Peter Drucker,1909-2005

SPRING/SUMMER 2006

the Alumni Magazine of NYU Stern STERNbusiness PETER DRUCKER, 1909-2005

THE MANAGEMENT THINKER'S YEARS AND WORK AT NYU STERN

Media Moguls Crash Campus Greenspan Honored Michael Steinhardt on Investing Kidville Grows Up Enron's Impact on Jobs Beware Celebrity CEOs Profits at Family Firms a letter fro m the dean

In this issue of tioned to carry out by virtue of our location in New STERNbusiness we mark York. We see New York, in all its complexity and the passing of Peter dynamism, as our classroom. In and around the city, Drucker, the prolific and the huge concentration of companies, managers, and brilliant management theo- executives serves as a vast source of knowledge – and rist who spent the most pro- as an audience eager for the future talent we provide. ductive portion of his remarkably long and influential As seen in this issue’s alumni pages, Stern is active- career at New York University Graduate School of ly connecting with a community that spans the globe. Business Administration, as Stern was then known. But we also have our sights set closer to home. In Drucker had a transformative impact on the field September, our Langone Part-time MBA Program, of management, and on the broader business culture, which already offers evening and weekend-only because he was a creative and innovative thinker who options at our Washington Square Campus, will return did not confine his analysis to the standard theories of to Westchester County. This location will make it more the day. While he spent much of his career based at convenient for working professionals in the area to universities – he taught at the School from 1950 to advance their careers without stepping away from 1971 – he never fit conveniently into the academic them. Students in Westchester will benefit from the mold. same excellent curriculum and faculty and receive the Whether the topic was the impact of technology or same degree as all NYU Stern MBA students. the management of large corporations, he always Making it easier for busy professionals to integrate offered a bold and fresh viewpoint – one in which close a first-rate business education into their working lives observation and experience informed theory. The same is the sort of project that would surely have intrigued process worked in reverse. Through his writings, Peter Drucker. With this issue, we honor his legacy teaching, consulting, and lectures, Drucker brought and contributions to the School and to the communi- theory and academic research outside the walls of the ties we serve, and we highlight the many exciting university to an extraordinarily broad audience. efforts and initiatives underway at Stern. Drucker encapsulated much of what we regard as our mission at NYU Stern – bringing together the best of academic research and real-world experience to provide the best business education to the brightest Thomas F. Cooley business students. It’s a mission we’re uniquely posi- Dean STERNbusiness A publication of the Stern School of Business New York University

President, New York University contents SPRING/SUMMER 2006 John E. Sexton Dean, Stern School of Business Thomas F. Cooley 2 Public Offerings Deputy Dean, Stern School of Business Alan Greenspan receives honorary degree, KKR founder Russell S. Winer Henry Kravis discusses private equity, and Vanguard founder John Bogle and author Kurt Eichenwald talk ethics Vice Dean and Dean of the Undergraduate College 8 Stern in the City Sally Blount-Lyon 8 Estée Lauder’s global brand manager, By Daniel Gross 9 A serial entrepreneur’s latest venture is child’s play, Chairman, Board of Overseers By Stephanie Sampiere William R. Berkley 11 8 questions for Houston Rockets owner Leslie Alexander Chairman Emeritus, Board of Overseers 12 Cover Story – Peter Drucker, 1909-2005 Henry Kaufman Remembering the NYU Stern years of the 20th century’s most Associate Dean, Marketing influential management theorist, By Dale E. Zand, and External Relations Richard Freedman, and David Rogers Joanne Hvala 18 Leading Indicators Editor, STERNbusiness Stern’s CEO Series: Talking media franchises with Anne Fudge of Daniel Gross Young & Rubicam Brands, Mel Karmazin of Sirius Satellite Radio, Managing Editors, STERNbusiness and Janet Robinson of The New York Times Company Stephanie Sampiere and Jenny Owen

