One has done expert-witness work on corporate corruption cases from Enron to WorldCom. Another works to revolutionize the way medical records systems protect patient care. A third strives to secure Rochester’s economic future with new generations of entrepreneurial talent.
In the world of business schools, the William E. Simon Graduate School of Business Administration is small-roughly 40 professors compared with hundreds at Harvard, for example. But for decades, the Simon School faculty has conducted some of the most influential business research in academia, while preparing the corporate chiefs of tomorrow to navigate a complex and changing world. The following profiles a handful of faculty members:
Hold your horses: The CEO might not be a bum after all.
Out of his research into corporate governance, James Brickley strips the veil off some common misperceptions. When something major goes wrong at a big company, he says, people often assume the fat-paycheck CEO must have been either crooked or incompetent.
Not so fast. Looking at the interaction between organizational design and corporate behavior, Brickley sees more complex forces at work. CEOs in large companies must decentralize decisions, he explains. They have to rely on auditors and other support personnel. When those protections fail, it is possible the executive was doing an adequate job and got caught in the vulnerabilities of an imperfect system.
“The general public has the perception that because CEOs are highly paid, they should know about everything important going on at the firm,” says Brickley, the Gleason Professor of Business Administration and professor of economics and management and of finance. “But if you look at large multinational corporations … you can’t design 100 percent foolproof systems. You do as much as you cost-effectively can.”
Sure, there are bad apples in the barrel, he says, but you need to look at the facts of each specific case.
Brickley’s academic research today focuses on issues of corporate governance. He is looking into the role of boards of directors and how board composition-the percentage of directors who are outsiders vs. corporate managers-affects executive compensation. He is probing the effects of institutional investors, the role of auditors and the impact of regulation.
One new law having a profound impact is the Sarbanes-Oxley Act. Meant to require and enforce sound financial reporting at public companies, the 2002 law is having numerous unintended consequences, Brickley says. For example, it is getting harder for public companies to find qualified people willing to sit on their boards. And, some companies might go private to avoid the close scrutiny.
When Brickley reports research findings, the finance world takes notice. A study reported in Financial Management in 2001 found him among the most cited researchers in finance journals over a 24-year period from 1974 to 1998. He also holds editing roles at several leading journals, consults to major corporations and serves as an expert witness in corporate governance cases.
At the Simon School, Brickley chairs the faculty curriculum committee, which has adopted what the school calls its Frame, Analyze, Communicate orientation. An expression of the Simon School’s philosophy of education, F.A.Ct. emphasizes quantitative analysis, creative problem solving and effective communication.
“We want our students to be data-driven: Show me the evidence,” Brickley says. “They have to be able to take unstructured business problems-where you’re not even sure what the problem is-define the problem, frame it and analyze it. … You’ve also got to be able to communicate the solution.”
The approach, Brickley and his colleagues say, helps Simon School graduates not only land their first job but also build successful careers confronting global business problems that change over time.
Indeed, that is what Brickley would like his own legacy to be: “I want (to be thought of) as a serious, careful, objective scholar who tried to work on interesting, relevant problems and shared with students to help them have successful careers throughout their lives.”
One of Gregg Jarrell’s favorite parts of teaching at the Simon School is tempting his students to commit the classroom equivalent of securities fraud.
The students don’t know they’re being set up. He breaks them into teams to work on hypothetical cases. He tells the teams not to share information-then sits back to see if “harmless chatter” crosses the legal divide. He leaves sensitive reports “accidentally” exposed then waits to see what happens to the information.
“There’s a lot of budding criminals in business school,” says Jarrell, professor of finance and economics. “They don’t think the activity is criminal. They just think that’s the way it works, the way you get ahead.”
The next case, unbeknownst to the students, will be litigation. The students learn just how many years they would spend in jail for doing the kinds of things some of them just did.
Jarrell might drive the point home with theatrics, but his message is dead serious: Business ethics are both fragile and crucial.
