June 2012

The magazine for decision makers

The value of relationships Integrity and trust are among the most important prerequisites for business success. In many sectors, nothing is possible without stable relationships. Leading Swiss managers share their experiences. Dr Markus R. Neuhaus, CEO PwC Switzerland

and states – is someone holding something back from someone? This too is an issue that concerns not only us tax consultants, but also businesses in Switzerland and Switzerland as a place for doing business. As the study on corporate headquarters presented by PwC partner Clive Bellingham in this issue of ceo magazine shows, our tax system is one of the main things that make this country so attractive. Again and again, Switzerland manages to build on its strengths. The portrait of a pro- ject to build a pumped-storage power plant in the Poschiavo valley is just as impressive an Again and again, Switzerland manages example of this as Art Basel. While the first to build on its strengths. capitalises on geographic advantages and the second on cultural assets, both are built on the ability to skilfully build and maintain relationships. This magazine contains many Given that writing the editorial for ceo maga- vance of our business, in other words ensur- impressive examples of the fundamental zine is the prerogative of the CEO, this is the ing that our advisory and consulting, tax and value relationships have within the economy, last one you’ll be reading from me. Having assurance services are relevant. and the way the ability to skilfully build and completed the maximum of three three-year In this issue of ceo magazine, PwC partner manage these relationships will be of increas- terms as CEO of PwC Switzerland, I’m hand- Julie Fitzgerald talks about regulatory devel- ing importance in an ever more highly net- ing over the baton to Urs Honegger, who was opments related to the audit in the EU. Now worked society. In this issue of ceo we hear elected chief executive by the Swiss partners you could say that the EU’s rules aren’t so from clients, business partners and business last autumn. Through the same democratic interesting for us in Switzerland. But we all friends. I think the fact that again and again, process so typical of our partnership, I have know that these regulations will have an people like this trust ceo magazine as a place been chosen to serve as the chairman of the immediate impact in this country. And you where they can present themselves and air board of directors. As I am still CEO, however, could say that rules for auditors aren’t very their views is great confirmation of our ability I have the pleasure of writing this editorial. interesting for you as a businessperson. But to maintain good relationships. Relationships Starting 1 July I’ll be giving my full attention again you’d be missing the fact that it’s organ- aren’t just the main theme of this issue of ceo to my new role and I’ll be taking on other isations like yours that will feel the effects magazine. For me they’re the thread that runs duties in addition. directly if the changes are implemented as through the entire business community − a The theme of our forum in this issue is “All or proposed, in the form of additional admin- community I’ve been lucky enough to have nothing”. This could easily be my own per- istration and responsibilities, and ultimately had a part in shaping over the last nine years. sonal motto. Five years ago, in addition to my additional costs as well. The regulations I’m especially looking forward to seeing how role as Swiss CEO, I also assumed leadership under discussion pose major challenges for these relationships will develop and evolve of our European organisation. Since then I our industry. We understand the desire for with our new CEO Urs Honegger at the helm. have overseen an international development new rules, and acknowledge that the finan- And I know that he’s looking forward to which has got the voice of Switzerland heard cial system as a whole didn’t function prop- building his relationships with you. in the firm’s global leadership bodies. I will erly during the crisis. We’re in favour of some continue to serve as a member of the global of the proposals, but believe others will be I wish you stimulating reading. Publisher: PricewaterhouseCoopers AG ceo magazine, Birchstrasse 160, CH-8050 Zurich, Switzerland Network Executive Team, with an expanded damaging. The article in this issue is designed portfolio of duties as of 1 July. My extended to give a clear picture of our position on these Markus R. Neuhaus Editors-in-chief: Alexander Fleischer, [email protected], Franziska Zydek, [email protected] global role will involve developing strategies matters. We’d love to hear your views too. Creative director: Dario Benassa, [email protected] related to quality, regulation and the rele- We also have to question the relevance of our tax services. With all the political shifts Concept, editing and design: purpur ag, publishing and communication, zurich, [email protected] taking place and the way the world is getting smaller, the issue of tax justice and the fund- © 2012 PricewaterhouseCoopers. All rights reserved. ing of massive public debt are increasingly The opinions and views expressed by the authors do not necessarily reflect those of the publisher. taking centre stage. At the same time, the ceo magazine appears three times a year in English, German and French. Circulation: 24,000 debate is increasingly moving away from the Free subscriptions and changes of address: [email protected] individual level to the level of corporations

Lithography/Printing: ud-print AG, Lucerne. Paper: Claro Bulk, silk, FSC, wood-free, coated, bright white ceo editorial 3 ceo 1/12 contents

Forum all or nothing Room with a view

Implenia CEO Anton Affentranger: Top athlete Esther Süss: Minister Christoph Sigrist: PwC auditor Simon Reding “I want to know where I am going “My respect for hair-raising “My belief in God forms the foun- experiences the cultural variety Value insights with what I do; otherwise I am not descents explains why my great- dation of my concern for people of the vibrant Asiatic metropolis interested in it.” est strength is in the climbs.” and their dignity.” Singapore on a daily basis. With its many competitive 6 8 10 58 advantages, Switzerland is benefiting from a trend as a preferred location for European or even global headquarters. 33

Advisory services parallel to the audit can often make sense because they enable a company to harness the full knowledge of the audit firm. Thanks to fundamental rules there are clear statements of permitted and non-permitted services, and there are strict procedures to ensure auditor independence. 36

The prospects for start-ups in Integrity and trust are among the most important prerequisites for Switzerland are excellent. But to succeed, start-ups need three business success. In many sectors, nothing is possible without stable things more than anything: a relationships. Leading Swiss managers share their experiences. good team, a sense of timing, and a solid network of relation- ships. 39

Most studies of compensa- tion systems foreground the benefits for shareholders and the costs for the organisation. But how are they perceived by the executives for whom they are designed in the first place? What are their expectations? 42

Service: Publications, training and information events. Ambassador Luzius Wasescha “Personnel is our most precious The market situation for airlines is With the project for the Lago- The Zurich Insurance Group Art Basel is the most important Marc P. Bernegger studied law. 44 is one of Switzerland’s most asset,” says Ruth Sandelowsky, difficult. Swiss International Air- bianco pumped-storage power started 2012 from a position art fair in the world. Co-director But instead of becoming a lawyer, experienced trade diplomats. His CEO of the commodity trading lines Ltd. CEO Harry Hohmeister plant, the operator Repower is of strength. CEO Martin Senn Annette Schönholzer talks about he became a businessman. network of contacts has been as and service providing company talks about conveying unpleasant opting for cooperation rather regards this as a sign that the the exchange between West and His business field is new media; useful to him as his Graubünden Kolmar Group. news, political conditions and than confrontation. Building group’s strategy is the right one. East, and tapping new markets. his focus is networking. Cover: Ruben Wyttenbach doggedness. 16 cultivating relationships. relationships with environmental 46 50 54 12 20 protectionists is bearing fruit. 24

4 ceo contents ceo contents 5 forum all or nothing

Anton Affentranger: “I do not like doing things half- heartedly, either in my private life or in my job. Life is too short for that.”

I grew up in a family that believed everyone has been given talents sibility again. I also did so in the conviction that I have a personal and should therefore use them, and that those who live according to responsibility here. As soon as I had found a solution for my own their strengths also have something to contribute. My father always company and knew that I had the backing of my family, I moved back said to me it didn’t matter whether I went to university or became a from Geneva to my old office in Dietlikon. baker. If I became a baker, it was only important that I baked the best Having goals is important for me because it motivates me. When I rolls. I’ve told my children the same thing. decided to give up smoking and take up running, I was able to go As for me, I am frequently pigeonholed as an all-or-nothing person. through it because I had the New York City Marathon in my sights That bothers me as I dislike pigeonholing per se. However, there are right from the start. That was what I wanted to do. I have since run many situations where I would probably describe myself like that too the marathon several times. Without my running, I could not cope if I had just three words at my disposal. I do not like doing things half- with my current work pace. Nevertheless, I would not do it if there heartedly, either in my private life or in my job. Life is too short for were no New York City Marathon. I want to know where I am going that. I do what I do either with my full commitment or not at all – any- with what I do; otherwise I am not interested in it. All the training thing in-between I consider a waste of time. and hard work are worthless if there is no passion. That applies to a Black or white – that is the question as soon as anything fundamental 42.2-kilometre run as much as it does to the task of inspiring more is involved and there is no room for compromise. Opting for white and than 6,000 employees. rejecting black is one thing. But sticking to it is another. When Imple- nia was the subject of a takeover by the hedge fund Laxey, we opposed Anton Affentranger, 56, was appointed the new CEO of it. We knew we were on the right side from the outset, both with Implenia in October 2011. Before that, he had already worked regard to the matter itself and also from a purely legal perspective. We for Implenia and its predecessor company Zschokke for knew that we were right. But did we do the right thing? I have regu- 13 years. From March 2006 to September 2011, he was the larly discussed this question with my closest executives. We always chairman of the board of directors of Implenia and from April came to the same conclusion and stood by our position. There was a 2009 to August 2010 the interim chairman of the board of time when Laxey owned 50 per cent of our capital and I was advised directors and CEO. by all sides to give up. Today, I am delighted that we did not bow to the pressure. If we had done so, Implenia would no longer exist. Photo: Helmut Wachter The conflict took up a lot of my time and that of the company over three years. It was also very unsettling for our 6,000 employees. But it strengthened Implenia. If there was an issue that we neglected dur- ing this period, it was careful planning for a successor to the CEO. We thought that we had found the best solution for our company, but we were wrong. It was therefore clear to me that I would have to accept a request from our board of directors to take over operational respon-

6 ceo forum ceo forum 7 forum all or nothing

Esther Süss: “Cycling is the only sport that literally involves climbs and descents. My motto: A rapid ascent; a steadier descent.”

The most important day for me this year will be 11 August as this is training or competition. My wait was finally over at the end of May, the day of the Olympic mountain bike cross-country race. Until then and now it’s official – the Swiss Olympic Selection Committee has I am totally focused on that day; everything centres around that race. chosen me, together with mountain biker Katrin Leumann, for the It even pursues me at night, when I dream of becoming an Olympic 2012 Olympic Games in London! champion. The Olympic Games are the crowning glory of any athlete’s My respect for hair-raising descents probably explains why my great- career. London will be my first Olympic Games – and probably my est strength is in the climbs, which is where I can make the most of last. my condition and competitiveness. My motto is: “A rapid ascent; a I became a professional sportswoman relatively late, when my part- steadier descent.” I am always aware of a fear of the descents, but the ner Erich Birchler, whom I met in 1998, introduced me to the sport greater my self-confidence, the less significant my fear. It’s possible of cycling. At first I rode racing bikes, but in time I came to love to train yourself to have self-confidence. I am also constantly refining mountain biking. In order to keep up with Erich, I had to train ever my technique with my trainer Beat Stirnemann. I work with a mental more frequently. As I spent more time on it, my ambition and desire trainer as well, but I probably have too much of a rational mind for to measure myself against others grew – so I began to enter races. In that. 2003 I became the amateur World Champion in the Marathon (84 Even if I were to win gold in London, I would not be set up for life kilometres); in 2010 I won the professional World Championship. financially; I will still have to work until retirement age. It would be At 38 years of age I am one of the oldest cyclists. This means I have lovely if professional cyclists were better rewarded, but what really to train around 15 to 22 hours per week. However, my experience bothers me is the lack of appreciation for the sport. We are usually makes me better at assessing risks. As your age increases, you tend to marginalised in the media. consider more what could happen when you hurtle down a slope; you Mountain biking is currently the focus of my life, but I also know that learn to recognise your limits. my happiness is not totally dependent on it. I pay a high price for my Cycling is the only sport that literally involves climbs and descents. sporting activities: they do not leave me with enough time for social And with mountain bikes it is over rough terrain, which can be dan- contacts, for my friends – or for myself. gerous and requires courage. When you face a “rockery” for the first time, you have to conquer your own fears. A rockery is a slope scat- Esther Süss, 38, became Mountain Bike Marathon World tered with a substantial number of rocks and large stones – nothing to Champion in 2010. She wants to crown her career by winning do with the garden feature, of course. If you don’t dare to ride down a medal at the Olympic Games in London. She lives in it, you can take the “chicken line”, a section that is not so dangerous, Küttigen, in the canton of Aargau, and works part-time as a but which represents a detour and loses you time. teacher of textiles. You have quite a few falls when mountain biking, but these falls are rarely serious, causing little more than a few scratches and bruises. Photo: Anne Gabriel-Jürgens On the other hand, broken bones or torn muscles can cost you a season. I’m much more aware of that at the moment as the Olympic Games approach, although I can’t wrap myself in cotton wool, in

8 ceo forum ceo forum 9 forum all or nothing

Christoph Sigrist: “One thing I cannot handle is when I experience indifference. The loss of faith in God drives me mad.”