22 Prospectus Contributing Writers New faculty appointments, noteworthy papers, awards, and honors Shana Carroll, Rika Nazem, Jessica Neville, Angela Parks, Carolyn Ritter, Susan C. Walsh, Lisette Zarnowski Office Hours – Faculty Research Design 24 The Burden of Celebrity Esposite Graphics How CEOs can lose by winning awards, By James B. Wade, Joseph F. Porac, Timothy G. Pollock, Letters to the Editor may be sent to: and Scott D. Graffin NYU Stern School of Business 28 Heir Loss Office of Public Affairs 44 West Fourth Street, Suite 10-160 Do shareholders benefit when corporate control stays in the family? New York, NY 10012 By Morten Bennedsen, Kasper Nielsen, Francisco Perez-Gonzalez, www.stern.nyu.edu and Daniel Wolfenzon [email protected] 32 Enron’s Final Accounting Fraudulent accounting can lead to substantial job losses, Illustrations by: By Simi Kedia and Thomas Philippon Gordon Studer Chrostophe Vorlet Steven Salerno 36 Peer to Peer Michael Caswell Student Life in Washington Square and Beyond: Robert O’Hair C200/BNP scholarship, a thriving tutoring business, the Undergraduate College partners with Wharton, and students’ in-depth look at the Met Opera 38 Alumni Affairs Alumni News and Events: The Alumni Ball, a career network and global community, and alumni in Westchester/Fairfield 42 Class Notes

48 Past Performance Dean Abraham Gitlow witnessed NYU Stern’s maturation from a post-war factory to a global power, By Daniel Gross Public Offerings

A SARBANES-OXLEY FOR NONPROFITS? Barry Fingerhut (MBA ’69), president of GeoCapital, LLC, who sits on a number of private boards, including the NYU Stern Board of Overseers, spoke about his experience as a board member at FEGS, the largest not-for-profit health-related and human services organization in the United States. According to Fingerhut, FEGS is already years ahead of public and private boards in terms of accounting practices and has always had adequate controls in place. However, he noted that a majority of nonprofits are under-funded and under-managed, and would have a difficult time being compliant with Sarbanes-Oxley. Gerald Rosenberg, chief of the New York State Attorney General’s Charities Bureau, discussed how his

From left to right: Professor Seymour Jones, Mark Lilling, Barry Fingerhut, and Joel Levy. agency investigates accounting abuses by nonprofits using anonymous tips from insiders and by reading the In November, nearly 200 academics, industry practi- charities section of The New York Times. tioners, regulators, and legal professionals attended a Teresa John, professor of accounting at NYU Stern, gathering at NYU Stern to debate whether it is practical concluded that certain provisions of Sarbanes-Oxley, or necessary for nonprofit organizations to implement such as those dealing with independent boards, audit Sarbanes-Oxley governance reforms. The event, spon- committees, audits, and improved controls, would sored by NYU Stern Ross Institute’s Corporate indeed benefit the not-for-profit world. Governance of Not-for-Profits, was moderated by Michael Hayes, a partner at PricewaterhouseCoopers Seymour Jones, clinical professor of accounting at NYU LLP, said he believes that a majority of nonprofits are Stern, and Mark Lilling (BS ’72), managing director at already implementing a good number of Sarbanes- Great Neck, New York-based Audit Committee Oxley regulations, but on their own timetable. Other Consulting Team LLC. panelists included: Joel M. Levy, CEO, YAI/National Lilling noted that in New York City alone there are Institute for People with Disabilities, and James S. 92,000 nonprofit organizations with a total of $218 bil- Sligar, a partner at Milbank, Tweed, Hadley & McCloy, lion in assets. Given the vast number of organizations – LLP. and the vast size of their assets – he asked panelists The Corporate Governance of Not-for-Profit whether nonprofit organizations should be subject to a Organizations forum was made possible through the set of regulations similar to those imposed on corpora- generous support of NYU Stern alumnus Mark S. Lilling tions by the 2002 Sarbanes-Oxley Act. and The Audit Committee Consulting Team LLC.

AMY CHUA DISCUSSES In September, Amy Chua, profes- Book of 2003.” Chua captivated the attracted world-class leaders to NYU FREE MARKETS AND sor at Yale Law School, delivered the audience with her perspective on the Stern including such prominent fig- INSTABILITY annual Lubin Lecture to a packed impact of globalization, and dis- ures as Vice President Hubert audience of NYU Stern students and cussed at length her theories on Humphrey, former US Senator Jacob alumni from the Undergraduate “market-dominant minorities,” citing J. Javits, and former Federal Reserve College's Scholars Program. During examples ranging from Burma to The Chairman Paul A. Volcker. In April, her lecture, Chua recapped the key Republic of the Ivory Coast. Thomas Friedman, foreign affairs themes from her book, World on Fire: The Lubin Lecture was estab- columnist at The New York Times, How Exporting Free Market lished by Joseph I. Lubin, a distin- journalist, and author of The World is Democracy Breeds Ethnic Hatred and guished business, civic, and philan- Flat, will deliver the 2006 Lubin Promotes Global Instability, which thropic leader and Trustee of New Lecture. The Economist selected as a “Best York University. The lectures have

