Horolonomics

Just before the holidays I published a post in which I shared my thoughts on efforts by investor Steven Wood to influence the direction of Swatch Group governance. I didn't mince words in my post. I had some doubts about the effort and I laid them out. Swatch Group had already provided a comment for my piece but at the time I published I had not heard from Wood even though I offered him a chance to comment.

Not long after I published I received a response to my query.

Wood was interested in commenting. I have to give him credit, he wanted to communicate even though I may not have been fully sold on his efforts. Some people will just shut you out in those circumstances. But Wood and his team were professional and prompt in communicating with me.

I decided to invite Wood to participate in a question and answer exchange. Our discussion is below, I think you'll note that he was very transparent in his responses. It is also clear that he's certainly a bit of a "watch guy," which is reassuring. There is a somewhat widespread sentiment that the watch industry could benefit when actual collectors are influencing corporate decisionmaking. Wood's responses below have been very lightly edited for style but without any omissions or qualitative changes. Please also visit his Substack posts because I think they are very interesting reads. I hope you enjoy.

H: When did you get interested in watches and watch collecting? Can you share some information about your collection? Are there themes or strategies in your watch collecting?

SW: I’ve always felt naked without a watch, and have checked a bare wrist for the time more than I’d care to admit. While I’ve worn watches my whole life, I didn’t start to really lean-in until I was 30 when my dad was going through a life-saving bone-marrow transplant, and he and my brother got me a used Calatrava. It meant so much to me emotionally. From that point forward, I became fascinated in the world of automatic and winding watches. The idea that a machine needs no battery or charge is still inspiring.

The Swatch investment has turbo-charged the interest, and I even recently incorporated a startup to make complimentary products and services in the industry.

H: What is your experience with influencing the path of a publicly traded company? What was the result of your involvement?

SW: This kind of engagement has been constant throughout my career, but from the board room, has happened now in 3 companies. The first was CTT in Portugal, a 505-year old company that needed to pivot from mail to e-commerce. The second has been on the board of Leonardo, the Italian security company, where we’ve helped management turn the laggard to a best-in-class international company. I’m still on the boards of both and think the world of these management teams, who have all embraced an outsider’s viewpoint to make their businesses more competitive globally. The results speak for themselves (and are included in our public materials), where revenue growth and shareholder returns have been best-in-class, no matter the geography. One principle that sustains each presence is a very strong focus on the customer as the most important stakeholder in any business.

H: How much of your assessment of Swatch Group is related to fundamental differences between the operation of Swiss and American public companies? Do you have any ideas about how to bridge those differences?

SW: According to The Ethos Group, Swatch is only 1 of 2 companies in Switzerland with no international directors. Switzerland is so competitive globally because of its societal embracing of a diversity of viewpoints. We called for a special election of a specific share class, as protected by Swiss law, and I can’t think of anything more Swiss than having a referendum.

There are very few US luxury companies (if any), because the industry requires a very long-term focus — which is not a strong suit of the US quarterly profit treadmill. While we come from the US, less than 10% of our portfolio is American because we can’t stand this treadmill. Swatch management likes to characterize all non-family shareholders as short-term focused, but they couldn’t be more wrong. The remaining shareholders, who have lived through decades of underperformance, are by definition a little too patient.

We ensured that our proposals were in accordance with the Swiss Code of Best Practices for Corporate Governance. So no, we don’t want the company to be more American - just more Swiss.

H: What does a successful Swatch Group look like to you?

SW: The watches that have recently been introduced by Blancpain and Breguet are insanely great. The issue with Swatch is not the watches they are capable of producing, all from their own industrial footprint.

The issue is that the world of watches has materially changed since its founder has passed away.

Modern marketing, protecting residual values, and new collaborations along with localized products have been absent from an otherwise sound strategy. It has meant that Swatch’s competitors, often using movements from Swatch, have taken a substantial amount of share away from the company in the only segment of the industry (>CHF 3,000) that is growing. It used to sell half of the watches in this segment, and now it’s less than 10%. It needs a new strategy to seize on this segment, which is in secular growth.

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My thanks to Steven and his team for collaborating on this post. I have no doubt that there will be more to this story as 2026 continues to unfold.

NB: As I was finalizing this post, Swatch Group announced their plan to add a new member to their governing board. It will be interesting to see how this interacts with Wood's efforts, if at all.

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