When I was about five, a black hat went by our kitchen window. I projects, such as the “Marktlücke” (Gap in the Market) project, which asked my mother, “What’s that?” She said, “That’s the minister.” Ever enables unemployed women of any age to continue working despite since then I knew I wanted to be a minister. But if I wore a black hat, difficult conditions and to pursue opportunities on the labour market. which I consider an ambivalent symbol, I would not use it to create Alternatively, they may be cultural projects, such as the “Midsummer distance and a sense of deference towards the minister, but would Night’s Dream” performance, rehearsed and staged in Affoltern am raise it to everyone.” Albis by 30 young asylum seekers and 20 young people with special A minister has pastoral duties. If he fulfils them well, he helps people educational needs. who approach him. But these people, in turn, help me. Looking at What all projects have in common is their aim of integration. The others enables me to recognise myself. I am totally convinced that the applicants present their ideas in person, which enables direct way others see you is what counts most. contact to be established between the donors and the recipients. I am a minister with my heart and soul, without reservation. Pastoral An individual member of the Parliament pays an annual subscription care, helping and mediating between people of all social strata and of CHF 500, a corporate body CHF 2,500. By the end of 2011, groups, is close to my heart. I am there for anyone who seeks me out. CHF 820,000 had been distributed among around 70 projects. It is I do not need special motivation for my daily work; I have never had amazing how many people quietly donate money for a good idea. a period of exhaustion. What does tire me, though, is bureaucracy, I am enthusiastic about chairing this Parliament and am doing all which ignores the concerns of people. I can to ensure that it becomes better known. Its motto is one that I My belief in God helps me to see and hear what preoccupies others. It like for its simple, direct message: “You have. You do. It works.” forms the foundation of my concern for people and their dignity. God appeared to me eleven years ago, when I fell 15 metres down into a Since 2003, Christoph Sigrist, 49, has been a part-time crevasse and was trapped there. I was rescued and only afterwards minister at the Grossmünster in Zurich. He also has a lecturing did it become clear to me what had happened: God can make the post in pastoral care at the University of Berne and has ground disappear from beneath your feet; at the same time he keeps been an army chaplain since 1990. Sigrist chairs the Zurich you safe as you fall. “Spendenparlament” (Donors’ Parliament), which finances One thing I cannot handle is when I experience indifference. When projects in the canton of Zurich that contribute to social things are lukewarm, neither black nor white, when innocuousness integration. He is married and has two sons. takes hold, when people lose their curiosity to try something new, when there is no desire to take an initial step without knowing where Photo: Markus Bertschi the second will lead. The loss of faith in God drives me mad. I make up for it, in addition to my daily pastoral work, with my job as Chairman of the Zurich Donors’ Parliament. Zurich was the first Swiss city to establish a body of this kind, in 2006 – the first such institu- tion was formed in Hamburg in 1996. The Parliament meets to debate which projects should be given financial support. They may be social

10 ceo forum ceo forum 11 diplomacy

“We have to invest in relationships”

Ambassador Luzius Wasescha is one of Switzerland’s most experienced and successful trade diplomats. Chair of the WTO negotiating group on the liberalisation of trade in indus- trial products since 2008, his network of contacts has been as useful to him over many years of awkward negotiations as his Graubünden doggedness.

In your work as a trade diplomat you tors also play a major role. You cannot behave cultivate professional relationships. in the same way in talks with an Asian repre- What does this involve? sentative as you can with one from the USA. In our field there are three raw materials: specialist knowledge, a network of contacts How important are personal relation- and experience. However, the main difficulty ships in a major international organisa- in maintaining international relations is that tion such as the WTO? they need to be constantly renewed, as the They are crucial! One of the reasons multilat- Dr Luzius Wasescha contacts change every two or three years. eral conferences function less efficiently now A lawyer by training, he has been than they did a few years ago is that personal head of the Permanent Mission How do you deal with this constant relationships are lacking. Many negotiators of Switzerland to the WTO and change? believe that it is enough to talk to representa- the EFTA in Geneva since 2007. You have to invest in good relations from the tives from the USA, the EU, Japan, China, As the Federal Council delegate start. There are certain accepted formulae, India and Brazil. Of course these are the most for trade agreements, he is such as the initial visit. When I was first important nations, and contacts with them one of the principal negotiators appointed in Geneva, I went round all the need to be cultivated. But there are a further for Switzerland at the WTO, and diplomatic missions, of which there were 130 countries that could also be included. It in negotiations for free trade around 70 at the time – that is still paying off is important to speak to their representatives agreements. Since 1980, Luzius to this day. There are also farewell receptions too. Wasescha has worked for the and welcome dinners. These rituals have the Federal Government in various purpose of facilitating closer contact with What form does cultivating these rela- capacities. He also teaches inter- new colleagues. Of course, chemistry is also tionships take on a day-to-day basis at national affairs at the University an important factor. But even those who do the WTO in Geneva? of St. Gallen and the State not naturally hit it off must find a way of get- The official meetings times are from 10 a.m. Secretariat for Economic Affairs ting on with each other. These personal rela- to 1 p.m. and from 3 p.m. to 6 p.m. This only (SECO). He will be retiring this tionships can be crucial when you end up sit- leaves the lunch break and the evening for summer. ting together overnight in a badly ventilated making and maintaining contacts – which room during an active round of negotiations. Photo: Cédric Widmer In addition to personal affinity, cultural fac-

12 ceo relationships ceo relationships 13 means that people dine together. These meals dinner. By the end of the evening I knew pens, and Hillary Clinton would be sitting The Doha negotiation round of the WTO very often are associated with discussions on that he was the author of his particular by her side, also bored. So the two of them is perennially declared to have collapsed. WTO contract a particular topic. And then, of course, there form – and I discovered that he would be started to talk to one another, and at some Will it now be continued? with Russia: are the receptions. I will be making a brief retiring in a year. So I proposed that we stage Ms Calmy-Rey got Ms Clinton’s private In theory, yes. But the differences are simply appearance at two events this evening. Poorer should wait a year! That was the solution. mobile number. When we were together too great. It has to do with the fact that a countries in particular are very grateful when Personal contact is a good way of obtaining in Moscow, at the President’s office, the negotiation round in the past always had the their national holidays are honoured by rep- information. Exchanging ideas helps to exchange really came in handy. She told objective of achieving a balance. In the cur- resentatives calling in. gain a better understanding of the other per- Medvedev: “You know, Dmitry, I’ve got rent round it has been a matter of correcting 18years son’s personality, and therefore any problems Hillary Clinton’s mobile number, but I don’t the imbalance created by the strengthening of negotiations Geneva has more Michelin-starred res- they may have. have yours.” She got his number straight of China. Ten years ago China was not even taurants than any other Swiss city. Is away. a member of the WTO. Now it is the second that because of the numerous diplomats’ You have already referred to intercul- most important export nation. The other meals? tural aspects. Where do the differences A free trade agreement is currently being states cannot open up their markets, because Possibly, although I certainly don’t always lie, for example, between Japan and negotiated between Switzerland and if they did, they would be flooded by Chinese go to the most expensive restaurants. I try to Russia, two countries with which you China. Is China at all interested in such products and local businesses would have to introduce my contacts to local customs. For have negotiated free trade agreements? an agreement? close down. The significance of this became instance, tomorrow I have a bilateral meeting The Japanese way of communicating depends Yes, of course. It was the same with Japan. clear to me in a bilateral conversation with with a delegation from Georgia, and we will strongly on harmony, and practically every- Both countries want to be strategic world an Indian colleague. He told me: “Our prob- be going to a simple country restaurant. This thing needs the seal of approval from Tokyo. powers and are therefore interested in con- lem is not the strength of China, but how we cultural policy – but since the acute threat is a place that appeals to people, as they often This means that you can’t expect spontaneity tractual links with Europe. If this is easier on are to employ the 10 million people who are The World Trade Organization from the Doha Round has gone, the issue of only see five-star hotels – which look the from a Japanese counterpart. And because a bilateral basis with Switzerland than with entering working life each year.” (WTO) these reforms has quieted down. I find this same all over the world. all the departments involved want to ensure the EU, it is tested out in this way. is responsible for global rules a shame, and in all my speeches I warn the that the representative puts across the united You have repeatedly stated that the EU, governing trade between nations. agricultural sector to take note – one day it So the personal touch is valued in position accurately when on the front line, What does a trade diplomat actually do and with it Switzerland, have become Its aim is to break down barriers will have to be able to live without tariff pro- personal relationships? there can be large numbers of participants in on a day-to-day basis when negotiations seriously marginalised on the interna- to trade, such as customs duties, tection! Absolutely! For receptions I usually invite the negotiating groups. This can sometimes for an agreement take years? tional stage in recent years. What do you subsidies and barriers to access people to a wine tasting. A winegrower from be really exasperating, especially at a minist- (Luzius Wasescha rises, goes over to his desk make of this development? for companies in the service sec- Are your roots in Graubünden the reason Geneva, Vaud or Valais comes and brings erial level, where the cultural differences are and returns with two thick stacks of bound The world is gradually becoming accustomed tor. It works towards liberalising for your being the head of the largest some of his wines for us to taste. complicated by language barriers. A Japanese paper.) to the reality that, in addition to the USA, the international exchange of national park in Switzerland, Parc Ela? politician rarely speaks English; he speaks These are the lists of obligations for Russia’s Brazil, India and China also carry weight. goods, from which export coun- Yes. Parc Ela was created by the 21 munici- But then when it comes down to business, Japanese! This is when you start to get “lost accession to the WTO. They were negoti- Japan and Europe are falling behind – and tries such as Switzerland benefit palities of the Albula and Julia valleys. Of you all have to represent the positions of in translation”, to coin a phrase. ated in bilateral talks with around 50 coun- with them, Switzerland. But this does not in particular. With its headquarters course there are rivalries – a Bergün vil- your own governments. Surely it makes tries. This is the result, to which everyone necessarily mean catastrophe for our econ- in Geneva, the WTO currently has lager does not like to be told what to do by no difference whether or not you have And how do you find the Russians? agreed – three kilos of paper! And this here omy. It is, however, catastrophic on a polit- more than 150 member states. someone from Savognin. I came to them as drunk a glass of wine together the previ- They have a fantastic negotiator who has is the contract between the WTO and Russia. ical level, where we can no longer rely on the The measures and disciplines someone who hails from Graubünden yet ous evening … handled the entire process of accession to the The negotiations lasted for 18 years. In the understanding of the EU countries as we used contained in the WTO regula- is not involved in regional conflicts that go … but you perhaps understand the other WTO. We have known one another for over Doha Round, we had around ten negotiating to. Most of them are still on our wavelength; tions apply to goods (since 1947, back generations. I find it really exciting to be party’s point of view that little bit better. For ten years, and by now I can read his body groups who met regularly. I led one of them. however, it is not the individual members GATT), services (since 1994, implementing a practical model of sustain- example: right at the start of my career, in the language. The relationship of trust I have There would be two-hour discussions on mat- who negotiate, but the European Commis- GATS), intellectual property (since ability here, even if it means sometimes fall- EFTA (European Free Trade Association) we with this colleague is amazing. Several years ters such as whether the word “promptly” or sion. In trade politics, a politician such as 1994, TRIPS) and procedures ing between two stools. were involved in standardising the applica- ago, when I was still working in Berne, he “immediately” should be used in a paragraph. British Prime Minister Cameron is like a Swiss for government procurement tion forms for the registration of medicines. would call sometimes and ask for my opinion If there is no collective will, such trivial cantonal president. Trade politics are not (since 1979, currently applicable Does negotiating with 21 rival moun- We all more or less agreed, but one represent- on two or three issues. This is when you see details can bring the whole thing to a halt. In within his sphere of competence. to 40 members, GPA). tain municipalities require cultivating ative was at odds with us. I invited him for how valuable networking can be – something such cases you have to see what can be done. www.wto.org relationships in a different way than one Ms Calmy-Rey was well aware of. She would No branch of Swiss industry is as seri- would in trade diplomacy circles? often get bored at those multilateral OSCE ously affected by tariff reductions, one No, the basic principles are identical. What (Organization for Security and Co-operation of the measures called for by the WTO, matters is knowledge, the ability to express in Europe) conferences where nothing hap- as agriculture. Does this damage your oneself and a network of contacts. And the relationship with farmers? greatest asset in any relationship is trust. The farmers’ representatives know that I make every effort to represent their concerns “Japan and Europe are falling behind – and with – provided these concerns have been adopted them, Switzerland. But this does not necessarily mean by the Federal Council, of course. I am a Graubünden man and know what it means to catastrophe for our economy. It is, however, catastrophic work in agriculture. In the Uruguay Round on a political level, where we can no longer rely on we were the only ones to talk about the mul- tifunctionality of agriculture, which enabled the understanding of the EU countries as we used to.” us to succeed in cementing direct payments in law. There has been a shift in our agri-

14 ceo relationships ceo relationships 15 commodities

“Personnel is our most precious asset”

Ruth Sandelowsky, CEO of the Zug-based com- modity trading and service providing enterprise Kolmar Group, talks about Switzerland as a busi- ness location, the finiteness of natural resources and the art of building long-term relationships.