2 Sternbusiness great teacher, we might have had a great jazz player.” Top: New York University President In accepting his hon- John Sexton (left) and orary degree, Greenspan NYU Provost David commented on how, on McLaughlin (right) confer Alan Greenspan. average, world standards of living are rising in large Bottom: Stern Dean Thomas Cooley con- part because of the widen- gratulates Greenspan. ing embrace of competitive

Photos by Phil Gallo free markets in China and India. “Since the autumn of 2001, global gross domestic product per capita has grown more than 8 percent. And NYU AWARDS GREENSPAN AND BROWN growth in developing Asia, HONORARY DEGREES where so many of the world’s poor reside, has At a special convocation in December, New been considerably faster,” York University conferred honorary degrees said Greenspan, whose upon two highly distinguished figures in the field of 18-year tenure at the helm of the nation’s central bank global finance: Alan Greenspan, chairman of the Board ended in January. of Governors of the Federal Reserve System, and Gordon Brown, who has served in the UK’s top financial post Brown, chancellor of the Exchequer of the United since 1997, lauded both NYU and New York City in his Kingdom. acceptance speech. “It is a privilege to be awarded and In the ceremony’s welcoming remarks, NYU Stern to receive an honorary degree in this great city, from this Dean Thomas F. Cooley said that both Chairman great university, which by virtue of its location – in and Greenspan and Chancellor Brown have kept their of the city – has become a global university of and for nations’ and the world’s economies on course and have the world,” he said. had a transformative influence on the way these Like Greenspan, Brown also discussed global eco- economies have developed. Dean Cooley also shared his nomic trends. “Globalization can work for people or pride in Greenspan (PhD ’77, MA ’50, BS ’48), one of against people,” Brown said. “Poorly managed, global- Stern’s most noted alumni: “At the Stern School, we ization can create a vicious circle of poverty, widening aspire to teach our students about the transformative inequality, and increasing resentment. Managed wisely, potential of business and the global business environ- it can lift millions who participate in the world economy ment,” he said. “No one represents this aspiration in a out of deprivation and become the high road to a more more realized form than our most celebrated alumnus, just and inclusive global economy.” Alan Greenspan.” Greenspan left the audience with a final thought: Robert Kavesh (BS ’49), NYU Stern emeritus profes- “America’s founding fathers … bestowed upon us a sys- sor, presented Greenspan with his degree and reflected tem of government and a culture of enterprise that have on their relationship. They were students together at propelled the United States to the greatest material pros- NYU, which Greenspan attended after studying the sax- perity the world has ever experienced. Today’s students, ophone at the Juilliard School. Later, Kavesh taught both here at NYU and throughout our country, are car- Greenspan as he pursued a graduate degree at Stern. rying forward those traditions. I know they will improve NYU President John Sexton shared an observation pro- upon this inheritance of democratic government and free vided by Greenspan’s wife, NBC correspondent Andrea markets in ways that we have yet to imagine.” Mitchell, who said, “If Professor Kavesh were not such a

Sternbusiness 3 Public Offerings

FLORIO'S GUESTS INCLUDE MEDIA BIG SHOTS global perspective, decentralized management, and strong TOM FRESTON, MARTHA STEWART, AND SUSAN LYNE employee culture. He encouraged entertainment managers to hire a diverse group of talented people and keep them informed; create a positive and fun corporate culture; maintain a passionate and open-minded attitude; put creative people in charge; celebrate success; give back to the community; and recognize when there is a need for a “good shake-up.” Above all, Freston encouraged students to “Do something you like. Luck and timing may not always work in your favor, but that doesn’t mean you're not succeeding because of your abilities.” On November 2, Florio brought in Martha Stewart, Martha Stewart (left) and Susan Lyne. founder, and Susan Lyne, president and CEO, of Martha Steve Florio, (BS ’72), an executive-in-residence at NYU Stewart Living Omnimedia, Inc., to speak candidly with Stern, takes the title of his course literally. For his course, students about the rise, fall, and recovery of the lifestyle Leadership in the Communications Industry, the former corporation. president and CEO of Condé Nast Publications, Inc., rou- After years as a stock broker, Stewart pursued her tinely exposes his students to well-known leaders in the dream of creating beautiful “How To” books on homemak- communications industry. ing. She found a partner in Time Warner after meeting Last September, Viacom Co-president and Co-chief much resistance from countless publishers, and proved that Operating Officer Tom Freston (MBA ’69) visited NYU tireless persistence in pursuit of one’s goals does indeed pay Stern and spoke candidly with MBA students and alumni off. Stewart also spoke openly of the scandal involving her about his rise from one of the founders of MTV to the chief sale of shares in the drug company Imclone, which tem- of a leading global media company, which now includes porarily derailed her career and created a series of chal- CBS, Nickelodeon, Comedy Central, Spike TV, and lenges for Martha Stewart Living Omnimedia. Showtime. In January, Freston became the chief executive Susan Lyne followed Stewart, detailing her career path, officer of Viacom. including her term at ABC working to launch hit television Freston said it was important for Viacom to focus on its shows “Desperate Housewives” and “Lost.” Lyne, who joined consumers, meet their needs, and deliver on their expecta- Martha Stewart Living Omnimedia in 2004 during a critical tions, particularly in a “media world that is in an unbeliev- transition for the corporation, described the initiatives she able state of disarray right now – it’s becoming fragmented has put into motion at the company to rebuild momentum, because of the Internet.” He cited creativity, innovation, strengthen the management team, and return the Martha and open-mindedness as key factors in the company’s suc- Stewart image to television. Martha Stewart’s new shows cess, and noted the company’s commitment to having a “The Apprentice” and “Martha” debuted this fall on NBC.