“The first time they have inside information, they don’t know how they’ll react. I show them,” Jarrell says. “Make your mistake here. Learn, and don’t make it again.”
That is not just an academic exercise to Jarrell. Former chief economist with the U.S. Securities and Exchange Commission, he is one of the nation’s leading authorities on financial issues in business litigation. Working with Pittsford’s Forensic Economics Inc., he has done expert-witness work on some of the highest-profile corporate corruption cases in U.S. history, including Enron and WorldCom.
Most expert witnesses tend to work either with prosecution or defense, Jarrell says. Forensic Economics works with both in roughly equal proportions.
“We’re objective and academic and pathologically independent,” Jarrell says. “We don’t say what we don’t believe.”
In WorldCom, Jarrell worked on the plaintiff side, computing damages for the class-action suit. In Enron, he supported CEO Jeffrey Skilling.
Skilling, of course, was convicted of fraud and sentenced to 24 years in prison for his role in the biggest corporate scandal in living memory. But nine of the 10 insider-trading charges against him were dropped. That was the part Jarrell worked on.
When he isn’t needling students or battling the powerful, Jarrell is at home wearing the apron strings. His wife, Lynne Davidson, is UR’s deputy to the president and provost in charge of faculty development and diversity-a job Jarrell says is far more demanding than his.
“I pick up the kids from school, I get the groceries and cook the dinner,” he says.
Likely he won’t be taking them to Disney World, though. Jarrell helped win a $240 million judgment against the firm in an intellectual capital case, and he figures all the ticket takers have been instructed to watch for him.
At times Jarrell, examining the dealings at the highest levels of corporate America, might think he has seen it all. But then his students can amaze even him.
In one classroom case, he recalls, he had instructed students to sell a company laden with liabilities-but without committing securities fraud.
He received the sellers’ document via e-mail. Printing it out, he noticed blank page after blank page coming out of the machine-a total of 60. Then, out came a page with words to this effect: Company X is saddled with environmental liabilities that bring its value to zero.
The selling team had bet the buyers would fail to print out the proposal or scroll down to see the disclosure-and they were right.
“I laughed and laughed,” Jarrell says.
Then he got a buddy of his from Nixon Peabody LLP to hear the case when the duped team sued to get its money back.
If anyone has seen the Simon School from every possible angle, it is Lawrence Matteson. The executive professor of business administration has hired Simon students, supervised Simon students, taught Simon students and is himself a Simon School graduate-a fact he credits for his rapid rise in the 1980s to the top management ranks of Eastman Kodak Co.
A Kodak employee since 1965, Matteson was supervising a small group of engineers when in 1979 he earned his MBA from the executive development program at UR’s business school. Within four years, he had become a Kodak vice president. Before retiring in 1992 as senior vice president of electronic imaging, Matteson had run the company’s worldwide equipment manufacturing business, spearheaded new business alliances with strategic partners and steered development of Kodak’s global competitive strategy.
What Matteson brings to the Simon School today is a powerful mix of academic discipline and corporate know-how.
“I bring a substantial amount of direct business experience from my career, which is a rich blend with the academic program,” Matteson says.
A Simon School professor since 1991, Matteson teaches corporate strategy, economics of competitive strategy, marketing strategy, and manufacturing and services strategy. He teaches in both the U.S. and European executive MBA programs. He also keeps active in the business world as a board member of SpatiaLight Inc., a Novato, Calif., manufacturer of liquid crystal on silicon microdisplays for large-projector television sets.
Looking to the future, Matteson would like to see the Simon School take a more active community-service role in helping Rochester firms develop management skills. He also predicts the school will increase its emphasis on experiential learning-putting theory into practice through projects and cases.
“The academic rigor of the program
isn’t going to change,” he says. “But I do see us applying it in ways that give students more experiences that streamline their transition into the work-a-day world.”