Ms Sandelowsky, in terms of sales, Kol- Why did the Kolmar Group choose Zug for mar ranks among the 50 biggest Swiss its headquarters when the company was Ruth Sandelowsky companies. Why is your firm virtually founded in 1997? For many years, Dutch national unknown to the public? There were and still are numerous reasons for Ruth Sandelowsky worked for Kolmar is a private company that does not see that … the commodities giant Phibro. In the need to publicise its activities outside of 1997 she set up her own com- its own professional sector. Having said that, Is the low tax rate in Zug among them? pany. In 2011 Kolmar Group Kolmar is very well known to the major inter- Yes, the tax system may seem the most obvi- employed 170 staff and gener- national players within its industry segment. ous and widely recognised reason, but that ated USD 6.7 billion in turnover It is considered to be an integrated part of on its own would not have done it. Switzer- from its operations worldwide. the industry, successfully fulfilling a much- land is very business-friendly, particularly in Alongside its Swiss headquarters needed multifunctional role. the service providing industry. The country in Zug, the company is present in is centrally located geographically and has a 26 locations, the most important Kolmar has a huge turnover … well-developed infrastructure. The airports locations for the company being … total sales value for 2011 was USD 6.7 bil- are easily accessible with regular connections Bridgeport, Connecticut, USA, lion. Whilst this figure as such is impressive, to destinations all over the world. Business and Singapore. Kolmar trades it is, on the other hand, also sensitive to mar- ethics are on an exceptionally high level. A with a broad range of products, ket conditions and the crude oil value. Kol- person’s word is their bond and, furthermore, from crude oil and petrochemi- mar tends to concentrate more on the total the quality of work meets the highest stand- cals to bio fuels and coal. The transacted quantity, expressed in metric tons. ards. Importantly, the workforce is highly company also offers financial and In 2011 Kolmar transacted 6 million tonnes of trained. There is a very skilled network of functional support to its clients products. Continued growth of this physically bankers, lawyers and other professionals such and is active in the transport and oriented number is more meaningful to us. as doctors and dentists. In a nutshell, the storage of commodities. country offers an attractive environment for both companies and their workforce alike. Photo: Ruben Wyttenbach

16 ceo relationships ceo relationships 17 170 employees 6.7 billion USD sales value

Switzerland has been facing growing value chain within, and across, certain indus- fee for the processing step to the plant owner. founders of Kolmar had a clear vision of how What is the future of biofuels? The pro- international pressure regarding its try segments. Take the crude oil chain for Ownership of, and participation in, mines or to build a flourishing business, in terms of duction of ethanol is heavily criticised as finance sector. Some observers predict example: Kolmar offers services in the crude refineries may be considered in the future. finance, but more importantly, to also create competing with food production. that the Swiss commodity sector will oil and refinery products sector. It also offers a working place where their employees would Sustainability in terms of the environment, soon face the same kind of pressure, for services relating to various petrochemicals Personal relationships lie at the heart feel good and have confidence in the future, energy and food supply – as well as preserv- example regarding tax privileges. Do you that are produced from the refinery products, of trading and any business. How do you both in terms of longevity of the company as ing the standard of living – are matters of share this view? which in turn form the feedstock for other establish, entertain and cultivate these? well as for themselves in terms of job satisfac- great concern for businesses and govern- So far we have been very satisfied with the processing steps, generating intermediates Kolmar enjoys long-standing relationships tion, continuity and career growth. Kolmar ments alike. Kolmar is very conscious of these Swiss business environment and hope it which, after further processing, result in raw with its business partners. This is not some- has a strong company culture that is seen as issues and endeavours to play its part by fol- remains so. materials for the manufacturing of consumer thing that comes easily but is the result of a unique in the world of trading companies. lowing present regulations and actively sup- products. Hence, the output of one process growth process over time. Many of Kolmar’s This is reflected in the very low turnover of porting measures aimed at maintaining strict Your company has just 170 employees. serves as the feedstock for a subsequent one. executives have been in this business for more staff. The management of the Kolmar Group compliance procedures. The German biofuels Other commodity trading companies Kolmar’s product range covers all of these than 20 years and in some cases even longer. considers its personnel as its most precious market, for example, can only be served by of comparable size employ many more intermediate and interconnecting steps, During this time, relationships have been asset and accordingly does its utmost to pro- us – and other suppliers – with materials that people. which is a rather unique feature in itself. I built based on trust, proven track records and vide them with stimulation and satisfaction are accompanied by sustainability certifi- Kolmar is indeed a very lean and efficient have chosen to describe this characteristic of continuous dialogue on how to best serve our in their jobs. Offering employees internal cates. organisation, and this is intentional. The Kolmar’s unique contribution to the smooth business partners and to help them achieve courses and constant opportunities to expand company is global and works from many running of the economics of commodities their business goals. Unlike other trading their professional horizons – and develop Many smaller commodity trading firms different locations as a coherent operation. as being in a sense “virtual” because Kolmar companies, Kolmar doesn’t believe in specu- themselves on a personal level – are integral have disappeared over the past few It relies on high-quality local presence and does not manufacture these products. lative trading. We are in a service providing parts of this policy. years or merged with the big players. expertise. At the same time, Kolmar is suc- business to the mutual benefit of the parties Will only a few major firms survive that cessful in getting maximum benefits from its Is the Kolmar Group also involved in the concerned. The products which the Kolmar Group are involved in the whole value chain organisational MATRIX model. extraction of raw materials? sells rely on finite resources. What does of producing, selling and delivering Conceiving of its role essentially as a service The Kolmar Group was founded, like this mean for the long-term development commodities? You call the Kolmar Group a “virtual” providing company, Kolmar offers its busi- many other trading companies, by a of the company? This question is difficult to answer. There is integrated company. What does that ness associates a comprehensive range of team of executive traders who had left As far as crude oil is concerned that is indeed a big market out there and there is always mean exactly? services – such as sourcing and marketing of their former employer. How do you make the case. However there is a constant search room for niche players that don’t need a huge Kolmar is, way beyond a mere traditional products, financing, logistics, storage, market sure your employees won’t eventually for alternative energy resources. Alterna- organisation to achieve profitability. How- trading entity, a genuinely global service information, project advice and more that form their own independent company? tive raw materials such as gas and coal are ever we strongly believe that if one aims at a providing company, which to date owns no can help them to achieve and optimise their Kolmar was indeed founded by a team of peo- available. It’s usually not only a question of global operation, it requires a business model production assets. The range of products the business objectives. Tolling, for example, is ple who had left their former employer. The environmental concern, but also one of cost. that foresees a certain size and capacity and company offers to its clients covers the entire an arrangement made with the processor to Ultimately we have to be aware that our pre- that is globally structured. Such structure will employ – at times idle – capacities by means sent standard of living is heavily dependent ultimately be more beneficial for the market of Kolmar supplying the feedstock as well as on the availability of these resources. As a we serve. managing the off take and paying a tolling company, operating within the basic tenets of social responsibilities, we are very flexible and can adapt rapidly to many changing mar- ket conditions very rapidly where the need for adequate service providing remains and “Kolmar enjoys long-standing relationships with its even grows. business partners. This is not something that comes easily but is the result of a growth process over time.”

18 ceo relationships ceo relationships 19 airline industry

“Networks can create dependency”

The market situation for air- In early 2012 SWISS was registering ation is job security – ultimately it would lines is difficult, and the pres- losses and the Lufthansa Group was make more sense to reduce someone’s salary shedding jobs. How do you pass on such by 5 per cent than to make them redundant. sure correspondingly high. bad news? Up to now we have actively implemented a It is part of business life. Of course you get good social partnership at SWISS. Swiss International Airlines worried every now and then, and it gives you sleepless nights – at the end of the day, So are pay cuts envisaged? Ltd. CEO Harry Hohmeister colleagues are affected. But we have to use Not at present, as our company is earning projects for change to regain positive energy money. We are doing everything possible to talks about conveying unpleas- as soon as possible. 2009 was also a difficult try and ensure that everyone can do their year, but we overcame the challenges. We will job with as few worries as possible. But if oil ant news, political conditions succeed in doing so this time, too, although prices rise to the USD 200 mark and the Swiss we are not anticipating a fast recovery of the franc gets even stronger, we will have to dis- and cultivating relationships. market in 2012. cuss lower pay. For the present, though, we are not talking about salary levels, but about That sounds like forced optimism. increasing efficiency. And I can already hear You always have to be optimistic in our sec- you asking if things have not already been tor. However, if you merely hope things will squeezed dry … get better, you won’t be able to win. In the airline business you have to work constantly Have they? Harry Hohmeister on improving. A certain degree of optimism When I took on the post of CEO in 2009, we has been CEO of Swiss Interna- is good to stop you from being ground down, brought in a consultant from outside to do tional Airlines Ltd. since 2009. but that’s simply a matter of attitude, not the a realistic analysis of the current situation. He trained in airline management solution. The result? We were quite a bit better than and worked from 1988 to 2000 for the worst, but still only in the middle range Lufthansa, mainly in managerial SWISS aims to achieve an annual operat- of our sector. I was not satisfied with that. roles. After a five-year period at ing profit of CHF 400 million. Have you Since then we have reduced overhead costs, Thomas Cook AG, where he exer- not set the stakes rather high here? in other words the administrative unit cost, cised various executive manage- We need this income to be able to make by 22 per cent – without having to lose people ment functions, he joined SWISS investments and succeed in the long term. or exploit them. Using automation and stand- in 2005 as a member of the man- We have initiated various specific projects to ardisation we can reduce overhead costs by a agement board and head of net- enhance results. For example, we are work- further 15 per cent over the next three years. work planning, and later assumed ing with Lufthansa to optimise local travel, charge of the company’s sales we are trying to improve our procurement In difficult times is the boss also required and distribution. He is 48, mar- processes and we are yet again reviewing our to act as communicator? ried, has a son and lives with his procedures. I am confident that we will be I need to stay on top of the situation. Anyone family in the vicinity of the airport. back on track by 2014. who is afraid of presenting unpleasant news

Photos: Cédric Widmer to 500 people should not be doing this job. Will the planned measures have an We regularly hold communication events for adverse effect on your staff relations? employees. We have implemented substantial improve- ments to the collective agreements with You have stated that you will never employees since 2006. But now that times stop spreading unrest through the are harder, there is no scope for higher pay. organisation. At present there is plenty At the moment the most important consider- of unrest from the market. Yes, at the moment I have less need to spread unrest than before. The high price of oil, cur-

20 ceo relationships ceo relationships 21 New image, new offers for customers: SWISS Arrival Lounge at Zurich airport.

rency developments with the strong Swiss few years to come. But the ability to adapt As an airline boss you are surely not Many would perceive a doubling of air Operating franc, and our competitors, many of whom to the employment market is an important happy with the political restrictions on travel as a threat. income are state supported, are very challenging success factor, as from a certain level you no air travel … But for many it is an opportunity. The developments for us. But the world is one longer shape your own destiny – others are Last autumn, voters expressed clear support demand is not created artificially; we are 4.9 of constant changes. An organisation that also involved in shaping it with you. for the airport in Zurich. If you look out of my satisfying customers’ requirements. And we billion CHF has set an unchanging course is not a good office window onto the airfield and the road, are developing in line with technological organisation in the long term. Managers are SWISS is part of the Lufthansa Group. you see a substantial advantage for mobility. progress. If we look back 20 years, Zurich- “Without air travel SWISS needed who question things and implement Is this operational relationship vital to Some people in politics have the attitude that Kloten had substantially less traffic with Swiss International Air Lines Ltd. a substantial part of initiatives to remain competitive, creative and survival? air travel is a luxury industry. That is sheer almost 70 per cent more noise than today. (SWISS) is part of the Lufthansa innovative. It is certainly true that SWISS in its current nonsense. We do not fly for pleasure, we are People should stick to the facts and not Switzerland’s gross Group and a member of the form would have ceased to exist without creating billions of francs worth of value, demonise the airline industry on the basis world’s largest airline network, national product Would you have got where you are today this association. The connection means that and here in Switzerland we are as much part of gut reactions. Star Alliance. The SWISS fleet of without your professional network? we have won back customers’ trust, and we of the public transport network as the rail would be lost – its 90 aircraft carries around Ultimately, the decisive factor is what you are benefit from economies of scale in fuel operator SBB. You are German. Do you need to under- 15 million passengers every year. contribution is six capable of. Networks have various dimen- purchasing, aircraft acquisition, sales and stand Swiss German for the purpose of In 2011 the airline, with a work- sions: my private network is very important customer loyalty schemes. This accounts You still have plenty of work to do to maintaining relations? times that of the force of 7,600, had an operating to me – family and friends who listen to for mutual savings of CHF 150 million per convince people of that. I think the most important thing is to fit in by income of CHF 4.9 billion agriculture sector.” you and voice their opinions honestly. As a annum. Over a ten-year period we are invest- Yes, as a business we need to get more the way you behave. I honestly don’t expect and made an operating profit boss you soon tend to overvalue yourself. ing a total of almost CHF 4 billion in new involved, as is the case in other sectors. my Swiss colleagues to speak standard Ger- of CHF 306 million. Networks help here by providing a degree of aircraft. We would formerly never have got Those who seek to make political capital at man in meetings. If I don’t understand some- objectivity and helping you keep your feet on that kind of money from anywhere, unless our expense, such as with the issue of noise, thing, I can ask. Although there is clearly an the ground. the state stepped in. could ultimately be damaging the economy. automatic reaction in these situations in I also have my airline network. Basically, I Without air travel a substantial part of Switzerland – when I come along people use have always taken care to ensure that I retain So size is everything? Switzerland’s gross national product would their dialect for two or three seconds and my independence and do not become too Size in an association brings economies of be lost – its contribution is six times that of then switch to standard German. closely involved in networks, as that always scale. But our strategy is to cover the home the agriculture sector. creates dependencies. market in Switzerland. If we were much big- You are seen as a quick thinker. Is that a ger we would have to promote transfer jour- The Zurich-Kloten airport can handle a help or a hindrance? Did you apply for the post of CEO at neys to a huge extent, which in turn would maximum of 66 take-offs and landings It certainly helps with decision making if SWISS? have a serious effect on the cost structure. In per hour, while the capacity in Frankfurt you are able to think through complex issues No. I have only ever submitted one job appli- this industry size alone is not the answer. is 120. Yet there is resistance to new quickly. In our environment, winning or los- cation in my life, and since then I have always runways here. ing often depends on the speed of your been headhunted. I have always shown Air transport is not only governed by Switzerland has to decide in which direction reactions. However, on an emotional level myself to be open to new tasks and have the market, but also by politics. To what it wants to go and what should be done with it can be a hindrance if you race ahead too never followed a fixed course. That’s still the extent do you have to be a politician? the airport infrastructure – what is needed to quickly and leave others behind. case today. I have been CEO at SWISS for Politics creates the framework; there is no maintain the attractiveness of an economy? three years and would like to stay here for a getting around that. Consequently, I cultivate Air travel is set to double again by 2030. And relationships with those in power in Berne, if that is the case, all these people – from Berlin and Brussels. Business people and pol- the Far East, for example – will travel to the iticians, regardless of political flavour, have places served by direct flights. to work more closely together in air transport to find the best economic solutions.

22 ceo relationships ceo relationships 23 energy market There were once two small natural lakes on the Bernina pass: Lago Bianco and Lago della Scala in the south. In 1910–1911, the two dams Scala (southern side) and Arlas (northern side) were built, creating a reservoir with a volume of 18.6 million cubic metres.

“Electrifying thought process”

With the project for the Lagobianco pumped-storage power plant, the operator Repower is opting for cooperation rather than confrontation. Building relationships with environmental protectionists is bearing fruit but remains a challenge for both sides.

Photos: Ruben Wyttenbach

24 ceo relationships ceo relationships 25 Since 2009, they have been meeting up and “seeking solutions rather than problems”.

