African Business made its annual trip to Geneva in Switzerland to meet the team behind the latest edition of the World Economic Forum (WEF) on Africa, which will be held in Abuja, Nigeria, on 7th-9th May. What will be the big questions for discussion this time? African Business Editor Anver Versi finds out.
The World Economic Forum’s headquarters occupy a charming, wooded spot at Cologny, a few kilometres from the town centre of Geneva. We arrived on a brilliant spring morning and were met by Maxwell Hall, the senior media manager of the organisation.
Since it held its first conference in 1974 at Davos, the World Economic Forum has evolved into the most important annual gathering of the world’s most powerful and influential people who can discuss issues of great current import candidly and in a neutral setting.
Initially, in 1971, a group of European businessmen met under the patronage of the European Commission and European industrial associations to discuss matters of mutual interest and to work out ways of becoming more efficient.
German-born Klaus Schwab, then Professor of Business Policy at the University of Geneva, chaired the gathering, which took place in Davos, Switzerland. The organisation was subsequently incorporated as a not-for-profit foundation.
Professor Schwab’s inspiration for creating the Foundation was his book, Moderne Unternehmensführung im Maschinenbau [Modern Corporate Management in Mechanical Engineering], in which the stakeholder principle was first defined. This concept states that “the management of an enterprise is not only accountable to its shareholders but must also serve the interests of all stakeholders, including employees, customers, suppliers and, more broadly, government, civil society and any others who may be affected or concerned by its operations”.
Strange as it may appear to us today, this concept of the responsibilities of the management of an enterprise to consider the wider society rather than just the interests of the shareholders, was a radical departure from the norm.
Management saw its role merely as generating profits for shareholders with little or no concern for its employees, the environment or the society in which the enterprise was located.
The net result, as we can see with hindsight, was often terrible working conditions, starvation wages, a destruction of the environment, fracturing of social bonds, an endless series of conflicts with labour and unions, and, significantly, low efficiency and stunted profits.
Management, for decades if not centuries, had been tricked by the false lure of ‘squeezing profit’ by stripping costs, including wages and those associated with work conditions, to the bone on the principle that ‘the less for them, the more for me’.
In fact, while it was indeed ‘the less for them’, it was not ‘the more for me’, except in very relative terms. An unhappy, underpaid and under-resourced workforce is very inefficient. It is also not motivated, as it only works out of the fear of losing whatever little income it gets, instead of working harder to get better rewards.
Enterprises also failed to see that workers were also the main consumers of their products and if workers had barely enough to keep body and soul together, they would not be able to buy the products that the management was so busy churning out – unless they were meant only for a wealthy export market.
The damage to the environment and social structures may have reduced costs in the short run but piled them on when the situation became no longer tenable. In short, management was busy cutting off the very branch it was sitting on and completely blind to this fact.
Professor Schwab’s book and his subsequent chairing of the initial meeting, opened the eyes of European industrialists, who realised that national economies were not small pies to be fought over but could be created and expanded to virtually any dimension they had the capacity to. It was no longer necessary to try and claw out a larger portion of the small pie but to enjoy large portions of increasingly bigger pies.