His motivation for continuing to teach, he says, is to pass on the benefit he received at the Simon School-superior academic preparation for success in the corporate world.
“My Simon education made a huge impact on my career,” Matteson says. “That’s why I’m back here-to share with other students what happened to me.”
Duncan Moore’s Simon School drive to foster entrepreneurship in Rochester starts with a UR version of speed dating.
In the first meeting of his technical entrepreneurship class, he has the students line up against the classroom walls-Simon School MBA candidates on one side, science and engineering students on the other. Each student then takes three minutes to introduce himself or herself-name, academic focus, interests outside of school. Then they break for beer and pizza.
The idea is to get the students acquainted. Over the course of the semester, they will form teams, come up with an entrepreneurial idea and write a business plan. Along the way, they will have help from some of Rochester’s leading business minds. Moore team-teaches the course with Paul Wetenhall, Simon School lecturer in entrepreneurship and president of the economic development organization High Technology of Rochester Inc. The two have people from UR’s Technology Transfer Office visit the class to present ideas. And, they link each team with an entrepreneur from the Rochester community who serves as a volunteer coach.
“When you start a business, it’s all about the networking-who you know, who you can get to pitch your ideas,” says Moore, Rudolf and Hilda Kingslake Professor of Optical Engineering as well as professor of optical engineering, biomedical engineering and business administration. “I’m trying hard to get the students connected with the community so they’ll stay in Rochester when they get their degrees.”
One former student already has gone on to form a company: Jason Masters, Simon School Class of 2005, took the class from Wetenhall and went on to found Northern Biodiesel Inc., an alternative-energy company in Ontario.
Moore himself is a Rochester entrepreneur many times over. In 1980 he started Gradient Lens Corp., a maker of precision optics and optical instruments. He was the founding CEO of the Infotonics Technology Center Inc. in Canandaigua, a business-industry consortium that develops and commercializes photonic and microsystems technologies.
At UR, Moore has served as dean of the School of Engineering and Applied Sciences and director of the Institute of Optics. He also is director of entrepreneurial activities at the Center for Entrepreneurship, established in 2004 after UR was awarded a five-year, $10.5 million grant from the Ewing Marion Kauffman Foundation to bring entrepreneurship education to academia. (His wife of 11 years, Gunta Liders, is director of UR’s Office of Research and Project Administration.)
On a national level, Moore chaired the 1990 Hubble Independent Optical Review Panel to gauge the correct prescription of the Hubble Space Telescope. In 1993, he became science and technology adviser to Sen. John Rockefeller IV of West Virginia. And from 1997 to 2004, he served as director of technology in the White House Office of Science and Technology
Policy for the Clinton administration.
Moore believes with passion that high-tech entrepreneurship is central to Rochester’s future vitality. Gone are the days when industry giants Kodak and Xerox Corp. would hire enough twentysomething engineers and business managers to sustain a robust economy, he says. Now it is up to visionary startups. And he is optimistic that a new era of bipartisan leadership is paving the way.
“It’s demographics. Ten years from now we could be in a heap of trouble because that generation will be missing,” Moore says. “If we’re going to turn this community around, we’ve got to keep more of the students staying here. This is my small effort to do that.”
G. William Schwert
Click through William Schwert’s personal Web site and you will find a choice summation of his approach to teaching:
“Your advantage as a Simon School graduate is that you approach business decision making from the standpoint of getting the analysis right,” he tells students of his advanced applied statistics class. “One warning: Statistical analysis is no substitute for thinking.”
What Schwert wants most for students, he says, is three things: exposure to the tools of business management, the ability to apply those tools intelligently to solve business problems and the communication skills to argue effectively for your position.
“There is little point in coming to the school for years and not leaving a lot different than you arrived,” he tells students.