Roberto Ferrari shows how complex pro- cesses can be depicted in the meeting room of the energy producer Repower in Poschi- avo, in the canton of Grisons. Taking his glass of water and pushing it gently to one side, the project manager for the new Lagobianco pumped-storage power plant explains: “When we had a problem in the planning process, the glass was not broken but instead viewed from a new angle.” By “we”, Ferrari means, in addition to his pro- ject team, primarily the monitoring group, which includes representatives from environ- mental organisations, fishermen, communi- ties near the site and the canton. Since 2009, they have been meeting up and “seeking solu- tions rather than problems”, says Ferrari. For a long time, this was not the case. WWF, Pro Natura and the Greina Foundation had objected to an initial project for a major pumped-storage power plant in the Puschlav valley from the 1980s and 1990s and had taken the case to the Swiss Federal Court. Repower had previously prevailed in all legal challenges. There was considerable disagreement among the opposing parties. The electricity producers wanted to produce more energy in the winter by raising the level of a reservoir lake at the Bernina pass by 17 metres. Such a move would only have allowed a small amount of residual water in the effluent stream, whereas environmental- Open to discussion: Roberto Ferrari, project manager for the Lagobianco project. Exploration shafts: shifting in the stone can result in adjustments to the project. Dam heightening: the old south wall of the Lago Bianco reservoir. ists were campaigning for much of the land- scape to be left as it is. Pressure tunnel approx. 18 km New start around the round table Lago Bianco The positions seemed irreconcilable until the Greina Foundation proposed a round table The Lagobianco project in September 2008. Felix Vontobel, deputy In the upper Puschlav region, Repower wants to set up a pumped-storage power plant with 1,000 megawatts of output, which corresponds approximately to the output of the Pressure shaft Gösgen nuclear power plant. The future power plant will make use of two reservoirs: approx. 2.5 km Lago Bianco on the Bernina pass, at a good 2,200 metres above sea level, and Lago di Poschiavo at around 1,000 metres. Power is produced when the demand and the price are right. Then the water flows downwards and drives the turbines in the central power station. Conversely, cheap electricity is obtained in times of low demand and used to pump the water back up into Lago Bianco. The two lakes are connected underground via an 18-kilometre-long pressure tunnel along the valley side and a 2.5-kilometre-long pressure shaft. The water drives turbines in an underground power station in Camp Martin on Lago di Poschiavo. The connection to the electricity grid is provided by an already existing international 380-kilovolt cable. Lago di Poschiavo The application for the approval of a concession was submitted to the canton of Grisons at the end of 2011 by Repower and the three municipalities of Pontresina, Poschiavo and Brusio. The investment costs amount to around CHF 1.5 billion. Repower is looking for production partners willing to participate in the project. The construction time for the pumped-storage power plant is six to seven years. 26 ceo relationships ceo relationships 27 “We suspended the proceedings before the Federal Court for half a year and saw the dialogue with the objectors as both an experiment and an opportunity.”

Team oriented: Felix Vontobel, deputy CEO at Repower, in the village of Poschiavo in southern Grisons.

CEO and head of assets at Repower, recalls: “There was total confrontation for years,” cheap nuclear and coal-driven power into “We suspended the proceedings before the says Gallus Cadonau, managing director expensive hydropower, which dries out riv- Federal Court for half a year and saw the of the Greina Foundation. The ecologically ers and streams in the process – an ecological dialogue with the objectors as both an experi- minded pragmatist was pessimistic about the blunder in the view of environmental organi- ment and an opportunity.” Federal Court case and feared the setting of sations. Ferrari, who is 54 and has a degree in energy a precedent with regard to the residual water With the boom in new renewable energies in technology and high-voltage engineering, volumes, in other words the water level in the Europe, primarily wind and solar energy, the has been at the company since 1987 and effluent streams of the reservoir lakes. Nego- market is now changing. Electricity from sun describes himself as being team oriented. tiation was the better alternative. and wind is not produced only in response “We frequently run the risk of giving too to demand but rather when the sun shines much weight to the topics and not enough Energy transition requires storage power and the wind blows. Batteries are therefore to our relationships with one another. Other plants needed to store the electricity when there is a ideas can open up new paths.” Vontobel, who In fact, says the Repower vice-president, a surplus and release it when demand requires. himself has operated a solar collector system “creative thought process” developed. From “We have to use this opportunity to bring privately for 16 years, ignored warnings from his perspective, a change in mindset among about the energy transition,” says Greina friends and colleagues who were against a the environmental representatives was deci- Foundation director Cadonau. collaboration with the allegedly unpredict- sive: “It was recognised for the first time that able environmentalists. an energy transition towards the new renew- The ups and downs of power production Val Poschiavo: the construction of the pressure tunnels and the underground power station will create more than 3 million The environmentalists also had to aban- able energies is only possible with storage At times, so much wind and solar power tonnes of excavation material. The construction will be a major burden on the valley – but also generate jobs and money. don their traditional ideas of the “enemy”. plants.” Up to now, pumped-storage power is produced that prices hit rock bottom. plants have had the reputation of turning 28 ceo relationships ceo relationships 29 In extreme cases, money may be paid for A three-legged stool buying excess electricity. Pumped-storage During its construction phase, the Lago- power plants make it possible to exploit such bianco project will have a significant impact a situation: if there is excess electricity at on the environment. During the construc- Lagobianco, water would be pumped 1,200 tion of the pressure tunnels and the central metres upwards from Lago di Poschiavo into underground power station, more than Lago Bianco at the Bernina pass and tur- 3 million tonnes of material will be created; bined in the opposite direction when there is the work will place a heavy burden on the increased demand (see box page 27). “If Swit- valley. In subsequent operations, there will be zerland wants to play a role in the European considerable fluctuations in level at the two context, it can only do so by providing storage reservoir lakes. solutions for the new renewable energies. The project group were looking for solutions Otherwise, we will be marginalised and will that were as environmentally friendly as pos- fall under the wheels of European politics in sible. The results are exemplary: around the energy sector too,” says Vontobel. 40 per cent of the excavation material can be Because pumped-storage power plants have reused for concrete production; most of it for a compensatory effect, they also make an the project itself. The dam on Lago Bianco important contribution to the stability of the will be heightened by 4.3 metres rather grid. In Switzerland, three new pumped- than 17, and the fluctuations in level will be storage power plants are currently planned defined and limited. In the valley river, the The Repower energy company or already under construction. “There is suf- hitherto frequently alternating water levels In 2000, several Grisons-based ficient demand. However, the transmission (hydropeaking) will be eliminated as a result power plant companies joined grid needs to be expanded for additional of the power production. New developments forces to form Rätia Energie, pre- capacities,” explains Vontobel. mean that turbines will be fed via pressure sent-day Repower. Forty-six per tunnels, and sufficient water will be supplied cent of the shares are held by the No energy transition yet to the Poschiavino river. Fish can migrate canton of Grisons, 24.6 per cent The Repower manager does not mince his again and lay their eggs. Important revitalisa- by the energy company Alpiq and words on the energy future: “Because there is tion measures are envisaged at both lakes and 21.4 per cent by the electri-city a lack of consensus in society for new nuclear the Poschiavino river. company Laufenburg. In 2011, power plants, we will have to find a substitute The participatory process of relationship Repower generated a turnover for around 40 per cent of our current electri- building remains challenging, however. of CHF 2.5 billion with 700-plus Lago di Poschiavo: when there is a surplus of electricity, water will be pumped 1,200 metres up into Lago Bianco and turbined in the opposite direction when there city generation. It is not realistic for us to Repower and the environmentalists do not is a demand for electricity. employees. Consolidated profits achieve that solely with the new renewable agree on everything. For instance, an initia- totalled CHF 54 million. Repower energies once we abandon nuclear energy tive from Grisons is demanding that domestic has a solid financial basis with altogether. Consequently, we will need a gen- producers do without coal-driven power from an equity quota of 40.7 per cent. eration of new gas- and coal-driven power abroad. But Repower wants to use this source Around two-thirds of the electric- plants.” of energy primarily for its important Italian ity turnover of 18.0 terawatt hours But there is strong opposition to such a devel- business. are generated by trading; a third opment throughout Europe. Vontobel points If the concession for the Lagobianco pumped- by supply and distribution. The to the consequences: “Because nobody is storage power plant is granted, a scenario for group has its own power plants in investing any more in this uncertain phase, unforeseen events needs to be drawn up with Switzerland (hydropower), in Italy some plants with a poor level of efficiency the monitoring group during the construction (combined gas power plant, wind) and high CO2 emissions continue to be in phase – for example, with regard to geologi- and Germany (wind). operation. The average age for Europe’s cal aspects, where shifting rock formations power plants is already at a critical level.” could result in adjustments to the project. Vontobel wants clear and reliable political “We do not yet have all the answers,” explains guidance so that his industry can invest. He Ferrari. also puts the situation into context: “Electri- What could still stop the project if the conces- city accounts for 24 per cent of the total con- sion is awarded? Ferrari answers with the sumption of energy in Switzerland. The lion’s metaphor of the three-legged stool. “The legs share of 76 per cent comes primarily from symbolise technology, ecology and economy. fossil sources of energy. But that fact is often They have to have equal weighting; otherwise conveniently ignored.” the stool will fall over.”

In 2011, Repower generated a turnover of CHF 2.5 billion with over 700-plus employees. 30 ceo relationships ceo relationships 31

Clive Bellingham, Headquarters Initiative Leader

ceo 1/2012 Value insights

improved efficiency was fully (87%) or at least partly relevant, with cost savings through econ- Switzerland omies of scale less so. Foreign multinationals, by contrast, rated both criteria as more or less equal The first choice for in relevance.

Tax appeal European HQs Many arguments speak for Switz- erland, among them legal cer- tainty, the possibility to work in partnership with the authorities, Multinational companies are opting to centralise business functions good infrastructure and quality in increasing numbers. With its many competitive advantages, of life. Tax too. All of the foreign Switzerland is benefiting from this trend as a preferred location for multinationals and almost all European or even global headquarters. the domestic companies polled named tax rates and the tax environment as relevant to their Switzerland choice of location. The decision to centralise and choose to locate centralised func- The first choice for European HQs Page 33 Language was another key criter- the choice of where to locate tions in Switzerland. The find- ion for multinationals in select- headquarters are inextricably ings make interesting reading. Audit and advice in parallel ing where to centralise. The use linked. Multinationals often opt Boosting quality and efficiency Page 36 of a common language by the to centralise as the result of a Efficiency gains thanks to business community was ranked business transformation. Once centralisation Start-ups ahead of quality of life and the you’ve decided to centralise cer- Centralisation is an attractive Young enterprises inject life into the economy Page 39 availability of trained personnel tain functions, you have to find option for multinationals, and (see graphic). a place to locate them. This usu- likely to remain so in the future. The psychology of incentives The financial crisis and its after- ally involves expanding existing A business transformation based Keep it fair and simple Page 42 math have made Switzerland offices or setting up a new HQ. on centralisation: even more attractive, with for- For many multinationals Switz- – boosts efficiency because it har- Service eign multinationals in particular erland is a very attractive loca- monises business practices, Publications, training and information events Page 44 viewing the country as a safe tion from which to coordinate – creates economies of scale haven. European or global operations. which help reduce cost. In 2011 there were around 500 Centralising key functions companies with regional or What’s interesting is that Swiss It’s striking to see to what extent global headquarters in Switzer- and foreign multinationals the foreign multinationals plan land. PwC has investigated this weight these two arguments dif- to increase their presence in phenomenon by asking multina- ferently. For domestic companies Switzerland. Over 90% of the tionals why they opted for cen- foreign multinationals surveyed tralisation and what made them

32 ceo value ceo value 33 Relevance of site-related factors Relevance of site-related factors

Scope and rate of corporate taxes 100% Scope and rate of corporate taxes 92%

Use of English in business community 91% Use of English in business community 84%

Quality of life 89% Quality of life 92%

Availability of trained personnel 81% Availability of trained personnel 63%

Geographical position 80% Geographical position 76% Foreign companies Proportion of internationally operating Proportion of internationally operating companies in Switzerland 71% companies in Switzerland 69% in Switzerland In 2010, foreign multinationals Proximity to sources of labour 68% Proximity to sources of labour 31% accounted for CHF 39 billion (7.1%) of Swiss GDP and Specialist know-how 62% Specialist know-how 39% 423,000 jobs (approximately 10% of total jobs). Proximity to existing and future customers 56% Proximity to existing and future customers 39%