leveraged buy-outs for known acquisitions, RJR Nabisco and expansion into the Asian market with HENRY KRAVIS, underperforming organiza- Toys “R” Us. He then touched on KKR's the opening of offices in Hong Kong WALL STREET tions. Jeffrey Robinson, newest endeavor – the company's and Japan. LEGEND, VISITS Stern assistant professor of NYU STERN management, conducted a candid interview with Kravis in front of an audience of 150 students and alumni. NYU Stern's Berkley Center for Kravis described his early pro- Entrepreneurial Studies, with the help of fessional years as a runner at Stern alumnus Al Berrios (BS '00), Goldman Sachs, which marked the recently welcomed Henry Kravis, co- start of a successful career on Wall founder of Kohlberg Kravis Roberts & Street. He also spoke about the

Co., the private equity firm that was launch of Kohlberg Kravis Roberts & From left to right: Al Berrios, Henry Kravis, Deputy Dean Russell Winer, and Professor Jeffrey instrumental in legitimizing the use of Co. (KKR) and two of its most well- Robinson.

4 Sternbusiness NOBEL LAUREATES, LEGENDARY INVESTORS CONVENE FOR HEDGE FUND CONFERENCE

The rapid growth of hedge funds has been one of the biggest stories in the financial world in recent years. Last September, a conference convened by NYU Stern’s Salomon Center brought together two Nobel laureates, several hedge fund pioneers, and about 400 people from the frequently overlapping spheres of finance and academics to discuss trends and From left to right: Dean Thomas Cooley, Myron Scholes, and Luc de Clapiers. Below, right: Professor Robert Engle spoke about his new research on measuring research in the field. downside risk. The Hedge Fund Conference, sponsored by IXIS Capital Markets, a evaluating hedge funds, member of the fourth largest banking network in and risk strategies/man- France, opened with remarks from NYU Stern agement. Dean Thomas Cooley and IXIS President and CEO In his luncheon Luc de Clapiers. Michael Steinhardt, the former keynote address, Myron managing member of Steinhardt Management LLC Scholes, 1997 Nobel and a legendary figure in the hedge fund industry, Laureate and chairman gave the morning keynote address. Steinhardt of Oak Hill Platinum reflected on his 27-year career in hedge funds and Partners, addressed the discussed the changes that have affected the indus- prevalence and inevitability of systematic risk in try since his retirement. Steinhardt pointed to what hedge funds. These risks include major events, such he views as the alarming proliferation of hedge as Hurricane Katrina and September 11, which funds today, the increased management fees which always impact the economy and ultimately clients’ are not reflected in returns, and the heightened investments but cannot be predicted. Scholes sug- emphasis on transparency between manager and gested that managers build flexibility into their risk client. Steinhardt advised fund managers to make models to account for unanticipated events. sure their first priority is always to make money for The conference concluded with a dinner reception their clients. featuring Alan Blinder, economics professor, co- The conference featured professors from leading director of Princeton’s Center for Economic Policy, business schools who presented new research on vice chairman of The G7 Group, and a former vice hedge fund-related topics, including market price of chairman of the Federal Reserve Board of variance risk; share restriction and asset pricing; Governors. Blinder spoke of the impending regula- hedge fund performance, risk and capital forma- tions the SEC is expected to impose on the hedge tion; and measuring volatility. Robert Engle, 2003 fund industry. He outlined the different types of reg- Nobel Laureate and Michael Armellino Professor of ulations, from disclosure to anti-fraud guidelines, Finance at NYU Stern, shared his new research on and recognized that while some of the generic argu- measuring downside risk. In several panel discus- ments for regulation apply to hedge funds, self-regu- sions, financial services executives covered a wide lation should be sufficient to ensure good business range of issues, including performance expectations, practices.

