Winter 2004 Style & Design
A quasi-celebrity in Switzerland, Hayek Sr. has been known to wear as many as eight watches (today there are four—the first Swatch off the production line, a $100,000 Breguet tourbillon, a $70,000 Blancpain tourbillon and a vintage Omega Special Seamaster) and is a shameless, sometimes comical name dropper: former European Commission president Romano Prodi, Cindy Crawford and the Sultan of Oman all made their way into the conversation. Breguet, which Hayek Sr. purchased in 1999 and dusted off, is the group's most élite brand and his pet project. He has upgraded the production facilities and opened stores and has been plotting to get his hands on the company's most famous creation, a pocket watch commissioned for Marie-Antoinette that was stolen from an Israeli museum in 1983.

"I have never tried to build a dynasty," he says, explaining that it was the six other company board members who pushed for Hayek Jr. The father controls a voting majority, and his only other child, daughter Nayla Hayek, is also on the board. (Her son Marc runs Blancpain for the group.) The board wanted Hayek Jr. for his many talents and to "keep the warm atmosphere and the entrepreneurial mentality in this company," he explains.

Hayek Jr. dropped out of business school (with Dad's blessing) to study filmmaking in Paris and after several years, including a feature film with Peter Fonda, joined Swatch in 1994 to work on marketing. In January 2003 he was named president of the group's executive management board—effectively the CEO of the company—and he's well liked within Swatch for his human touch. Still, it can be hard to escape Dad's shadow. "Yes, my father is a genius. It's very rare to have people who are both visionary and pragmatic, so of course I admire him, but I could not work here if I made him into a god," says Hayek Jr., who flies a pirate flag outside his office window. "I'm coming from a different place. I think he can learn a lot from the marketing side," he continues. "I'm listening probably more to people. That's a big difference between him and me."

Not everyone is convinced by the plan to keep Swatch in the family. Recent articles in the Swiss and German press have criticized the Hayeks' management of the company. At a shareholders' meeting last spring, a Swiss pension-fund manager pressed for changes on the board of directors; he was quickly and overwhelmingly voted down. Hayek Sr. had to interrupt his summer vacation to rebut a speculative article in the financial weekly Wirtschaftswoche that suggested he might sell off Swatch and reposition the group as a luxury-only concern. It's true that, for all its luxury brands, Swatch Group shares are traded at a 20% discount compared with luxury-only groups like Moët Hennessy Louis Vuitton (LVMH) and Compagnie Financière Richemont, which includes Cartier, Baume & Mercier and Piaget. "It's the biggest stupidity ever written," he groans.

But nothing stung more or generated more buzz than a front-page article in the Zurich financial paper Cash shortly before the watch world's annual spring convention in Basel. As competitors and retailers pecked at velvet trays loaded with millions of dollars' worth of watches in the back rooms of the fair, they chewed over the headlines HAYEK SENIOR DISEMPOWERS SON and THE JOKE'S OVER AT SWATCH, as well as a particularly saucy sidebar titled IT'S ALL GETTING TOO PERSONAL—LOVE AND CONSPIRACY À LA SWATCH, which detailed romantic liaisons between board members and executives. "I'm convinced there's a real corporate-governance issue," says Victor Weber, the journalist who penned the critiques.

Hayek Sr. waved off the charges, particularly the idea that he has revoked power from Hayek Jr. "It's not true. I'm as hard on him as I am on every other director in the group, but I was doing only my job as chairman," says the elder Hayek. "Haven't we been complaining about chairmen at other companies who let people do whatever they want?"

Succession has not been a dominant issue for financial analysts, however. After suffering more than other luxury categories because of recession, Iraq and the SARS epidemic, watches are on the rebound, and the Swatch Group is among the best placed to benefit, they say. Although Swatch sales have fallen off in some markets, Omega, which contributes a whopping 44% of the group's earnings, continues to pick up speed, and there's growth potential for the group's other high-margin luxury brands. When Goldman Sachs surveyed international watch retailers at Basel, they said Cartier, Omega and Rolex were the brands they expected to show the fastest growth through the end of the year. IWC, Jaeger-LeCoultre, Tag Heuer and Breitling also looked strong.

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