Road and rail infrastructure 54% Road and rail infrastructure 71%

Availability of R&D 44% Availability of R&D 31%

Proximity to suppliers 41% Proximity to suppliers 29%

have centralised or plan to cen- – Employees have to relocate and when you undertake the trans- to rest on its laurels. It has to play How the study was conducted tralise their procurement func- get used to a new working and formation. Any mistakes in cen- to its strengths to achieve an even The original intention was to focus on foreign multinationals with headquarters in Switz- tion here; 81% have similar plans living environment. What are the tralisation can have serious con- stronger position in the reloca- erland. But as the study progressed it became clear that many of the challenges and for sales and marketing. The implications for remuneration? sequences. For example, a failure tion business. opportunities around centralisation are the same for both Swiss-based global groups and finance and tax functions are also What additional work will it to establish the new responsi- The centralisation trend will con- regional international groups, so it was extended to include Swiss multinationals as well. prime candidates for centralisa- involve for HR? bilities within the organisation tinue. As the balance of power in The findings distinguish between the responses of these two groups. tion for both Swiss and multina- – Processes and systems have to will result in a lack of credibility the global economy shifts from tional companies. be changed. New controls have to externally, which can undermine West to East, more and more The survey covered 93 individuals from 74 companies. Of these, 68 were holding com- Centralising IP − which is be introduced, and risk manage- the whole strategy of running the multinationals will be setting up panies, 27 of which were legally registered in Switzerland and the USA, 10 in Europe increasingly used to refer to ment has to be adapted in line business from Switzerland. hubs in Asia. There have been (excluding Switzerland) and 4 in Asia Pacific. The high number of US-based companies intangible rather than intel- with the new set-up. How can all Centralisation requires profes- concerns that Singapore will polled may be a factor in the popularity of the use of a common language in the business lectual property − is another this be handled without disrupt- sionalism and thorough prepar- become the “next Switzerland”. community as an important criterion in choice of location. extremely important concern for ing the business? ation. It’s not something that can But a more realistic scenario Swiss multinationals. Swiss com- – New invoicing and transaction be accomplished overnight. Even is that multinationals will opt Of the companies surveyed, 21% post global sales of less than EUR 1 billion and 32% panies apparently set great store flows have a direct impact on when the process is under way, for three hubs: one in Europe, have global sales of more than EUR 10 billion. Participants operate in the following by registering trademarks, copy- VAT reporting. What happens if each step has to be questioned one in America and one in Asia. industries (from most to least common): industrial products, retail and consumer goods, rights and patents under their invoicing flows no longer cor- and adjusted as circumstances Singapore or Switzerland is not life sciences, technology, telecommunications, entertainment and media, energy, utilities own legal system. respond to the physical flow of change. an either/or decision. For Switz- and mining, and public. goods? erland, the major challenge is to Not without challenges – Centralising in Switzerland Insights for Switzerland ensure that it’s first choice on the The prominence of the industrial sector is in line with a PwC observation that over the Relocation is no routine task, means paying tax in Switzerland. What can Switzerland learn from continent Europe – and that it last 20 years or so it has been primarily manufacturing companies that have opted to even for large companies. It poses Foreign tax authorities are look- the survey about the strategic continues to play a global role in centralise functions in Switzerland. This may be because standardising and centralising challenges very few said they had ing with sharper eyes at struc- considerations of multinationals? Europe. processes and functions within physical supply chains enables greater efficiency gains experienced before. tures to confirm they are being Government and the business and cost savings through economies of scale; and also because standardisation and cen- So while centralisation has many used legitimately. authorities have only to look at [email protected] tralisation are still at a relatively early stage of development in the services and financial benefits, it also demands consid- the main arguments stated by the sectors. erable effort: These and many other aspects of companies polled and gear their – New structures and responsi- the process have to be considered policies accordingly: tax, lan- You can order the study «HQs in Switzerland – maximising benefits and handling bilities have to be established, guage, infrastructure and quality challenges» by e-mailing [email protected]. maintained and adapted. How of life. Switzerland already ticks will staff react? all these boxes. But it can’t afford

34 ceo value ceo value 35 Julie Fitzgerald, Giving advice on other assur- allowing firms to provide non- rules governing what goes on this Assurance Markets Leader ance-related issues enables the audit services to audit clients, list are very restrictive at PwC, auditors to get to know all the but only under very restrictive it does contain more services facets of their client’s business. conditions. than people often assume (see They are then in a position to These rules are the legacy of sidebar). look at business transactions the Sarbanes-Oxley Act, which But statements of permitted from an operational as well as unleashed a wave of regulation services and strict internal rules The European Commission’s legislative from a financial point of view. all over the world when it was aren’t much good if people don’t proposals on audit policy They have a better understand- passed by the United States in comply with them. That’s why With audit quality inseparably bound up with the qual- ing of the risks, which enables 2002. The restrictions on the PwC has a uniform process in ity of financial reporting, high-quality audits are crucial new insights into the way busi- non-audit services provided by place across the globe to ensure if the financial markets are to function properly. The ness transactions are presented audit firms rest on three princi- that no advisor in any territory explicit aim of the European Commission is to reform the in their client’s financial state- ples: provides a service that is not European public interest entity audit market to improve ments. Because it makes them permitted. Roughly speaking, the audit quality. Many of its proposals will do just that, and more alert to discrepancies, and 1. Independent auditors may procedure for obtaining author- are welcomed by PwC: Audit and advice immediately able to respond not function in the role of their isation for services runs like this: critically when discrepancies client’s management, i.e. make responsibility for the audit of a • The consistent use across Europe of ISAs (International arise, the fact that their firm has decisions. multinational group always lies Standards on Auditing) to enhance consistency and confi- in parallel also provided non-audit services 2. Independent auditors may not with the PwC territory where dence in the quality of audits actually enhances the auditors’ audit their own work. the group is headquartered. The • Comprehensive reporting from the auditors to the professional scepticism. 3. Independent auditors may not lead auditor must record all the board of directors Boosting quality and efficiency Another factor is the complex- do bookkeeping. subsidiaries of the client group in • A requirement to set up an audit committee or augment ity of modern audits. Especially a so-called central entity services its responsibility, and closer dialogue between the audi- at multinationals, the audit is These principles make sense. system, and keep this informa- tor, the audit committee and the full board of directors such a complex business that the Auditors must always be able to tion up to date. If an advisor Audit regulation has been back in work on the audit, the audit firm • Improving two-way communication between supervis- auditors rely on the support of form an independent opinion. in any PwC territory wants to the limelight since the European gains deep insights into its client ory regulators and auditors specialists in areas such as tax, IT They should be able to make sug- provide a service to one of the Commission published its Green and a growing understanding of • The removal of barriers to auditors’ working across and valuation. The major audit gestions and proposals, but not entities within the audited group, Paper on audit policy in autumn its business. This is knowledge the EU firms have this knowledge in- decisions, as it’s the company and they have to send a request to 2010. Now that the ensuing con- the firm can then draw on if it’s house. Their auditors and advi- its board of directors who bear the lead auditor giving reasons sultation is complete, the com- involved in another project for On the other hand there are other proposals that sors follow the same standards, responsibility for the financial why they believe the service is mission has presented its legisla- the same client. And the experi- PwC does not support: and their work is closely coord- statements. In Switzerland, audi- permissible, and describing the tive proposals on audit policy. It’s ence it gathers in the course of • Mandatory rotation not just of the key people involved inated. Buying in expertise from tor independence is enshrined guidelines to which the service already clear that the new rules the project will, in turn, feed in the audit, but of the audit firm itself. This would other companies invariably leads in the Code of Obligations (CO) is subject. Having reviewed will be tighter. But it remains to back into the audit itself. A good constitute interference in the corporate governance of to difficulties in understanding and the Audit Supervision Act this request, the lead auditor is be seen how far-reaching they example is deal due diligence. the audited entity by restricting the choices of its meet- and inefficiency, which in turn (ASA). One of the provisions of obliged to reject it if there is any will be. While the compatibility The auditors know the company ing of shareholders. Empirical studies have also shown lower the quality and raise the Art. 728 f. CO, for example, is indication that the service might of assurance and advisory ser- and its strengths and weaknesses. that mandatory rotation diminishes audit quality and cost of the audit. that auditors may not audit their jeopardise independence. In vices is just one aspect of the They can shed light on the finan- increases costs. own work. The law thus prohibits particularly sensitive or unclear future regulation, it’s a key issue cial, tax, personnel and oper- • A prohibition on providing non-audit services to audit Restrictive rules already all services where there is a risk cases, the lead auditor consults in terms of audit quality. ational implications of a deal and clients. This would prevent companies from drawing on in force that the auditors may audit their the partner responsible for risk Experience shows that a strict place them in the right context. the full experience of their audit firm, reducing efficiency Those against the provision of own work. management. Once a decision prohibition on providing non- And after the transaction, the and – even more relevant from a governance point of view non-audit services by audit firms has been made, the advisor and audit services to audit clients auditors will know what specific – restricting their ability to determine the most suitable often argue that giving advice Only permitted services territory in question must accept leads to a loss of knowledge and deal-related risks they have to service provider. leads to conflicts of interest and provided it without argument. efficiency. In the course of its keep a closer eye on. prejudices auditor independence On the basis of the three prin- There is no empirical evidence to suggest that either of and audit quality. But in many ciples, audit firms have separated Safeguarding independence these two proposals would strengthen auditor independ- areas precisely the opposite is out services that are compatible Under the current rules it is pos- ence or improve audit quality. true: parallel accompanying and services that might conflict sible to clearly demarcate permit- Advisory services parallel to the audit can often make sense advice, especially in related areas with the principle of independ- ted and non-permitted services. because they enable a company to harness the full knowledge of assurance, can significantly ence. The result is a statement of Audit firms have institutionalised improve the quality of the finan- permitted services. Although the far-reaching measures designed of the audit firm. Thanks to fundamental rules prohibiting cial statements. Who is more to safeguard independence. auditors from auditing their own work or performing a aware of the weaknesses in a The process described above is management function there are clear statements of permitted company’s financial statements only one of a range of measures and non-permitted services, and there are strict procedures than its auditors? The current including enterprise-wide quality to ensure auditor independence. rules already take account of this, management systems, internal

36 ceo value ceo value 37 Stefan Gerber, Middle Market Leader Switzerland codes of conduct, general and Commission’s latest legislative Greater responsibility for engagement-specific confirma- proposals contain four options, audit committees tions of independence, and the two of which are favoured by the We should be taking a different disclosure and recording of all commission: a complete prohib- approach to improving audit personal financial investments. ition on delivering non-audit quality, one that addresses the ing modules, assesses projects, Despite all these safeguards, in services to audit clients, and − powers and responsibilities of provides financial resources and Switzerland in particular com- the most draconian alternative of the individual bodies involved connects public and private insti- panies seem to have adopted a all − the creation of audit-only in the reporting process and the tutions. kind of informal law of prudence. firms. way these bodies communicate. Fearing criticism from their The responsibility of the audit Start-ups well prepared stakeholders, directors and audit Further restrictions will committee, for example, should The CTI may be one of the rea- committees often tend to err very prejudice audit quality be augmented – also vis-à-vis Summary sons why people planning to start much on the safe side when it PwC is in favour of many of the the CFO – and dialogue with Under the present rules a business are so well prepared comes to buying other assurance EC’s proposals, because they will the external auditor should be nowadays. They tend to approach services from their auditor. This help improve the quality of the stepped up. audit firms are only projects with a healthy mixture of is a result of a greater awareness audit (see sidebar on page 37). The key to improvements in audit allowed to provide non- caution, consideration and ambi- of good corporate governance. But like other audit firms, PwC quality lies in communication. audit services under very tion. This is reflected in relatively Sometimes companies anticipate rejects rules to strictly separate Experience has shown that dia- restrictive conditions. high survival rates for newly the expectations of the public audit and non-audit services. logue between the auditor and Generally advisory services Start-ups established companies. Official and the media, but in doing Prohibiting other assurance ser- the audit committee in particular are prohibited if they could FOS statistics for 2003 to 2007 so they miss an opportunity to vices fails to recognise the reality has to be intensified. Communi- show that half (49.2% to be pre- conflict with the audit- potentially boost efficiency and within organisations and the cation is never a one-way thing. Young enterprises inject life cise) of new businesses survived harness useful knowledge. audit process. A prohibition will The auditors rely on the coopera- ing role or raise doubts as their first five years. At 57.4%, do nothing to improve the quality tion of the entity they’re audit- to the independence and the percentage is higher in the The present situation could be of the audit. ing. Stakehold ers within the objectivity of the auditor. into the economy industrial sector than in services. described as follows: As the 700-plus contributions organisation should be seeking Further restrictions, or That’s an excellent track record. • In practice the current rules to the Green Paper consultation dialogue and giving the auditors even the creation of audit- But there’s also no disputing the on combining audit and non- show, this isn’t just the opinion of information on the company’s fact that embarking on a start-up only firms, could prejudice audit services have proven to be PwC or the auditing profession. strategy, the way its business is The prospects for start-ups in Switzerland are excellent, with half requires more than just cour- adequate in terms of ensuring An evaluation of the contribu- performing, the risks, and im- the quality of the audit age and a good idea. It’s a step that auditors do not audit their tions by the Goethe University portant business transactions. without doing anything to of all new businesses surviving their first five years. But to succeed, that has to be carefully thought own work. in Frankfurt has shown that only The European Commission’s strengthen auditor inde- start-ups need three things more than anything: a good team, through, prepared and struc- • Organisations have substan- 15% of companies, their stake- proposals also include welcome pendence. Other assurance a sense of timing, and a solid network of relationships. tured. There are plenty of chal- tially improved their corporate holders and the academic com- moves in this direction. services, for example advice lenges to be faced at any stage governance in recent years, also munity are in favour of prohibit- Another point is the way audit in the development of a new with regard to the external audit, ing the provision of non-audit firm independence is under- on tax or due diligence Start-ups give the economy new Start-ups also create jobs. business, from founding and set- and are very cautious when it services (audit firms were expli- stood. This is primarily a matter matters, can significantly impetus. Young entrepreneurs According to the Swiss Federal ting up the company to growth comes to giving work to audit citly excluded from this evalua- of personality. Independence improve the quality of the have new ideas, enthusiasm, and Statistical Office (FSO), for and – as the case may be – open- firms. tion). Not only this, but 77% of doesn’t mean that the auditor audit, especially in complex belief in their ability to make example, the 11,471 companies ing up to outsiders. Funding is a • An audit combined with other those surveyed in PwC’s June keeps their distance from the cases. things happen − all of which established in 2009 employ a good example. If you’re not lucky assurance services can improve 2011 “European Audit Commit- people responsible within the helps breathe life into the busi- total of 21,793 people. The Fed- enough to have won one of the the effectiveness and efficiency tee Chair and CFO Poll” believed client’s organisation. To be able ness landscape. New businesses eral Council is well aware of the competitions for good business of the audit itself. that the existing safeguards in to form an objective opinion, the drive the whole economy for- economic potential of start-ups, ideas, when it comes to raising place to ensure audit firm inde- auditor has to meet and discuss ward. Their innovative energy and has set up a commission capital you’re generally going to There is no empirical evidence to pendence are adequate. with people at different levels also boosts Switzerland’s reputa- dedicated to support their devel- be reliant on friends and fam- suggest that even tighter restric- of the company. The only guar- tion as a centre of research and opment: the Commission for ily. But if you want to develop tions on permitted services will antee of independence are the development. You just have to Technology and Innovation (CTI) further, or are even considering raise audit quality, and indeed powers of judgment and personal look at the many spin-offs that reinforces the interplay between going international, you’ll need the opposite is likely to be the integrity of the auditor. Com- have emerged from the Federal practical research and develop- additional sources of funding. case. Despite this, the European panies should treat their auditors Institutes of Technology in Zurich ment, entrepreneurship and the These days professional inves- as partners with the ability to (ETH) and Lausanne (EPFL) in promotion of start-ups. The CTI’s tors are very critical. As well as think critically, rather than as a recent years. The knowledge and venturelab scheme offers train- analysing business plans they’ll scrutineer. pioneering spirit of these busi- examine every single product nesses also help make Switzer- and project under the micro- [email protected] land the leading centre of innova- scope. They’ll calculate internal tion in Europe. rates of return, and take a close look at value creation. And they’ll

