The Prince of Liechtenstein on leadership

Very few people go to university knowing that their studies will need to equip them to run a country. Arriving at the University of St Gallen in the autumn of 1965, Johannes Adam von und zu Liechtenstein was one of the exceptions.

If it had been up to him, the heir to the principality of Liechtenstein - a tiny Alpine state nestled on a narrow strip of land between Switzerland and Austria - would probably have been arriving to study archaeology or physics.

However, his father, Franz Josef II, wanted his son to take a course that would prepare him both for running the family businesses, and for his future duties as head of state. Neither physics nor archaeology quite fitted the bill. So the young prince instead signed up for a four-year undergraduate degree in business, economics and law, subsequently deemed by the Swiss University Conference to be the equivalent of the later masters in management.

The course was good, and despite his royal background, he was able to lead a comparatively normal life as a student, the prince recalls, sitting in the library of the royal residence, a well-turreted medieval castle perched on a mountain top overlooking Liechtenstein's capital, Vaduz.

"That was no problem. Of course, [the other students] knew who I was. But when my parents sent me and my brothers and my sister to school, we went to primary school like everybody else, and my parents told the teachers that they should treat us like everybody else. And it was the same at university," he says.

Along with his peers, the prince took classes in a broad variety of subjects, ranging from economics and business to marketing, several types of law and technology. In addition to this, students also had to clock up six months of work experience, which the prince did via a stint at Hambros, the London merchant bank.

It was not long before he had an opportunity to put the lessons he had learnt into practice. When he left university in 1969, his father told him that - at the age of just 24 - he was to oversee the rebuilding of the family's businesses, including the bank, which were in a state of some dilapidation.

"I wanted to go to business school after university, but at that time the family business was in a terrible shape. My father had been financing the monarchy by selling art and land since world war two, because about 80 per cent of the family business was in Czechoslovakia and was expropriated after the war," says the prince.

"The family bank was in a bad shape, and the family business that was left was also in a bad shape, so I started to get involved with reorganising the bank."

As part of his course in St Gallen, the prince had written a thesis on the introduction of computers into the financial services industry - where much record-keeping, in those days, was still done by hand. This, in combination with the courses he had taken in bookkeeping, he says, was a good preparation for overhauling the family bank.

"My father did not have much insight into the running of the bank," he says. "It was basically run by relatives and some other managers who were not …" he pauses, searching for the right word, "very efficient, to put it mildly."

Part of the problem, the prince says, was that while the bank's official bookkeeping was good - more advanced, he reckons, than what he had seen at Hambros in London - the bank was being used to finance a lot of bad businesses, not all via the official accounts. "Off balance sheet, as you would say," the prince adds wryly.

"Through my thesis, I had gained insight into this. I knew what was going wrong. So I started to reorganise the bank, and when I had done this I closed down some of the family businesses in Liechtenstein that were losing money and were financed basically off-balance sheet by the bank."

After winning a family tussle, the prince took control of the family's businesses in Austria, and spent much of the 1970s reorganising them as well, a process he says was helped by the knowledge of commercial law he had gleaned at St Gallen.

With the family businesses back on an even keel, the prince had hoped he might finally be able to return to university to study physics or archaeology. But events took a different turn. In 1984, Franz Josef II passed on his executive powers to his son, leaving him in charge of running the country that his family has ruled since 1719.

The prince had always been interested in foreign policy - as an 18-year-old, he caused a stir with a speech arguing that Liechtenstein should develop its own foreign policy, rather than being carried along in the "rucksack" of Switzerland - and he devoted much energy in the early years of his leadership to international relations.

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One of his first goals was to take Liechtenstein into the United Nations, which he saw as a means of protecting the sovereignty of the tiny principality, which has a population of little more than 36,000. However, to do so, he had to overcome significant opposition both at home and abroad.

In the latter days of the cold war, western countries were afraid that fragile postcolonial states would be sucked into the orbit of the Soviet Union. As a result, there was a movement to stop small countries joining the United Nations.

With the aid of Claiborne Pell, a US senator for whom he had briefly worked as a teenager, the prince succeeded in changing the US's position on this question, before turning his attention to winning over domestic opinion.

Liechtenstein's parliament was opposed, arguing that UN membership would be an unnecessary expense. The prince, who is among Europe's wealthiest monarchs, responded that he would pay the fees himself, but then also pick the country's UN ambassador. The parliament dropped its opposition, and agreed to pay the bill. In 1990, Liechtenstein joined the UN.

The lessons the prince had learnt at St Gallen did not play much of a role in this struggle, he says. But in his next big foreign policy battle, they did. With European integration gathering pace in the early 1990s, the question of whether Liechtenstein should join the European Economic Area became increasingly pressing.

He was convinced that, as a tiny economy dependent on being able to trade freely with its neighbours, Liechtenstein should join. Once again, he found himself on the opposite side of the debate to the parliament.

"It was really a fight," he says with a smile. To rally popular support for membership, the prince spent a lot of time canvassing members of the public, and says that his knowledge of business, economics and law enabled him to do this more convincingly.

"I was able to see why it was so important for our economy to join. And with the arguments that I put forward I was able to convince the people, because I had a grasp of economics and business," he says. "St Gallen was useful because it helped me to analyse the question from a number of different angles."

In 2004, the prince handed down the powers of day-to-day governmental decision-making to Hereditary Prince Alois, the eldest of his four children with Princess Marie ­- although he remains the legal head of state. After decades of leadership, does the prince believe it can be taught? The subject is now a focus of many business schools but he is not convinced that it is easily learnt in a classroom. Nor does he feel that it is necessarily something on which business schools should concentrate.

"I think it can be taught, but of course, to be successful, you have to be at least gifted to a certain extent. When I was a boy I was taught to play the piano. The teacher gave up soon because I was totally ungifted," he says. "I think it's the same with leadership. It's still a little bit of a black art."

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