Behind the Scenes at Davos, Claims of a Toxic Boss

0:00Hey, it's Jess. Annie Minoff, one of our senior producers, is going to be stepping in to do some hosting this summer while Ryan is out on leave. Enjoy.

0:18Every year, a ski resort nestled in the Swiss Alps hosts the world's biggest party for the rich and powerful. Some people call it the Magic Mountain. Most people know it better as Davos. So Davos is an alpine city in Switzerland. That's our colleague Shalini Ramachandran. It's the site of this annual meeting that brings together the planet's power brokers from like morning to past midnight meetings over coffee and cocktails and fondue. And there are thousands of CEOs and billionaires. You'll run into billionaire George Soros. His Majesty, King Abdullah II of Jordan. Queens and kings and presidents who descend on this place.

1:06Send hello to everyone in beautiful Davos. You know, you can run into Al Gore in the hotel bar or Bill Gates near the metal detectors or Sting in the elevator. And it's about networking and it's about making deals and talking about big ideas. Over the years, the Davos conference has taken on big topics. Peace in the Middle East, climate change, gender equality. And they've touted big wins. Organizers have taken credit for major diplomatic breakthroughs, including averting conflict between Greece and Turkey and bringing together the leaders of East and West Germany after the fall of the Berlin Wall.

1:45To improve the state of the world, that was the tagline, you know, to make the world a better place.

1:54But as Shalini discovered, there was a lot more happening behind the scenes. She and our colleagues have been investigating allegations of sexism, racism, and harassment at the organization that runs Davos, an organization called the World Economic Forum. — Based on our reporting, what they publicly stand for — things like gender equality and uplifting women — they're at odds with the way that a lot of people inside the World Economic Forum's own organization have been treated by senior bosses. — And now, after a fresh round of allegations, a major leadership shakeup is underway. The World Economic Forum is now investigating its founder, the top boss, and now he's leaving under a cloud of suspicion and with allegations hanging over him.

2:54Welcome to The Journal, our show about money, business, and power. I'm Annie Minoff. It's Wednesday, April 30th.

3:07Coming up on the show, the boardroom drama and leadership crisis, rocking Davos.

3:29The World Economic Forum, the nonprofit that runs the Davos Conference, has been around for more than half a century. Today, it has over 800 employees and takes in hundreds of millions of dollars, much of it from partner companies that pay big bucks to attend Davos. But the organization started small. So Klaus Schwab founded the World Economic Forum in 1971, and he started it as something called the European Management Forum. At the time, Klaus Schwab was a German engineer and economist, broad-shouldered with glasses and a dour expression. And he kind of experienced the post-World War II reconstruction time frame, and he became a professor.

4:16Schwab's time growing up in Europe after the war shaped his views on the power of global cooperation to rebuild economies. And that experience gave him a big idea. So I felt I should create a platform where Europeans, business leaders, government leaders could come together and talk about their future. He loved this concept of a multi-stakeholder participation, which basically means governments and businesses and nonprofits work together to accomplish important goals. He believed that when these people work together, problems can be solved faster. And so the Davos meeting was born.

4:58These days, it hosts 3 ,000 leaders from over 130 countries. And as Davos' importance increased, so too has Schwab's. Schwab is 87 now, and not exactly a household name. But his role at the top of the World Economic Forum has made him one of the best-connected people in the world, with a Rolodex that includes everyone from royals to rock stars. Klaus Schwab became the ultimate powerful person, this uber connector of all these power players, the CEOs, the queens, the presidents, the prime ministers. But as Schwab and his organization worked to shine a light on the world's problems, Shalini started hearing about problems within the forum itself.

5:43What I learned was, you know, there's a dark side to this organization behind these glitzy Davos annual meetings. We heard a lot of examples of sexual harassment, pregnancy-related discrimination, and racial discrimination. Based on our reporting, there's at least two instances of managers using the N-word. One former employee, a Black woman, described an incident in which a boss, brandishing matches, asked if he could set her wig on fire. She reported the boss to Human resources, and nothing happened. The forum told the journal last year that they weren't aware of the allegations. The employee eventually chose to leave the organization.

6:28And then there was a story an employee told about a strange encounter in 2010 during a flu vaccination drive. Based on our reporting, a senior executive who in recent weeks has left the organization pretended to be a medical doctor when a young female staffer showed up to a flu vaccination drive. And he asked her medical questions and responded affirmatively when she asked if she should take off her shirt and requested she move her body in different positions. According to a complaint sent to Schwab and forum leaders, the woman only realized she'd been duped when the real doctor walked in. According to the complaint, the manager later brushed it off as a joke.

7:09The woman complained to human resources. And immediately after she complained, she began noticing her work was constantly criticized by her boss, despite positive feedback from external stakeholders, and within months, the forum fired her. The forum told the journal last year that the incident was a misunderstanding. Documents show that the executive was reprimanded and had his bonus reduced.