38 ceo value ceo value 39 Start-ups in 2011 not only evaluate the business, trolling and HR. And experience work the same way they do. but the team that runs it as well. shows that established businesses That’s also part of having a good like helping young companies. team. North- Zurich western +5% It’s all down to the team In addition to a core team con- Switzer- A good team is the most import- sisting of the management and Products must be ripe for land tant prerequisite for success. This advisory board, a start-up should market 0% doesn’t just apply to financing, also have an external team that Besides the team, the other main but to the management of the can provide advice on specific key to success is time. A good business itself. The term “team” issues. This external team might idea or innovative product isn’t has to be broadly defined. It’s include lawyers to advise on pat- much use if the market isn’t yet an enormous help to a start-up ents and intellectual property, or ready for it. By the same token, a to have scientists, researchers specialists to provide guidance start-up may have correctly iden- Lake or experienced managers on the on auditing, tax or employee tified a market need, but still lag Geneva board of directors or advisory participation. This external team behind in terms of product devel- region Espace Central Eastern board. The success of university can help make sure that a start- opment. The secret to timing is +10% Mittelland Switzer- Switzer- spin-offs shows just how import- up evolves in the right direction. market maturity. For the CTI, land +6% land ant input like this can be. Most What’s important is that these for example, market maturity is +2% +5% of these entrepreneurs have advisors are also entrepreneurial one of the criteria for granting included professors of their for- and business minded, and make its seal. A CTI start-up label indi- mer universities on the board, the people running the start-up cates that a new product has mar- and these professors for their aware of aspects of manage- ket potential. Market maturity part bring a network of contacts ment they may never even have facilitates access to risk capital, in the business world. A high- thought of, for example project and at the same time makes the calibre board gains a company accounting or the choice of loca- business attractive for people Ticino start-up prestige and important tion and legal form. A business- in the scientific, academic and +8% know-how. Added to this, new minded approach should also be business communities. And Summary businesses are also often reliant taken to compensation and the this, in turn, is precisely what it Start-ups breathe life on these people because they choice of advisors. Young entre- takes to build the right team. lack resources in operational preneurs need young, uncom- into the economy. They functions such as finance, con- plicated advisors who think and [email protected] create jobs and strengthen Switzerland as a centre of innovation. A successful new venture needs good timing and the right Last year saw a record number of new company registrations, with 39,665 team. If start-ups take this businesses entered in the commercial registry for the first time, 5% more A real-life example in the fourth quarter of 2012. But to know the business. There are than in 2010. At 10%, the Lake Geneva region saw the greatest increase. Only Why external audits message to heart, an even in north-western Switzerland did the number of new registrations stagnate. make sense for The budget for a very promising more important than the fact that checklists and templates that greater number of them start-up companies start-up that PwC had audited it would have to raise funds was make preparing for the audit itself Source: Dun & Bradstreet (Schweiz) AG for the first time showed a loss. the realisation that while the start- easier. But a good auditor has will survive. And this will In the set-up phase, what start- That’s nothing unusual for a busi- up had done its liquidity plan- to know what’s really important make this country younger, ups need most is advice. But ness in the start-up phase. But ning, rough budgeting and sales to the company; in the example more dynamic, and more once they start expanding their the end-year equity position was forecasting, it didn’t have tools described it was dealing with business or want to go interna- successful in the long term. looking very thin, and the audi- to assess its capital structure. To long-term orders and capitalising tional, they need to be audited by tors concluded that the company make sound financing decisions it research expenses. The company PwC also supports young an established external auditor. would be overindebted the follow- needed a solid basis for analysing was able to discuss with PwC entrepreneurs An audit gives young entrepre- ing financial year. Subordinating its balance sheet. PwC worked the pros and cons of the various PwC is the sponsor of the Venture neurs comfort on their financial debt wasn’t an option since the with the company’s financial offi- options and the impact on its business plan competition staged situation, provides the basis for start-up had almost all its bor- cers to create a comprehensive financial statements in the current every two years by the Swiss doing the necessary calculations rowed capital via banks. To avoid planning tool that allowed it to year and subsequent periods. Federal Institute of Technology internally before embarking on ending up in the courts, the com- make balance sheet, P&L and The added value of an audit for (ETH Zurich). PwC’s head of Con- growth plans, and builds external pany had to raise capital over the cash flow forecasts on a monthly a start-up is that it can draw on sulting Holger Greif sits on the trust in the reported figures. Not course of the year. The question basis. the huge experience of an inter- jury, and CEO Markus R.Neuhaus only this, but the auditors some- was how much, and by when. national network when tackling its is a member of the advisory coun- times come across shortcomings Calculations revealed that an Value added by the audit own individual challenges. cil. PwC has also been directly that don’t have anything directly extra half-million francs in finan- For an internal audit to create involved in promoting young to do with the financial state- cial resources would be required comfort and add value, intensive, enterprises for many years as ments but which have important two-way dialogue is really import- a premium partner at the Swiss implications for the business. This ant to enable the auditor to get Economic Forum (SEF). creates additional value.

40 ceo value ceo value 41 Dr Robert W. Kuipers, discount deferred pay to assess questions are astonishing. When regions. International companies Leader Reward Switzerland its present cash value. What’s asked to imagine what pay cut should be aware that the effect striking, however, is that the another executive offered their of individual incentives varies people in the study applied much ideal job would be prepared to from region to region. In Brazil, higher discount rates than the take, participants named a much India and China it’s not only the economic theory would suggest. higher figure than when asked employment market that func- So while a rate of around 5% a how big a pay cut they person- tions differently, but the indi- year would seem appropriate ally would accept to do their vidual psyche as well. LTIs have in terms of economic theory, ideal job. So for example they to be adapted in line with these the subjective rate applied by imagined that a senior execu- factors. But at the same time the executives polled averaged tive would be prepared to take a it’s also important for global com- around 30% on a global basis. 60% cut in pay in return for a job panies to have a uniform incen- Executives in Latin America dis- offering personal satisfaction. tives philosophy to underpin count deferred pay by as much But they personally would only their strategy. Within this frame- as 45% per annum, the highest be willing to take a 28% cut in work, however, they have leeway The psychology of incentives figure in the study. The lowest pay for their ideal job. The results to take account of individual figures were in Switzerland and are similar regardless of the pos- preferences. the Netherlands, with 12% and ition, salary bracket, region or When designing an appropriate Keep it fair and simple 11% respectively. This shows just industry. People have got accus- model it helps to bear in mind how important the economic, tomed to their level of income how the various components cultural and social framework is. and have difficulty imagining mesh together: In Switzerland people obviously working for less than two-thirds trust a promise to pay more than of their current pay, even in their in Brazil. ideal job. But perceptions are different when people are asked a choice between receiving a prospect depends on many differ- Most studies of compensation systems fore- 4. Fairness is fundamental to imagine what other people specific amount of money today, ent performance criteria, most of ground the benefits for shareholders and the Companies try to make their would be prepared to accept. or receiving a much larger sum at which are linked mathematically. Jean, Jacques, and the question remuneration fair. But what’s costs for the organisation. But how are they a later date but at the risk of los- A long-term incentive plan (LTI) perceived as fair? Does it have 6. The mere existence of an LTI of fairness perceived by the executives for whom they are ing it all (for example the certain can be pegged to an absolute to do with the absolute amount is motivating Jean and Jacques are two friends leaving business school. Jean designed in the first place? What are their prospect of CHF 40,000 now, or figure such as the development of the pay you get in return for Executives appreciate it when is offered a job to join the management team of Company A, a 50:50 chance of a deferred pay- of the share price, or to a relative expectations? your own performance? Or is it their organisation offers LTI paying a total of CHF 187,500. Jacques is offered a comparable ment of CHF 90,000 in two years yardstick such as a peer group. the amount you get relative to plans. Most feel motivated by the job at Company B for CHF 195,000. – with a 50:50 chance of coming Internal figures may also be used a peer group? The study shows mere fact that such plans are in Jean finds out by chance that the average pay in the manage- out with nothing). More than to relativize the general develop- quite clearly that it matters less place and they can participate. ment team at Company A is CHF 180,000. Jacques then discov- half of those polled chose the safe ment of the market. And incen- to individuals what they are paid This reflects a psychological need ers that the figure at Company B is CHF 202,500. alternative. The striking thing is tive plans may also incorporate in absolute terms than what to belong. People are proud to be Who is more motivated: Jean, who would earn more than aver- that contrary to popular percep- qualitative indicators such as cus- they are paid relative to those among those whose performance age, or Jacques, who would be paid more in absolute terms but PwC joined forces with the Lon- tions, executives in the financial tomer or employee satisfaction. A they consider to be their peers. is valued most highly by their would be worse off compared with other members of the man- don School of Economics to find industry were just as risk averse complex, ambiguous system will There are, however, exceptions, employer. So it’s no contradic- agement team? out how executives rate and as the rest. give executives little incentive. with pay in absolute terms more tion that not everyone who feels The executives taking part in the study were almost unanimous assess different pay scenarios. To ensure their performance is important in terms of motivation motivated by LTIs also sees them in saying that Jean is more motivated than Jacques. It’s more More than 1,100 people in 43 2. Complexity and ambiguity properly rewarded, it has to be as for executives in Eastern Europe, as effective. In Switzerland, for important to earn more than your peers than to earn more in countries were interviewed. The destroy value straightforward as possible. Brazil and China. example, only 38% of respond- absolute terms. Fairness, in relative terms, is key. findings show that it’s psycho- Executives want to understand ents believe in the efficacy of logical factors that determine the rules. Given the choice of 5. People don’t just work for long-term incentive plans. whether a system of remuner- different bonus systems, most 3. The longer you have to wait, money ation works and gives managers will choose the straightforward the less it is worth People work in return for a Match your LTI to your sufficient incentive to up their option. This should be food for LTIs contain promises for the reward. But they also seek sat- audience performance. It also emerges that thought for people designing future. These promises are isfaction in their job. Can this What can companies learn from different types of incentive are incentive plans. With all their always bound up with uncer- personal sense of satisfaction be this? One of the important rated differently from country deferrals, claw backs and risk tainty on whether they will be reduced to a monetary value? insights from the study is that an to country. But there are certain adjustments, most incentive kept, whether a payment will be How much pay would a manager incentive plan has to be tailored common threads: plans end up being very complex. made in future, and how much sacrifice in return for the ideal to the organisation and its execu- Whether an executive actually will be paid. It’s an economic tru- job? The study’s answers to these tives. Your LTI has to fit your 1. Executives are risk averse receives the amount held out in ism that a payment in the future audience. There’s no standard The study involved a game simu- is worth less than a payment model that will work for all com- lation to find out respondents’ today, which is why executives panies, industries, executives and attitude to risk. Participants had

