"Shareholders were already demanding twenty years ago."

Dr. Bernd Pfister, CEO Paros Capital AG, Board of Directors IRF Reputation AG

You have been supporting IRF as an external board member for some time. We are currently experiencing very turbulent times, with high inflation, the threat of energy shortages, deglobalization with disrupted supply chains, the aftermath of the pandemic, armed conflicts in Europe, and so on. How do you keep your optimism as an entrepreneur, board member and investor?

You have to keep the long-term perspective in mind. It's very easy to overlook technical progress and innovation, but in the long- term trend, productivity progress and technical change leads to two to three percent growth in the global economy. Just to put that in perspective, that's greater than the GDP of Italy in one year. That's one reason why stocks have experienced the greatest asset growth since 1900 and will continue to be the best asset class over the next hundred years. I think the media are very quick to focus on wars and other crises. But in reality, that positive noise is always there. So it's not difficult for me to remain optimistic.

We'll come back to the role of the media later. Being a board member today requires much more knowledge, commitment and professionalism than it might have in the past. Has the board of directors become a high-risk job?

If you don't know your business, then yes. But if you bring enough experience to the job, that's not the case. You have to act carefully. It's the same today as it was twenty years ago. Certain risks that one is not willing to bear himself can also be insured.

The Swiss success model is being challenged from various sides. One keyword is restrictions on tax competition, where pressure from outside is becoming ever stronger. How can Switzerland continue to consolidate and retain its advantages in international competition?

Switzerland should continue to rely on its natural strengths. We have a sound economic policy, we are blessed with very solid fiscal data, we have a stable political situation, we are competitive and innovative. Switzerland is one of the only countries in the world that has a free trade agreement with China and develops a trade surplus with China. We have trade surpluses and current account surpluses with Europe, and that also strengthens the Swiss franc. From that perspective, Switzerland is very well positioned to continue to be competitive.

You are not only invested and active in Switzerland, but also in foreign companies. Are the current challenges hitting Switzerland differently than the surrounding foreign countries?

I think that while many of the challenges are global (supply chains, wars, diseases), Switzerland is in a significantly better position to deal with these crises for the reasons I mentioned earlier. But also for specific reasons, for example the relatively low inflation rate compared to other countries. Consumers in Switzerland have to deal with three, maybe four percent inflation this year. That's exciting by Swiss standards, but you have to put that in perspective with England, for example, which is expecting twelve to thirteen percent inflation.  

One of Switzerland's peculiarities or qualities is that we are continuously developing innovative solutions. Even the traditional financial center is showing new market segments and clusters, such as the entire FinTech, blockchain, crypto industry, which is on the rise in Switzerland in particular. How sustainable do you see these new developments in finance?

I've been in venture capital for thirty years and I'm always trying to be open-minded to new technologies and trends. I’m pleasantly surprised that despite the apparent volatility in cryptocurrencies and problems you read in the newspapers, there is an agile ecosystem of entrepreneurs and startups on the way that has compelling technological solutions to offer. However, I would like to distinguish between cryptocurrencies, which to me are just one possible application for blockchain technology, while other applications for blockchain technology can carry very sustainable and fundamental changes. One example from Africa that impressed me was the encryption of cadastral data and land records using Blockchain technology. Sixty percent of all legal cases in Nigeria, for example, are land ownership disputes. That wouldn't be necessary if blockchain technology could be used to uniquely encode ownership. This solution approach could be a "trillion dollar solution" for a continent like Africa. This is indeed economically desirable and sustainable. This is just one example illustrating what this technical progress can offer, and it is nice that we in Switzerland have a dynamic development on the subject. I am therefore very positive that Switzerland can occupy new topics and is internationally competitive in this area.

Key topics in corporate management, some of which are new, are sustainability, digitization and communication. How is the management of an organization, a company, changing as a result of these new trends?

The three topics are very different. In my view, ESG is more of a flavor of the day, a marketing concept. From my point of view, a decent businessman who ran a company fifty years ago already adhered to ethical principles back then. He served society responsibly and didn't throw dirt into the river. That should not change today. This does not require ESG guidelines, which produce very flimsy results. For example, nuclear energy is evil at one time, and now it gets an ESG label and is a green technology. It is completely different with digitalization. It fundamentally changes all business processes in a company. I've served on seventy boards of directors, and in all of those companies, digitization has fundamentally changed the value creation processes. Part of that is your last point, communication. It has also changed a lot over the last few years, partly because the media landscape is constantly changing, and partly because there is a different focus within communications. Twenty years ago, eighty percent of communications work was bought communications, meaning advertising. Today, instruments such as investor relations, public relations, active communication via press releases and the coverage of topics are much more important.

Communication or media channels in particular have not only become digitalized, but they have also become democratized. Today, anyone and everyone can be their own medium, you can make yourself known via social media, you are no longer dependent on gatekeepers from a handful and state-run media. What does this fragmented media environment mean for companies and the way they communicate?

It has become much more difficult. Before, it was easier to position oneself via the top media or TV stations. With five or six outlets, you could maximize your reach and cover the population in a very homogeneous way. Today's fragmentation in communication means that you also have to fragment your message and distribute it to different target groups via different channels. This makes corporate communications significantly more difficult and far riskier than it was twenty years ago.

Does this increase the risk of activist shareholders making more demands on companies?

Shareholders were demanding twenty years ago already. Nowadays, as an entrepreneur, you have more stakeholders to serve than you used to. Twenty years ago, you were more focused on shareholder value and serving your investor base. Today, you can no longer limit yourself to that and enforce all corporate policy decisions under the primacy of shareholder value; you have to take all stakeholders in society into account, and that makes the task of managing a company more difficult and more risk-prone than it used to be.

What are your personal wishes for the future of Switzerland as a business location?

I would like us to concentrate on our strengths, to pursue a differentiated, liberal economic policy driven by people's personal responsibility. I would like us to continue along the path we have chosen and not to follow the guidelines from Europe so closely, but to consistently go our own way and try to maintain open communication with all economic blocs. I advocate that we should not join the deglobalization process, but instead be open to the world vis-à-vis all blocs. This would provide the best conditions for Switzerland in the long term.

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