voce when Marcel Ospel, the UBS chairman, told us that Sir Siegmund would be mighty proud of how UBS did business: wilfully destroying value was not one of Warburg's precepts.
BANKS: SKA; UBS; Credit Suisse; Bank Leu AG