7:36Some current and former employees told Shalini about alleged incidents involving Schwab himself. One woman described a meeting in which Schwab propped his leg up on her desk with his crotch in front of her face. According to her account, Schwab told her he'd like to see her wearing what he called a Hawaiian costume. The woman said Schwab had told her more than once, quote, I need to find you a man, and if I were not married, I would put myself on the top of that list. Two other employees also confirmed they saw Schwab strike the crotch pose in front of the staffer and other women. For their investigation, Shalini and her colleagues and reviewed more than 80 current and former employees.

8:16They also reviewed documents such as HR complaints, internal emails, and text messages. So you publish your article outlining what these ex and current employees have told you they experienced. What happened next? Employees at the World Economic Forum were actually a bit shocked by the forum's response to our article, which was to deny a lot of things and essentially say that in many cases, these people who spoke out had performance-related issues, and it angered a lot of people. And then at the same time, there were partners of the forum that contacted the forum raising questions. At the time, the forum disputed the journal's reporting.

9:02A spokesperson told the journal that the article mischaracterized the organization, as well as Schwab. It called the claims vague and false and said Schwab never made sexual advances. Last year, the forum's board created a special committee and hired a law firm to investigate its workplace culture. Recently, it said that review had concluded, and it shook up its senior leadership. The final report was never publicly released.

9:31Earlier this month, Schwab announced that he would transition out of his role at the forum. But it wouldn't be immediate. He planned to step down by 2027. At this point, after this investigation by the forum, how are things looking for Schwab? It seemed as if he had kind of come out unscathed from this investigation. And there's clearly leadership shaking up going on. But he looked like he might kind of get his graceful exit. And then, just this month, a bombshell. In recent weeks, the board received a whistleblower letter. And that letter would end up blowing up Klaus Schwab's whole plan. What was in that letter?

10:20That's after the break.

10:37A few weeks ago, the World Economic Forum's board received a letter. In it, current and former employees repeated some of the allegations the journal had reported. But the letter also contained fresh accusations, this time leveled directly at the boss. This whistleblower letter alleged financial and ethical misconduct by both the founder, Klaus Schwab, and his wife. We feel compelled, the letter said, to share a comprehensive account of systemic governance failures and abuses of power that have taken place over many years under the unchecked authority of Klaus Schwab. The letter alleged that Schwab and his wife, Hilda Schwab, mixed their personal affairs with World Economic Forum resources without proper oversight.

11:25One of the allegations said Klaus Schwab asked junior employees to withdraw thousands of dollars from ATMs on his behalf. Another says he used forum funds to pay for private in-room massages at hotels. Another alleged that Hilda, his wife, a former forum employee, scheduled token forum-funded meetings in order to justify luxury holiday travel at the organization's expense. The whistleblower letter also mentioned a sprawling estate overlooking Lake Geneva called Villa Mundi. The forum bought the modernist building for$30 million and spent another$20 million on renovations. A whistleblower letter maintains that Hilda Schwab, Klaus Schwab's wife, maintains tight control over use of the building and that portions of the property are understood to be reserved for private family access.

12:19The Schwabs deny all these allegations. A spokesman for the family said that Klaus Schwab intends to sue whoever is behind the anonymous letter. The spokesman also said that when Schwab charged massages to the forum, he always paid them back. As far as the Villa Mundi property, he said the Schwabs live nearby and have only used the estate for forum-related events. The whistleblower letter ignited a new crisis at the forum, one that's pitting Klaus Schwab against many members of the organization's board. The board's risk and audit committee wanted to investigate this, and Klaus Schwab didn't want them to.

12:57So Schwab told him, no, please don't investigate this. And what ensued was kind of a boardroom battle where the board cut him out and said, we do have to investigate this. And so Schwab said he would rather resign immediately. At an emergency board meeting on Easter Sunday, the board decided to open an investigation into Schwab. Schwab then resigned. The board has appointed a former Nestle CEO as the forum's interim leader. What could all of this mean for the World Economic Forum long term? Like, will people still go to Davos? I think there could be a lot of questions about how an organization that allegedly tolerated this sort of behavior can also at the same time prescribe governments and corporations with sound management practices and what you should do to be a better steward in society.

13:56So there's a sense that maybe this thing needs to fix itself first before partners will want to associate with them. And now they have to see, is there a World Economic Forum after Klaus Schwab? Does all these people who used to come here still want to come to this place that's now been tainted by a lot of these allegations that many of these companies who are its partners likely wouldn't tolerate in their own workplaces? And this is all happening at a time when there's been a lot of criticism of events like Davos. Like they've kind of been slammed as these meetings of out-of-touch elites. You know, there have been a lot of attacks on Davos over the years.

14:39And, you know, it's become a sort of punching bag of the right in the U.S. And that's sort of this globalist kind of view that I think has come under attack in recent years. And especially with the rise of President Trump and other kind of nationalist movements around the world that are kind of more about sort of being isolationist and, you know, each country for itself. But that still hasn't stopped CEOs and government leaders from making the pilgrimage every year to this place and paying the World Economic Forum for the privilege of doing so.

15:41Thanks for listening. See you tomorrow.