Schwert notes that examining research data with an inquiring mind frequently leads him to question conventional interpretations. On examining the term “hostile takeover,” for example, he sees more similarities than differences between “hostile” and “friendly” takeovers-it’s just that in “friendly” takeovers, the hard bargaining takes place behind closed doors and the parties come out shaking hands for the press conference. Regarding initial public offerings, he believes the data raise questions on whether book-building by investment banks-in which potential investors are sought out and surveyed really gains a company the best share price.
Examining poison pills, Schwert says the data indicate the defense measure stands for hard bargaining on behalf of shareholders-not a means to entrench management.
“Some of my best friends, including Mike Jensen and Gregg Jarrell, think I’m just wrong about this,” notes Schwert, distinguished university professor and professor of finance and statistics.
If so, that is a debate among heavyweights. Michael Jensen, a former professor at both the Simon School and the Harvard Business School, is a world-renowned expert on organizational strategy. Simon School colleague Jarrell is the former chief economist of the SEC.
Schwert himself is a highly respected authority on stock market volatility and managing editor of the prestigious Journal of Financial Economics.
Looking to the future, Schwert sees the Simon School remaining committed to its high academic standards, even in the face of the pressure felt by business schools throughout the country to win the media-ranking wars. The best education, he says, doesn’t always win the popularity contest; what counts is graduates’ career-long ability to solve problems as they evolve in a changing world.
If you scroll to the bottom of the “Teaching” page on his Web site, you will find a quote from Walt Whitman that Schwert believes “says it better than I can”:
“You are also asking me questions, and I hear you; I answer that I cannot answer-you must find out for yourself.”
The last week of November will find Abraham Seidmann in Chicago, pursuing one of the central personal and professional missions of his life.
Seidmann will attend the 92nd scientific assembly of the Radiological Society of North America, helping to spread word of his pioneering work on medical informatics among an audience of more than 60,000 physicians, researchers and allied health professionals.
Medical informatics is a developing field that seeks to build integrated systems linking laboratories, radiologists, pharmacies, physicians and hospitals to provide a consistent view of patient records. Everyone wins with such systems, Seidmann says. Medical providers save time by not having to repeat information gathering. And patients are protected when everyone sees a complete picture of their medical histories, chronic conditions, prescribed medications and drug sensitivities.
“One of the major issues in the delivery of advanced patient care in the United States is lack of integrated medical records tracking patient history from cradle to grave,” says Seidmann, Xerox Professor of Computers, Information Systems and Operations Management.
Advancing medical technologies is an issue that hits home to Seidmann. He lost his first wife to melanoma and his second wife to lung cancer. Today, he conducts research sponsored by Kodak and Rochester General Hospital, and, working with Excellus Blue Cross Blue Shield, Rochester Region travels throughout Upstate New York to educate medical communities in how to implement state-of-the-art electronic systems.
“I’ve also been in touch with senators in Washington, D.C., regarding the need for a more coherent national policy on this topic,” Seidmann says.
An internationally recognized expert in operations management, Seidmann began his career in Israel working on information systems for the banking industry. He joined the Simon School faculty in 1986, quickly winning the MBA class Superior Teaching Award and later its Top Professor Award. Seidmann has enlarged the Simon School curriculum with new courses introducing advanced material on the strategic and economic aspects of business information systems. He has published more than 100 research articles and serves as an editor for leading journals, including the Journal of Management Information Systems and Management Science.
“My general interest is using economics and management science in trying to understand how to price information and information services and how to better design the delivery of executive information systems in the most cost-effective way,” he says.
Seidmann has consulted with companies from Xerox to SmithKline Beecham, with Israel’s Institute of Productivity and with the Israeli Ministry of Defense. With close ties still to Israel, Seidmann travels there twice a year to visit family and consult with colleagues.
This year marks Seidmann’s 20th anniversary with the Simon School. Working with his MBA and Ph.D. students is one of the great satisfactions of his career, he says. He also looks forward to continuing his research-for example, to improve imaging technologies for earlier detection of cancer.
