Highlights from Davos

By: scutler

File Under: Listed Companies

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My name is Scott Cutler and I am an executive vice president at the NYSE Euronext overseeing the America's listings business. While this is my first post on the blog, I will be a regular contributor in the future. Last week I was in Davos for the World Economic Forum (WEF) annual meeting -- my first time attending. Despite the prevailing economic gloom and uncertainty, I thought the global dialogue was interesting and constructive. Here are a few take-aways that may be of interest to our corporate community in the U.S. and abroad.

Why NYSE Euronext goes to Davos
We have been involved with the WEF for several years, and elected to continue our involvement because it provides a unique platform to personally meet with global government and corporate leaders over a few short days. It would take months to meet with all the people we touched over those four days. We were very involved in panel discussions, media interviews, receptions, and meetings with heads of state, central banks, and CEOs from the world's leading public and private companies. The general tone was somber, but there was a nice balance between understanding the forces behind our current crisis and discussions about real solutions toward repairing our interconnected global financial system.

Who else shows up
From what I've heard, this year was much less flash and much more substance than years past -- there was a topic to discuss. Though many CEOs of the U.S. financial institutions withdrew in the weeks leading up to the event, over 40 heads of state showed up (more than double the previous high) and most of the general sessions were filled. People wanted to participate in the debate, and get involved. From an NYSE Euronext perspective, we really took an approach of focusing on solutions rather than highlighting problems.

Key take-aways
Again, from what I could gather, the contrasts to prior years were many and vivid. Last year, the financiers were the sovereign wealth funds. This year, it was the role of government as financier of last resort, and the merits of capitalism were both challenged and defended -- quite passionately at times. Russian Prime Minister Vladimir Putin made a public speech about promoting entrepreneurship and innovation, with a warning about the limits of government involvement, and former President Bill Clinton expressed comfort in a nationalized banking system. Who philosophically offered a better solution, Keynes or Freud?

Most agreed that the crisis was born of a lethal combination of self-regulation in the banking sector and regulators that either did not understand or did not appreciate the complex nature of today's global financial system. I am not sure some of the brightest minds in the world reached a clear consensus on the right cause or solution. Clearly, we need a better understanding of how to value assets, identify systemic risk, and address jobs. We need transparency in the many opaque financial products that trade without any visibility -- we already have platforms that provide for central clearing and reporting, but the financial institutions are slow to participate. We will need to focus on global solutions and collaboration and put aside nationalist interests and protectionism We will all have to find a balance between governance and the spirit of entrepreneurship. This sentiment was echoed throughout the forum, as was the call for international cooperation. German president Angela Merkel and British Prime Minister Gordon Brown went so far as to ask for the creation of a global economic institution with a mandate and the power to prevent future economic crises. Investment in infrastructure was the catch phrase of most global leaders -- good if you are a provider of infrastructure.

Interestingly, I spent a significant amount of time with the Latin American delegations and they seemed the least affected by the global chaos -- not because they weren't caught up in it, but because they've been through it before. While the rest of the world is clearly struggling, they managed to be upbeat as to the state of their economies and banking systems. I'm sure there are lessons to be learned from them.

We, in our role as a global exchange, were asked about how we could instill market confidence. It seems the real question is how to instill consumer confidence. People need to feel comfortable about their homes, their jobs, their families, before they will return or care about the financial markets again. This crisis has shaken the overall confidence and trust that people have in the market --a market that is fundamentally built on trust.

What corporate executives are thinking about
During the week, I had the opportunity to meet with many of our listed-company executives. In addition to the above, the conversations centered on the idea that we have all been too focused on the financial-services industry and we need to turn that attention to the "real economy" -- the sphere where the recovery will likely come from. In the near term, these corporations are busy finding ways to position their businesses to take advantage of the new world -- there is no better time to take market share and improve one's competitive position. There is obviously a lot of uncertainty ahead for all of us in 2009. I suppose there is some comfort in knowing that the big-picture concerns are the same for everyone right now.

Continuing the conversation
One of our goals at NYSE Euronext is to continue to fight on behalf of our issuers for what is right for them and the markets. As 2009 and the new global economy unfolds, we aim to be at the forefront of this changing landscape. We have already been working with the new administration in the U.S. on initiatives that will make our markets more fair, more transparent and more efficient, and we will continue to take the ideas of our listed companies to the regulators and lawmakers. If there is more we should be doing, please let us know!

I welcome your thoughts and impressions on Davos, whether you were there or not. And as you'll be hearing more from me regarding our listings business and other matters, I'd like to hear more from you about our marketplace and what's needed to get IPOs, venture capital and entrepreneurship moving in a positive direction.