Business-as-usual stance keeps Swatch ticking over

Replacing larger-than-life business leaders is never easy, and even less so when they happen to be your dad. So Nayla Hayek was well advised to stress “business-as-usual” at the world’s leading watchmaker last week, in her first public comments since succeeding her father as chairman of Swatch Group.

Ms Hayek was the surprise choice to succeed her father Nicolas Hayek as chairman after his unexpected death at work. Mr Hayek, Swatch Group’s founder, was widely regarded as a saviour of the Swiss watch industry.

Even at 82, the tireless Mr Hayek, a trained engineer who combined technical savvy with natural showmanship, remained the group’s dominant figure. Many had expected the chairmanship to go to Ms Hayek’s younger brother Nick, who, though also in his father’s shadow, is perceived to have performed soundly since being appointed group chief executive in 2003.

The sense of continuity has pleased investors, aside from some rumblings about Ms Hayek’s commitment to the job.

Although a board member since 1995, and ostensibly responsible within the group for the Middle East, Ms Hayek is better known as an equestrian and horse breeder than a salesperson or manager. At her estate in northern Switzerland near Lake Constance, she has gained an international reputation as a member of the World Arabian Horse Organisation – a status, some claim, that has helped her gain access to some of the Gulf region’s horse-loving potentates.

Now Ms Hayek, aged 59, has to fill her father’s shoes, leading a quoted group whose 19 brands include horological legends like Omega and Breguet, not to mention the ubiquitous Swatch.

Fears of family upsets appear to have been misplaced: her brother Nick described the appointment as entirely logical, given his sister had earlier this year been promoted to become one of her father’s two deputies as chairman. Moreover, analysts noted that Nick, aged 55, had also been granted board membership at the same time.

But those who lauded Ms Hayek’s appointment as an acknowledgement by Swatch Group of corporate governance best practice probably had the wrong end of the stick.

True, the group’s board includes worthies such as Jean-Pierre Roth, the former governor of the Swiss National Bank and nobody’s fool, for all his easy Swiss-French charm.

Ms Hayek’s promotion came not because giving the job to her brother would have attracted criticism on account of his then dual mandate as chairman and CEO. Swatch Group has long shown itself aloof to prevailing market fashion.

This is, after all, the company that stamped on its 2008 annual report the warning: “This publication is not recommended for the acrobats and jugglers in today’s financial circus.” Famously disdainful of equity analysts and short termism in general, the company regularly releases its results early to wrong-foot hedge funds trying to make a quick turn.

Rather, Ms Hayek’s appointment came primarily because it corresponded with her father’s wishes, as understood by his fellow board members.

The world watch market has recovered strongly since last year’s crisis, vindicating a bullishness that made both Nicolas and Nick Hayek appear over-optimistic compared with their rivals.

Since then, Swatch Group, like Richemont, the world’s second-biggest luxury goods group, and powerful non-quoted independents, such as Patek Philippe, has outperformed, gaining market share from less financially secure brands. The group has even hinted it could benefit from current uncertainties – and its SFr1.1bn ($1bn) cash pile – to make acquisitions.

Last week brought the purchase of a small supplier, the latest in a string of such deals. The company’s hold on its industry will, if anything, strengthen further from next year, when Swatch Group finally stops supplying rival brands with kits of watch parts and sells only completed movements.

That prospect has forced some rivals to invest heavily in creating their own production capacity, and will make it more difficult for arrivistes to claim to be true manufacturers – fully vertically integrated producers, commanding prices commensurate to that status.

The adage that one generation makes a family fortune, the second consolidates it, and the third loses it may yet be disproved by the Hayeks, who together control 41 per cent of Swatch Group’s voting rights.

The group’s latest personnel changes included promoting Marc Hayek, the founder’s 39-year-old grandson and a group chief executive in the making, to take on Breguet, the famous brand his grandfather pretty much brought back to life.

european.view@ft.com