42 ceo value ceo value 43

• Basic salary should be depend- ent to a large extent on the func- Publications, training and information events tion and the local market. • Short-term cash bonuses should be linked to the goals and results of individual departments and corporate functions. www.pwc.com/utilities www.pwc.ch/r&c www.pwc.ch/disclose Award for joint PwC Switzerland and • Incentive plans should enable Swiss Re project executives to share in long-term The shape of Disclose power to come Im Fokus: Unabhängigkeit business performance. Customers Investment, affordability and security take control In a joint project with Swiss Re, PwC Switzerland showed in an energy-hungry world • Given the differences in pen- Multi-channel – the changing Swiss retail landscape how to successfully implement organisational change in 12th PwC Annual Global Power & Utilities Survey sion plan legislation from place How the multi-channel shopper is changing the Swiss retail landscape finance. The two companies worked together to deliver F1, Juni 2011 Aktuelles aus der to place, pension plans tend to be Rechnungslegung a cultural and behavioural change programme covering und Revision set up on a regional basis. 33 offices in 21 countries. The aim was to renew and make • Fringe benefits should be clearer the vision and strategy of Swiss Re’s finance depart- largely geared to things valued ment, as well as to define and implement values and desired by the executives in question. behaviours – such as cross-departmental collaboration – to In some countries, for example, Summary improve performance by making the working environment status symbols such as a company Most executives prefer their more attractive for employees. Risk of power blackouts increases Instant shopping via multiple channels The latest in accounting and auditing car are valued more highly than rewards to be immediate in others. and certain. They’re less To date the project has received two awards. The Association When it comes to assuring the supply of elec- The retail trade is set to change in the next PwC’s regular publication “Disclose” looks of Management Consulting Firms (AMCF) gave it its AMCF tricity, the challenge faced by governments few years. More and more consumers are into key aspects of financial reporting and Simple LTI models keen on deferred payments Award for the most innovative and efficient consulting pro- and the energy industry is to strike the right doing so-called multichannel shopping. In the auditing in clear and understandable lan- The most difficult component to that are subject to terms. ject in the human capital category. And the project earned balance between costs, security and sustain- run-up to a purchase they compare different guage. The focus of the June issue is on inte- get right is the long-term incen- The challenge for com- an MCA Award in the finance and risk management category ability. In a PwC survey of 72 energy utilities suppliers and consult with friends before buy- grated reporting as a forward-looking cor- tive plan. The very existence of panies is to come up with from the Management Consulting Association (MCA). in 43 countries, most respondents also reckon ing via the channel of their choice. One char- porate reporting model. Integrated reporting an LTI in which they get to par- an appropriate and attrac- that there will be a growing risk of power acteristic of this new consumer behaviour is covers a broad range of relevant information ticipate is enough to give most For more information: blackouts in Europe and North America in the that different channels are often combined: alongside financial reporting, enhancing the executives a positive feeling. But tive system of remuneration www.amcf.org years to come. The reasons include the grow- people do their research online or use print quality of reporting for addresses by linking if it takes years for an LTI to pay geared to the business, its www.mca.org.uk ing scarcity of fuel and growing obstacles to catalogues, and then make the purchase. and going into the individual components out, people get frustrated. For owners, and the execu- investment in infrastructure projects. You can download the study «Customers of the report in more depth. The publication incentives to work, companies tives who work for it. This Harald Port You can download the “Annual Global Power take control» in English as a free PDF from also includes an update on other current have to take care to create bal- is a complex undertaking, Advisory, Leader of Insurance Sector, PwC Switzerland & Utilities Survey” in English as a free PDF www.pwc.ch/multi-channel, or order topics. anced models that give execu- especially when it comes to Tel. +41 58 792 13 53 from www.pwc.ch/energy. printed copies from [email protected]. You’ll find the online edition of “Disclose” in tives a fair stake in long-term [email protected] German and French at www.pwc.ch/disclose, business performance. This isn’t long-term incentive plans. or order printed copies from easy. For a start, external factors LTIs should be as fair and [email protected]. such as market volatility, eco- straightforward as possible. Events nomic uncertainty and changing business models mean LTIs have You can download the Regional and global HQ Conferences to be adjusted on a permanent study «Psychology of The HQ Conferences taking place in Zurich and Geneva basis. And then there are the Academy newsletter are now an annual event. They are organised and hosted psychological factors. This means incentives» in English as by the PwC HQ market team and look at topics of inter- Subscriptions: that incentive systems should be a free PDF from PwC’s Academy is there to help leaders like you prepare est to the leadership of the regional HQs of multinational ceo, the magazine for decision makers, is published by PwC. kept as straightforward as pos- www.pwc.ch/reward. for the challenges of tomorrow. It’s an opportunity to companies based in Switzerland and Swiss companies The magazine appears three times a year in English, German sible and be linked to only a small network and advance your professional development. The with similar centralised operations. In 2012 the theme of and French. To order a free subscription, please e-mail number of strategic performance Academy is underpinned by our extensive know-how in a the conferences will be “Enhancing the value delivered by [email protected] specifying your desired language. indicators. wide variety of sectors, and driven by our high standards your Swiss principal company”. Address: PwC, ceo Magazin, Birchstrasse 160, 8050 Zurich, Responsibility for the incentive of quality. From the choice of themes to the selection of Speakers at the events are a combination of our clients Switzerland. system has to lie with the board expert speakers and seminar leaders, everything about and figures from the Swiss political sphere and tax of directors or remuneration our events and courses is designed to help you build your authorities together with input from PwC’s HQ market Reader service: committee – not with the share- knowledge and expand your networks. experts. Past events have been attended by up to 100 The authors of the PwC topics can be contacted directly at holders or annual general meet- clients. Participation is on a first come, first served basis the e-mail addresses given in their article. For a comprehen- ing. It makes sense to consult the Receive periodic updates on our events and and there is a CHF 300 fee. sive overview of PwC publications, please visit www.pwc.ch. owners, but it’s a mistake to leave courses by subscribing to the Academy newsletter: You can order PwC publications and place subscriptions by them to decide on the right sys- pwc.ch/academy_newsletter. Dates e-mailing [email protected] or faxing 058 792 20 52. tem of incentives. 4 October 2012, Zurich, Renaissance Zurich Tower Hotel 20 November 2012, Geneva, Starling Hotel Geneva [email protected] Sonja Riccoboni ([email protected]) will be delighted to receive your registration. 44 ceo value ceo value 45 insurance

“Evolution not revolution”

The Zurich Insurance Group started 2012 from a position of strength. CEO Martin Senn regards this as a sign that the group’s strategy is the right one: “We are exclusively focused on doing what we do best – managing insurance risk – and we try to keep the business model as simple and agile as we can.”

Mr Senn, between January and March doing what we do best – managing insurance 2012, the Zurich Insurance Group posted risk – and we try to keep the business model USD 19.63 billion in business volume, as simple and agile as we can. We select the and thus 10 per cent more than in the best asset managers from around the world. previous year. Are you happy with that Working with the best and constantly refining figure? our understanding of the market gives us a We are very pleased with this excellent result. competitive edge. Delivering such strong numbers in this chal- Martin Senn (55) lenging environment shows our strategy is You’ve been Zurich’s CEO for more has been CEO of Zurich Insur- working. than two years. Have you instituted any ance Group since 2010. He changes in strategy? joined Zurich as Chief Investment You’re credited with bringing Zurich The company was in good shape when Officer and member of the Group through the 2009 crash with minimal I became CEO, so what was required was Executive Committee in 2006. damage. How did you do that? evolution not revolution. We’re on a His career path has included vari- First, let me credit my team for that. No one stable course with a strong balance sheet, we ous management positions at the person runs a company or a major division. generate strong cash flows, and have a well- former Swiss Bank Corporation Our success was a great team effort. What diversified portfolio of insurance risks. Our and at the Credit Suisse Group. we did then – and continue to do – is stick main strategic move has been expansion into Between 2003 and 2006, he was to the basics. We invest our assets relative emerging markets. One example of that is our Chief Investment Officer at the to liabilities on a risk-adjusted basis and we acquisition of Banco Santander’s insurance Swiss Life Group. only invest in things we truly understand. For business in Latin America. This is an import- instance, we consider the effect that instru- ant strategic move. We’re also expanding in Photo: Cédric Widmer ments such as CDOs could have on our overall Asia; we acquired Malaysian Assurance Alli- balance sheet. We are exclusively focused on ance last year and have now renamed it to the Zurich brand. In April this year we signed an exclusive distribution agreement with HSBC in the Middle East. Balancing our strength in

46 ceo relationships ceo relationships 47 Europe and the US with our growing strength own people on the ground. We’ve maintained ened. The public and the private sectors for example, can also be applied in Asia or Stable relationships and mutual trust in the emerging markets is an important stra- a presence in Latin America for many years, went into the crisis together; now they need Europe. So we encourage our people to speak seem to lie at the heart of the insurance tegic priority for us. and the Santander deal strengthens our to come out of it together. So for us, a up, to take the risks, and to think innovatively business. How do you establish and established position there. constructive dialog is very important and in order to create solutions for customers entertain relations to your providers and So with a strong balance sheet, you something that we pursue. around the world. customers? can pick up some bargains in these crisis We’re in a period of historically low Good relationships, whether they are per- times? interest rates. Does that change the way Zurich Financial Services Group changed Is recruiting talent more of a challenge sonal or professional, are very important. As Clearly, in the current market environment you run the insurance business? into Zurich Insurance Group. What is the today than it was, say, a decade ago? with all relationships, the key ingredient is a our strong capital position provides us with Low interest rates are a challenge for the reason behind this change of name? Certainly, it’s more a topic of discussion today mutual trust and understanding between all opportunities. Another example of this was industry. It means that the largest sources of The name change from “Zurich Financial Ser- than it was a decade ago. But at Zurich, we parties. Of course, trust needs to be earned our acquisition of 21st Century Insurance income for the industry are under pressure. vices” to “Zurich Insurance Group” reflects see the recruitment of talent as more of an and takes time to develop but in my experi- in the USA about three years ago. However, And the effects will most likely accelerate the fact that our business portfolio focuses on opportunity than a challenge. As a strong, ence, it is very worthwhile to invest the time it’s still important to stay disciplined with over time because insurers tend to invest for insurance, providing a clear brand message to successful multinational company, we can necessary as good relationships are invalu- acquisitions. Controlling temptation to only the long run. So, as we reinvest our assets, our customers, shareholders and other stake- provide people around the world with able. buy for the sake of growth is paramount. we have to put them into lower-returning holders. rewarding careers. Clearly, we want to do 1st quarter 2012 Principles must be applied stringently; this is vehicles. Nevertheless, Zurich is in a strong even more to develop and motivate our peo- Has the allocation of your time changed particularly important because there is a lot position. We have shown that we’re able to Josef Ackermann was appointed new ple because people are our most important significantly in the past few years? of uncertainty. And uncertainty carries risk, generate strong cash flows. We have a very Chairman of Zurich. Do you expect a asset. I’m spending more time with regulators. which must be counterbalanced. strong balance sheet. And we are highly change of strategy? These discussions revolve around ways to 19.63 diversified. Zurich has a clearly defined strategy which What traits do you look for in new address the current crisis. I’m pleased to billion USD With respect to your expansion into is based on continuity and has worked well. joiners? say that the regulators’ doors are open to us business volume developing markets, could Zurich go it Is it your view that, for the medium term, There is a distinct, continuous process involv- I look for globally minded people with the because as a company, we managed the cri- alone? Or are partnerships and acquisi- interest rates will remain low? ing both board and executive management to capacity to anticipate change and the flex- sis well and are dedicated to maintaining a tions preferable? Yes – other scenarios do not seem realistic for control and adapt this strategy. We will con- ibility to accept it. I also put a lot of emphasis strong relationship with our key regulators. For a multinational company such as Zurich, the time being. tinue to adhere to this set-up and procedure. on character. Good character, honesty, and the greenfield approach is suboptimal. It consistent behaviour – that’s what we’re look- Do you foresee a day when your time will takes too long to make a meaningful con- You’re aware of the criticism of the finan- Which would you choose: better innova- ing for. be allocated more normally – if there is tribution to the group. So we employ other cial industry. What is your reaction? tion or faster innovation? such a thing? options: cooperations and acquisitions. Our I understand that the public at large is upset Clearly, better innovation that results in sus- Switzerland’s «Freizügigkeitsabkommen» I’m not sure what normal really means. But alliance in Latin America with Santander because of the mistakes that were made. But tainable, meaningful contributions to the (covenant on freedom of movement) has here at Zurich, we are positive thinkers. We enhances our distribution capabilities there. mistakes were made by a number of parties business. Quality in everything we do comes had a major effect on your operations believe that no matter what happens, there is We’ve been establishing these sorts of co- – not just the financial sector. The insurance first. here. Are there any negatives to it? always a day after. It’s part of our culture, our operations for quite some time. For example, sector has actually been a stabilising factor No, not at all. Zurich is truly a global organ- way of thinking. We stay focused on our strat- we’ve just concluded similar arrangements during the crisis. I understand the outcry, but Do you see innovation flowing from the isation. At our corporate centre, we have over egy and disciplined in its execution. And I’m with Deutsche Bank in Germany; and with there’s a risk that if the regulators respond in developing to the developed world? 1,000 people from 45 different countries. The confident that we can look forward to better Credit Suisse here in Switzerland. These a populist way, the recovery could be threat- Yes – and that is one of Zurich’s most promis- opening of the Swiss borders has been im- days for the economy. are exclusive agreements. But we also have ing opportunities. We are a large organisation portant for our company and for the economy non-exclusive agreements with other banks and we have our fingers on the pulse of many of Switzerland as a whole. It’s one of the around the world. And of course, we have our markets. An opportunity in Latin America, reasons that such a small country has such a large impact on the global economy.

Will the global movement of employees increase or decline? “Better innovation results in sustainable, It will remain important. In my own career, I had a chance as a young employee to go to meaningful contributions to the business. Quality Hong Kong and to learn many new things. We in everything we do comes first.” will continue to support people who want to move into new cultural zones. It’s an import- ant element in developing an organisation’s talent.

48 ceo relationships ceo relationships 49 art market

“The system is founded on trust”

Art Basel has been in existence for 43 years, during which time it has become the most important rendezvous for galleries, collectors, dealers and art lovers from all over the world. Co-director Annette Schönholzer talks about her role as an intermediary, the exchange between West and East, and tapping new markets.

The art trade depends on relationships. Where do you see yourself as co-director Annette Schönholzer (48) What exactly is their function? of Art Basel in this network of relations? Since 2008, Annette Schönholzer An extremely important one. There are three We are a service organisation, forming a plat- has been co-director with Marc levels of relationships: firstly, the relationship form for exchanges and transactions between Spiegler of Art Basel, the world’s between people and works of art, which in galleries and collectors. I am simultaneously most important contemporary art addition to material value also has a strong at the centre and at the edge of what goes fair. She started with Art Basel in intangible and emotional value. Then there is on. The global contacts of Art Basel are not 2002 as project manager for Art the relationship between the gallery and the specific to me personally, but they obvi- Basel Miami Beach. Her previous artist, which is often a lifelong connection. ously open a lot of doors for me. I’ve had the jobs included project manager Finally you have the relationship between opportunity to gain insight into some of the for the Swiss national exhibition gallery and collector, which often works three most impressive private collections, but I am Expo.02 and curator of the VIPER ways, also involving the artist. It is interesting always well aware that I am only a guest. film festival. She studied English to note that all contacts are founded on Someone who could not make that distinc- and German Language and trust and are rarely governed by contracts. tion would find it unsatisfying, because huge Literature and Film Seiences They are usually sealed informally with a amounts of money are often involved. at the University of Zurich, and handshake. gained a Master’s degree in The 300 or so stands at Art Basel are Culture Management at the Inter- Why? sought after and are a mark of prestige national Centre for Culture and Because the value of art is not something that for any gallery. How do you deal with Management in Salzburg. She has can be set in stone. The price of a work does the risks involved in dependencies and dual American and Swiss citizen- lie within a certain bandwidth, but it varies conflicts of interest? ship, grew up on the East Coast up or down depending on the desire of indi- Co-director Marc Spiegler and I are respon- of the USA and now lives with her viduals or institutions to own the artwork. sible for ensuring that the selection process husband in Basel. It is similar to human relationships, which are also based on trust. Like a person, every Photo: Andri Pol work of art is unique and therefore has an intangible value.

50 ceo relationships ceo relationships 51 “The art markets in countries such as Mexico and Brazil have developed enormously over the last ten years; we are also seeing increasingly more of India. Indian collectors Photo: Christoph Kern begin to take an interest in Western art; they look set to be a large market.”