“Mammography is old technology,” he says. “We are pushing to move the frontier.”
Clifford Smith recalls that his dad used to say: “For the fellow who only knows how to use a hammer, everything looks like a nail.”
He remembers these words when describing one of the chief satisfactions of being a professor at the Simon School: cross-disciplinary collaboration with colleagues.
For example, Smith is the author, with professors James Brickley and Jerold Zimmerman, of “Managerial Economics & Organizational Architecture,” a groundbreaking textbook that applies the lessons of economics research to practical issues of corporate structure and decision-making.
Smith is an expert in corporate finance, Brickley an authority on organizational economics and Zimmerman an accounting guru. In most other top business schools-where faculty can reach the hundreds-these experts would hardly ever meet, Smith says. But the Simon School, with roughly 40 professors, is small enough to avoid excessive specialization-a huge advantage for addressing complex, real-world problems.
“We tend not to clique up,” says Smith, the Louise and Henry Epstein Professor of Business Administration and professor of finance and economics. “In another school we’d be three different guys in three different departments … but most business problems have facets that cross traditional functional boundaries.”
Likewise, Smith as a teacher emphasizes problem-solving skills above factual information. The half-life of facts-details of a tax code, for example-is so short that the information will be obsolete by the time a student graduates. The business school’s job, Smith says, is to educate managers for the long term.
“I’d rather focus on things that are more based on principles,” he says. “I want to give students a conceptual framework that will be useful for the rest of their lives.”
Students in the Simon School’s executive MBA program have given Smith their Superior Teaching Award 19 times; students in the MBA program have voted him the award 10 times.
Smith also is recognized internationally in his field. He has served as president of the Financial Management Association National Honor Society and sits on the board of Home Properties Inc., a real estate investment trust. He has published 16 books and more than 90 articles in leading finance and economic journals. Among his editing roles, he serves as an adviser to the Journal of Financial Economics.
Smith himself continues to advance the leading edge of academic research, confronting such complex and changing problems as risk management.
Thirty years ago when he was earning his Ph.D., he says, risk management meant buying insurance in case your factory burned down; the academic community hardly talked about it. All that has changed. Today, corporate finance departments grapple with multiple types of exposure, from interest-rate risk to foreign-exchange exposure. Wall Street in response has developed a plethora of hedge products, such as futures contracts, swap contracts and options contracts.
“Who should buy these things? What questions should they be asking? It has to do with your tax status, HR policy, organizational structure,” says Smith, who has served as president of the Risk Theory Society and associate editor of the Journal of Risk and Insurance. “These discussions just didn’t take place 30 years ago.”
Joanna Shuang Wu
Enron, WorldCom-their failures were due to ingeniously complex manipulations of financial data, right?
Wrong. It was simple accounting fraud-the kind of stuff a Simon School student could detect after one day in Joanna Shuang Wu’s introductory accounting class.
“A lot of basic things we’re learning the first day of class, there could be a $10 billion accounting fraud because of that,” says Wu, associate professor of accounting. “A lot of the students don’t realize that at first.”
To drive the point home, Wu covered the Enron case in class while the executives were on trial. She looked at the simple accounting breaches that brought such catastrophic consequences. She examined the management incentives that paved the way. And she hammered home the importance of ethics.
“It keeps them interested in the course, and they get to understand what’s going on out there,” she says.
Wu is one of the newest members of the Simon School faculty, among a growing number of women entering the professorial ranks. She teaches corporate financial reporting to the incoming MBA class and conducts research into international financial reporting, the behavior of financial analysts, management compensation and mutual fund performance.
One of her current projects is to examine the costs and benefits of the Sarbanes-Oxley Act. Passed in 2002, Sarbanes-Oxley is considered the biggest change to U.S. securities laws since the New Deal. The law increases financial-reporting requirements at public companies and stiffens civil and criminal penalties for fraud. It was meant to protect shareholders, but does it? Wu set to find out.
