The response from the Davos crowd has always been to talk, talk, and talk a bit more. But there is an increasing impatience with capitalism’s inability to regulate itself.
By Lionel Laurent
Ten years ago, the Davos conference asked the question: “What must industry do to prevent a broad social backlash?” The answer probably wasn’t “double, triple, or sextuple the wealth of the most prominent conference attendees, while letting median household incomes stagnate back home”. Yet, that is what happened. Make no mistake: The backlash is coming. There has always been a whiff of hypocrisy at Davos, where elites expand their carbon footprint, eat $43 hot dogs and throw lavish parties in the name of making the world a better place. “Fat cats in the snow”, the regular attendee Bono once called it (and he should know). But, given the rapid advances of populist politics, it is remarkable that, in 2019, those felines are looking better-fed than ever. The past decade and a half has seen US corporate profits outgrow employee compensation at an unprecedented pace, according to the St. Louis Fed. A Bloomberg News analysis of the fortunes of a dozen Davos attendees found that they soared by a combined $175 billion since 2009. Those feel-good panel debates on topics like “Better Capitalism” are pretty laughable.
The response from the Davos crowd has always been to talk, talk, and talk a bit more. But there is an increasing impatience with capitalism’s inability to regulate itself. That might explain why quite a few handsomely paid “Davos Men” have experienced a rather brutal comeuppance of late.
It’s surely telling that Carlos Ghosn—the ultimate personification of Davos, according to Bloomberg BusinessWeek—will not be anywhere near the event this year, after his shocking arrest in Japan for allegedly under-reporting his pay. The holder of three passports, who amassed a $120 million fortune after many years of leading the Renault-Nissan carmaking alliance, cut a gaunt figure in court this month when denying the charges. Whatever the merits of the case, the pile-up of revelations about his lavish lifestyle, including a report that he benefited from a Dutch tax residency, has done serious damage to his image.
Other jet-setting Davos regulars will be keeping a lower profile too. Hot-shot investment banker Andrea Orcel was meant to be taking the reins at giant Spanish lender Banco Santander SA in early 2019, but he was dumped before his first day on the job—officially because of a disagreement over back-pay with his former employer UBS Group AG. Press reports put the figure at $40-$60 million, with Santander declining to compensate him for that amount. Beyond the financial considerations of a retail bank stumping up that kind of cash, the symbolism would have been terrible just as Spain’s populist parties are gaining ground.
British ad mogul Sir Martin Sorrell has been another mainstay among the guest speakers at Davos. This year, his name is absent. Sorrell left WPP under a cloud last year, after a probe into alleged personal misconduct and misuse of company assets. Sorrell has denied these allegations, but he has confirmed and defended a travel expense bill of 274,000 pounds for his wife.
No doubt, these examples will be talked about only in private at this year’s Davos; no doubt, the usual panel fodder of more co-operation and better governance will be dished up instead. But who is listening? Donald Trump, Emmanuel Macron and Theresa May are all too busy fighting political conflagrations at home. Populist and authoritarian leaders now oversee the lion’s share of G20 economic output. While Trump is a true friend to rich Americans, his populism has opened up political ground for the radical left. Alexandria Ocasio-Cortez, a US Democratic congresswoman, has grabbed more attention this year with her proposed 70% income tax rate (a policy that most Americans support) than any Davos Man will.
So, expect some jitters around the fondue set. More than 10 years after the collapse of Lehman Brothers, hostility toward the corporate elite is finally hitting the political mainstream in a meaningful way. Executive rewards are looking indefensible, and being a globe-trotting “thought leader” offers no protection. Look at Macron’s apparent eagerness to distance himself from Ghosn, despite the harshness of the Japanese legal system. Davos Man should look over his shoulder.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.