Art Basel in Miami Beach with Latin Ameri- the context of Western art. The Hong Kong How much of an effect did the financial can collectors has also drawn more and more Fair is an ideal opportunity to present a and debt crisis have on the art market? collectors from this region to Art Basel. Euro- balanced cross-section of Western and Asiatic Over the last four years we have repeatedly peans and US Americans usually come to the art. experienced variations in purchasing behav- exhibition individually, in pairs or as museum iour and prices, but viewed long term it is a parties. Latin Americans also come in pri- What other markets do you pay special stable market. Established names always sell vately organised groups. We often see whole attention to? well. Galleries that take a long-term view delegations from Asia, which can sometimes The art markets in countries such as Mexico and work together with reputable collectors present us with problems as we are unable and Brazil have developed enormously and institutions generally come through to admit all the members of a party. In Asian over the last ten years; we are also seeing crisis periods well. Overall, the art market countries they have high expectations of the increasingly more of India. India is interest- is anticyclical, one of the mysteries of this hospitality and the availability of the host. ing because it has a strong internal market: market. Art Collectors Lounge, Art Basel Miami Beach. Many expect the directors to accompany the Indians generally buy Indian art. This habit is delegation, and are not always understanding now gradually being eroded as Indian collect- How do you explain it? if this isn’t possible. This is also a great chal- ors begin to take an interest in Western art; Because of its concentration on uniqueness, lenge for us. they look set to be a large market. the art market operates outside the usual economic cycles of supply and demand. The Asian market is one of the fastest- You regularly travel to the emerging Even if all other investment opportunities growing art markets in the world. How countries, both to gain an understanding are closed, people can always invest in operates smoothly and fairly. The decision ... the renowned VIP events. What do you does the exchange between West and East of them and to establish and maintain art. Apart from the material investment, a about who will participate is made solely by do to keep your demanding group of operate? contacts. How do you approach these for- work of art also offers a lasting intangible the six-person selection committee. Although customers – the wealthiest art collectors The systems are fundamentally different. In eign cultures? value. Marc Spiegler and I are great art lovers, we – constantly satisfied? Europe and the USA the majority of art fairs I notice again and again that although we are not allowed to buy any artworks in the I don’t believe we have to offer more year on have arisen through the gallery scene. In have a mutual language in English, there are context of Art Basel. We have imposed this year, but we definitely have to maintain the Asia the art market operates primarily via the still some misunderstandings in terms of con- ban on ourselves to avoid any claims of bias. top quality of what we do provide. One of the auction houses, and trust in galleries, a tent. I have learned to be more careful when We also keep our favourites to ourselves. challenges of Art Basel is the growing circle cornerstone of the success of our system, dealing with other cultures and not to judge of collectors who are interested in visiting first has to be built up there. people on their words but on their behaviour You speak of Art Basel as an exchange during the first few hours. This international and actions. platform. Why does it function so well? growth has been enormous in recent years How much progress has been made here? The basic model is relatively simple: a com- and has led to us having to impose new We are only just beginning. There are already The Internet is also changing the rules in mittee uses a strict selection procedure to admission criteria. In order to satisfy the a few galleries – including Swiss ones – that the art market. Internet fairs can gener- choose the best galleries. These are then basic requirements of the collectors – plenty are active in China. In 2013 we will be ate a presence that physical fairs such as required to present their best works and art- of time to be able to view the works closely running a fair in Hong Kong covering a net Art Basel cannot match. ists. Done properly, it draws in the right peo- and in peace – we have extended the preview floor area of 15,000 square metre. The aim is The Internet fairs do actually have a time ple. We can do no more than facilitate and period by a day. We have also established a to exhibit 50 per cent Western culture and limit, as no gallery is interested in display- promote interaction, and to be honest we are network of twelve VIP agents who act as Art 50 per cent Asian. In Basel the proportion of ing works online forever. Every work needs a on tenterhooks every year to see what results Basel ambassadors in the individual markets Asian art is currently around 5 per cent. The window of availability – without this moment it will bring. In addition to the exhibition and maintain contacts with collectors and reason for this relatively low proportion is of excitement the market cannot function. It itself, we can encourage the various encoun- galleries. that it is not easy to position Chinese art in is also difficult to make buying decisions ters by means of events that bring people with respect to lesser-known artists over the with specific interests together … The art world used to be dominated by Internet. Internet fairs are therefore an excit- Western Europe and North America, but ing and relevant development, but they do for the last ten years the Asian and Latin not represent direct competition with the American markets have been gaining in physical market offered by fairs like ours. I significance. What effect is this interna- consider them to be a supplementary service. tionalisation having? All those involved in the art markets are trav- elling more and further afield. The success of

52 ceo relationships ceo relationships 53 start-ups

“I am the next generation”

Marc P. Bernegger studied law in Zurich. But a PC that he bought as a 15-year-old proved to be a defining purchase: instead of becoming a lawyer, the 33-year-old graduate (lic. iur.) became a businessman. His business field is new media; his focus is networking.

When people google your name, they approach someone because I know who I’m find you on Twitter, Facebook, LinkedIn, dealing with. I find it difficult to assess some- Next Generation Finance Invest Google+ – there’s no network where you one if I don’t know them, which is why I don’t In 2009, Thomas Winkler and are not present. What’s the advantage? include them in my network. Robert Lempka established the Multiplication of my activities! My address investment company Next Gener- book contains just over 1,000 entries. Thanks Are you the rule or the exception with this ation Finance Invest (NGFI), which to virtual networks I can manage those practice? has its registered office in Zug. entries with relatively little effort. There are an increasing number of people The goal is to invest in companies who see it like I do. But I still receive many that have a promising position How many of those 1,000 plus people do contact enquiries from people who I do not by virtue of pioneering ideas and you know personally? know, without so much as a comment. I innovative technologies and to All of them. Although I work in the virtual ignore them; they’re no good to anyone. enable them to benefit from the world a lot of the time, I meet all the people new megatrends in the finance whom I connect with in an online network in And what benefit are your 1,000-plus sector. Winkler was previously person. That is a basic rule for me. contacts to you? CEO at ABN AMRO Switzerland I have a very broad base when required and and Lempka CEO at ABN AMRO Why? can activate my network at any time. But marketindex. Marc P. Bernegger, For me, contact in the virtual network means clearly the contacts relevant to me are hardly Internet entrepreneur, has been that, for instance, somebody can approach more numerous that they would be without the third partner at NGFI since me to ask whether you can do serious busi- social networks. 2011. Next Generation Finance ness with Mr X from my network. Or I can Invest is listed on the Berne Is the new media changing relationships? eXchange (BX). On the one hand, it is possible to have a great many more relationships than in real life and Photo: Marc Wetli that undoubtedly results in a certain degree

54 ceo relationships ceo relationships 55 use of new and innovative technologies; the business has scarcely changed despite the digital revolution. We invest in business models that aim to use technological innov- ations to increase efficiency in the finan- cial industry. The companies also have to of standardisation. On the other hand, a lot be potential “game changers”, i.e., we are it’s obvious that the established dealer with “I get the impression that many of today’s more time today is spent managing relation- looking for ideas that trigger fundamental representative shops in good locations will ships than in the past, when you only had changes in the financial sector, using the have a problem at some time. These trans- managers have no idea what is relevant a telephone, meetings and letters at your Internet as a basis. formation processes are in full swing and for the younger generations. How do they disposal. For someone like me who is also in unstoppable. A good example is smartphones. a sector that frequently involves bringing peo- Can you give us an example? They have only been around for a short time want to get people like me interested?” ple together, it can be very interesting to have ayondo, one of our investments, is a platform and yet they have already radically changed a a network that extends across all continents that acts as an interface between professional great deal. Everyone has access to everything, and industries. dealers and investors. We work at the cutting can go shopping, book flights and network – edge of technology and so efficiently that it whenever and wherever they want. I get the is possible to make good profits at the same impression that many of today’s managers Bernegger is an Internet entrepreneur. As a 20-year- time as our customers earn money. Investors have no idea what is relevant for the younger can link up with a professional dealer of their generations. How do they want to get people old law student, he founded the Zurich party platform choice for as little as EUR 100. Imagine what like me interested? That is impossible. usgang.ch together with his colleague Simon Virlis – and will happen when word gets around that there are alternatives to having to pay into a then sold it in 2008 to the Axel Springer publishing house. fund for exorbitant fees. Bernegger grabs his iPhone, cradles it in his hand, looks Parallel to this, he created the amiando online service with You do not have a background in the up: “A representative office? I don’t need that personally, colleagues from Munich. This event registration system financial industry. What’s your role at not even a secretary. The next generation will do every- received the Global Technology Pioneer Award from the Next Generation Finance Invest? I am the “next generation”! My two partners thing themselves, will know prices and will expect trans- WEF in 2010 – and was acquired by XING the same year. are a few years older than I am and were top parency. The current status quo in banking is not aligned bankers. You could say I represent the next generation in the company. Since I started to this new target group at all.” working on the computer as a teenager, I have You sell your companies almost before dealt with the issue of how established busi- they have had a chance to get established. ness models, their processes and value chains Why? are transported into the virtual world. The I find it exciting to be at the start of some- mechanisms are always the same. What do you think it needs? What is your greatest challenge here? thing. When a start-up develops positively, Changes that result in substantially leaner People who hear about us for the first time there will always be a moment at some point You were a founder and entrepreneur and more cost-efficient business models. say: Exciting! I didn’t know anything like that when I have to fill out a holiday form as the twice; today you are an investor. How do There are ideas, there are technologies – existed. They would therefore not have found company’s founder. That is the signal for me you like your new role? start-ups in this area now have the best ayondo, for instance. Not even via Google. to move on. Having a lot of employees is nice, I would not call myself an investor; I am still chances of competing with established finan- To google something, you have to know that but it is also a major burden. At amiando, an entrepreneur. I’m not primarily concerned cial service providers for market share. it exists. It is therefore essential for us to we also had well-known investors on board about money; I am more interested in build- proactively approach people who we think right from the start. In these circumstances, if ing up something new and enduring. From a If your visions become reality, many should know about such innovative solutions there is a good opportunity to sell a company company perspective, we are heavily involved people will lose their jobs. in the first place. for a good price, that is the natural course of in these start-ups as soon as we have invested, Is that a reason to prevent innovation? I don’t things. which sets us apart from other investors. enter into in-depth considerations – we tackle And for that you activate your huge the whole thing from scratch, as if it were network. You then participated as a partner in What industry is the pioneer in these a greenfield site. Not understanding much Precisely, as incidentally my two partners do Next Generation Finance Invest, which changes? about banking, not being closely involved as well. Together, we can thus set a great deal was founded in 2009 and has its regis- Up to now, the media world has certainly in it, is very helpful here. Why does so little in motion in a very short space of time. tered office in Zug. What does that been the sector that has been shaken up most. come from the banks themselves? In trad- involve? However, there are only a few people in the itional industries, there are always people The financial industry is the last bastion in management echelons of these groups who who have a lot to lose through change. which everything still functions more or less know and understand what is really happen- Pioneering innovations must and will come as it did 20 years ago. There is only limited ing; otherwise they would be much more from outside. aggressive in relocating their activities to the Internet. Retail is also undergoing fundamen- tal change. Today, you can get a product at the cheapest price anywhere in the world. So

56 ceo relationships ceo relationships 57 room with a view

Building bridges Simon Reding works as an auditor in the financial services sector for PwC in Singapore. His place of work – the PwC Building – is right in the city centre, enabling him to experience the cultural variety of this vibrant Asiatic metropolis on a daily basis.

I work in an office on the 16th floor in the with huge cultural differences. My Asian col- heart of the financial district, and from my leagues often live with their parents until window I look out over the glass towers of they are married because living accommo- the surrounding office buildings. The pres- dation is very expensive in Singapore. Most ence of 130 international banks in the city expats live in condominiums, residential makes it one of the most significant financial developments with a range of facilities. This centres in Asia. Unlike Switzerland, banking means that private contacts outside work confidentiality remains untouched in Sin- between locals and expats are quite rare. This gapore, although Switzerland is still viewed is compounded in my case by the fact that I as a model, including in matters of banking moved to Singapore with my family, and pre- regulation. fer to spend my leisure time with my wife and Singapore is an attractive location for com- our three children. panies wishing to establish a presence in Asia. In Switzerland we are used to a good deal The city-state is strategically well placed, of freedom to arrange our working day as it just a few hours’ flying distance from all the suits us, whereas unified office hours are the important markets in China, India, Indonesia norm here. The working day starts late and and Malaysia. Its political stability and a ends late. People often go for a brief supper well-developed legal system also create an together and then go back to work. Asiatic attract-ive environment for companies that colleagues consider personal relationships in wish to move here. This is supported by the workplace to be very important; there is authorities and national bodies with a favour- high emotional attachment to the company, able attitude to business, who work closely and they value joint professional activities. together with the commercial sector to pro- As many of our customers operate in Switzer- land and China, and as I have very close “I try to find ways of reconciling differences between contacts with my PwC colleagues in Zurich, different mentalities and, above all, between the various I see myself as a link between the cultures. I try to find ways of reconciling differences rules and regulations.” between different mentalities and, above all, between the various rules and regulations. mote growth in specific branches of industry. Building bridges is not always easy, but I Further underlying reasons for the popularity believe it is a very important task, and one of Singapore are the simplicity of its regula- which allows you to grow both personally tory framework and its low taxes. and professionally. Singapore is multicultural and attracts employees from all over the world. Most Photos: Darren Soh/laif of my colleagues are Singaporean, Japanese, Chinese, Indonesian, Malay and Australian – people from a wide variety of backgrounds

Financial District Singapore: a multicultural place of work for PwC auditor Simon Reding.

58 ceo relationships ceo relationships 59 ceo 1/2012 Value insights

Switzerland The first choice for European HQs Page 33

Audit and advice in parallel Boosting quality and efficiency Page 36

Start-ups Young enterprises inject life into the economy Page 39

The psychology of incentives Keep it fair and simple Page 42

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