“The market reaction was rather negative,” she says. “From the shareholders’ perspective, it was hugely costly.”
Working with Professor Jerold Zimmerman and Ph.D. student Feng Gao, Wu also looked at whether small firms try to stay small to remain exempt from Sarbanes-Oxley. Evidence shows they do-another unintended consequence of the law.
Wu has published in the Journal of Finance and the Journal of Accounting and Economics. She is associate editor of the latter.
What is it really like being one of the first female professors at the Simon School? Wu points out that two out of the three new faculty hires last year were women. She finds the Simon School a welcoming and collegial place, she says, where good work is supported and respected.
“I’m sort of among the first few (women) in the business school, but I don’t feel like I had to break barriers or overcome tremendous odds,” Wu says. “It’s not like that.”
Among his many research interests, Jerold Zimmerman has turned his sights on an issue of crucial interest to the Simon School itself: the phenomenon of business school media rankings.
The rankings are to Business Week, U.S. News & World Report, the Wall Street Journal and the Financial Times what the swimsuit issue is to Sports Illustrated: a wildly popular way to sell copies. But do they really help students shop for the best education?
Consider what Zimmerman-Ronald L. Bittner Professor of Business Administration and professor of accounting-has to say:
“U.S. business schools are locked in a destructive competition for media rankings that diverts resources from long-term knowledge creation,” he writes in a 2006 paper, co-authored with Linda DeAngelo, a professor at the University of Southern California. “MBA curricula are distorted by ‘quick fix, look good’ packaging changes designed to influence rankings criteria, at the expense of giving students a rigorous, conceptual framework that will serve them well over their entire careers.”
A business school’s popularity can rise or fall depending on media rankings, Zimmerman notes. Yet rating changes year to year represent more statistical noise than news. And they pressure schools into all kinds of unwise actions, from dumbing down courses to diverting resources from undergraduate and Ph.D. programs.
Don’t get Zimmerman wrong: the Simon School does rank high by media measures. But that is not what the school is all about. Zimmerman recalls the guiding intentions of William Meckling, who as dean from 1964 to 1983 led the Simon School from a small evening and undergraduate program to a graduate research and teaching institution of national stature.
“Dean Bill Meckling believed strongly that by getting the faculty to work across functional areas-accounting, economics, finance-there could be great synergies that would be the differentiating factor of Rochester from other business schools,” he says.
Zimmerman’s own career shows the advantages of this approach. An accounting specialist, he is co-author with Clifford Smith, a finance expert, and James Brickley, an authority on organizational economics, of “Managerial Economics and Organizational Architecture,” a book recognized for bringing cross-disciplinary research expertise to solving real-world business problems.
Zimmerman also walks the talk in the business world. He serves on the boards of IEC Electronics Corp., a Newark contract manufacturer, and CPAC Inc., a chemical company in Leicester.
That combination of corporate governance experience and collaborative academic research brings depth and vitality to teaching, he says.
“When teachers bring into the classroom current research ideas, the unresolved issues of the day, it challenges students to think,” he says. “The flow of ideas back and forth, from the boardroom to the classroom to research-you can’t separate those things. … Each informs the other.”
Among his many professional accomplishments, Zimmerman is an editor of the Journal of Accounting and Economics, winner of the American Accounting Association Seminal Contribution to the Accounting Literature Award, and author of several influential accounting textbooks. He also has served as mentor to numerous Ph.D. students who have gone on to make substantial contributions in their fields.
Looking to the future of business schools, Zimmerman sees some possible solutions to the ranking problem. One is to work with the media to develop more balanced ranking criteria. Another is to withstand the pressure to shortchange research and substantive teaching.
“In short,” Zimmerman writes, “we need to get as creative at resisting or negotiating better rankings criteria with the media as we have been at gaming the existing criteria.”
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11/17/06 (C) Rochester Business Journal