Klaus Schwab’s abrupt departure from the World Economic Forum, the influential organisation he founded and led for more than half a century, has complicated carefully laid plans to persuade Christine Lagarde to assume the helm in a seamless transition, according to people familiar with the discussions.

Schwab, 87, had initially intended to stay on until early 2027, the same year Lagarde’s term as European Central Bank president comes to an end, but he left last month amid accusations of financial misconduct and a clash with the Forum’s directors. He denies any wrongdoing.

As the board deals with the fallout, it still sees Lagarde as the top candidate and has held internal discussions on the matter since Schwab’s resignation last month, according to a person familiar with those conversations, who asked not to be identified. The conundrum is that Lagarde has more than two years left at the ECB and has previously said she will serve her term in full.

That effectively leaves the WEF without a clear choice to lead the organisation at a pivotal moment and needing to find a figure who can do it all: reforming the institution to address allegations of sexism and bullying from the Schwab era, while at the same time keeping CEOs paying membership fees that bring in hundreds of millions of dollars in revenue every year.

Whomever is chosen will also have to ensure that the WEF’s flagship annual gathering in the Alpine resort of Davos remains an event of choice for the world’s financial and political elite.

Lagarde, who started her career as lawyer, was previously managing director of the International Monetary Fund and finance minister in France, the first woman to hold both posts. She was appointed ECB chief for a non-renewable eight-year term in 2019.

Former Nestle Chairman Peter Brabeck-Letmathe, 80, is currently leading the board on an interim basis. Its members include global power brokers such as BlackRock CEO Larry Fink, IMF head Kristalina Georgieva, former US Vice President Al Gore and Lagarde herself. The board would like to move quickly on an appointment, according to the person.

Spokespersons for the WEF and ECB declined to comment.

The WEF has also discussed appointing BlackRock’s Philipp Hildebrand, a former head of the Swiss National Bank, to the board in order to maintain a strong Swiss influence in the group. That would be welcomed by Switzerland’s government, where there are concerns that Schwab’s departure may lead to larger changes and loosen the Forum’s ties to Switzerland. Hildebrand, BlackRock and the Swiss government declined to comment.

For more than half a century Schwab was the defining force behind the organisation, which he set up in 1971 and is now headquartered in a sleek stone-and-glass building in the exclusive hilltop town of Cologny overlooking Lake Geneva. He juggled the responsibility of running the WEF with being a professor, and later an honorary professor, at the University of Geneva.

It was only in his mid-80s that Schwab began to publicly talk about stepping away from day-to-day management, despite the fact frustration had been building for years among staff over when the founder would finally give up the reins.

Finally, in May 2024, Schwab announced that he was stepping back from active leadership, dropping “executive” from his chairman title and adding the role of CEO to WEF President Borge Brende, a former Norwegian foreign minister. Then, in April, he said he would retire, but his plan was to stick around until early 2027, broadly in line with the end of Lagarde’s ECB term.

That same month, a bitter internal battle erupted when Schwab was told by the board that they had received a letter accusing him of financial misconduct and there would be an investigation. News of that letter was first reported by the Wall Street Journal. The details of this clash come from conversations with people familiar with Schwab’s leadership of the Forum, who requested anonymity discussing internal business.

Schwab had just been cleared in a previous investigation into harassment, prompted by a similar letter in the summer of 2024, and he said he’d quit if the probe went ahead.

He followed that up with an e-mail to board member Thomas Buberl, CEO of insurer AXA, threatening legal action. Buberl and the board weren’t swayed. They called his bluff. Schwab walked.

The fallout at the highest echelons of the WEF marked an ignominious exit for the octogenarian.

The Forum declined to comment on the specifics of the probe, but said it will be “thorough and objective.”

Switzerland’s regulator of foundations and charities has also looked at the issues but so far hasn’t seen reason to take action. It said the board is “taking the necessary measures to investigate the allegations.” The watchdog can step in at any time if it deems the probe isn’t thorough enough.

Schwab has denied any impropriety, and said that he and his wife Hilde always had the “highest professional, financial, and ethical standards.”

In response to questions, he said they “reject the allegations brought forth in the email of 16 April 2025 from an anonymous source. We are of the opinion that the Audit and Risk Committee and the Board of Trustees of the World Economic Forum overreacted timewise, also concerning the mandate of the new investigation without a prior in-depth discussion.”

All this upheaval comes at a critical time for the WEF. It has in recent years championed causes like diversity and inclusion as part of its self-proclaimed commitment to “improving the state of the world.” But as Donald Trump’s administration actively seeks to dismantle DEI projects, scores of companies are cutting back on such initiatives.

Some executives, long-time attendees at Davos, have also privately expressed frustration about a DEI overload at the event. Instead of workshops on workplace diversity, gender and the environment, they want it to be more about networking — its historic strength — and dealmaking.

Still, despite the turmoil, none of the WEF’s 900 or so partners have cut funding so far. That money is vital for the Forum. Membership and partnership payments brought in 271 million Swiss francs ($324 million) in the last financial year, accounting for more than 60% of total revenue.

“The question is always how strongly the personal brand is connected to the corporate brand,” says Johanna Gollnhofer, a professor of marketing at Switzerland’s St. Gallen University. “The organisation is clearly in crisis mode and is trying to protect its brand. The investigation it launched is an example of that — it’s sending the message: Look, even if our founder has gone rogue, you can trust us as an organisation.”