Sternbusiness 5 Public Offerings

Top, from left to right: Max Holmes, Geoffrey Gold, Marti Murray, Allan Brown, Professor Ed Altman, and Jeanne Marano, executive director of Alumni Affairs.

Bottom: Ed Altman and Wilbur Ross.

PROFESSOR ALTMAN LEADS LIFELONG LEARNING WORKSHOP ON DISTRESSED DEBT Ross provided a case study Edward Altman, Max L. Heine Professor of Finance on his revital- at NYU Stern and the vice-director of the Salomon ization of the Center for Research in Financial Institutions and steel industry in 2002, where he created the Markets, recently led a Lifelong Learning Workshop on International Steel Group (ISG). ISG acquired “Investing in and Analyzing Distressed Debt.” This Bethlehem Steel, LTV, Weirton, Acme, Georgetown, half-day workshop, sponsored by the Office of Alumni and US Steel’s plate operation to become the largest Affairs, featured a presentation by Altman and Wilbur integrated steel company in North America. Then, L. Ross, Jr., the noted turnaround financier and chair- through its merger with Mittal Steel, it formed the man and CEO of WL Ross & Co. LLC, as well as a largest steel company in the world. Ross also discussed luncheon and a panel discussion with industry experts. his interest in purchasing distressed automotive parts Altman offered a preview of his famed “High-Yield enterprises, like Collins & Aikman. In describing the Bond Default and Return Report” for the third quarter roller coaster ride of working with turn-around compa- of 2005. Altman explained that while default rates nies, Ross said, “There are two good days – the day you have retreated from their high in 2002 and investors get in, and the day you get out.” have seen an all-time high recovery rate of 60 percent The workshop concluded with a panel discussion in the third quarter of 2005, there will be higher with industry experts Allan Brown (MBA ’94) from default rates in the future, with larger companies Concordia Advisors, Geoffrey Gold (MBA ’91) of among the victims. “No longer is size a proxy for Strategic Value Partners, Max Holmes from Plainfield health,” said Altman, who was named one of the 100 Asset Management, and Marti Murray (MBA ’86) of most influential people in finance by Treasury and Risk Murray Capital Management. Management magazine. He noted that the market has Altman has been educating Stern MBA students on grown dramatically in recent years, with a face value of “vulture investing” and “bankruptcy predication” for $700 billion, market value of $540 billion, and an esti- 30 years and has approximately 50 graduates known mated $150 billion dedicated to investing in this area as “Altman’s Vultures,” who are established profession- in America alone. als in the distressed debt markets.

6 Sternbusiness VANGUARD FOUNDER, Bogle has been an advocate for the have been greatly compromised as the management compensation; the pro- BOGLE, CRITICIZES individual investor for more than 50 US economy has moved from an own- portion of stocks held by individuals CORPORATE GREED years. Since retiring from Vanguard ership society in which individuals has fallen from 92 percent in 1950 to in 2000, he has emerged as a fre- held the capital of corporation, to a 32 percent today; and the mutual fund quently caustic critic of corporate structure in which institutions predomi- industry has been taken over by finan- governance. His most recent book, nate as owners. As a result, he said, cial conglomerates, with 41 of 50 fund The Battle for the Soul of Capitalism, owners' capital has been put at risk to managers being publicly held. lays out his views on the recent build the interests of corporate and “It is time to build the world failures of the American financial financial managers. Bogle suggested anew,” Bogle argued. “Fund managers system. that we need to return to building com- today are in the business of earning a In a discussion on November 17 panies with integrity, and to a system return on their capital, not yours.” He with a packed house of alumni and in which the money invested in a com- called for the formation of a federal students, Bogle noted that his lec- pany and put at risk by the investor is commission that would develop poli- tures at NYU Stern – he was a visit- actually used to benefit the investor cies to respond to corporate failures. ing professor in the 2000-2001 aca- rather than corporate and financial He also recommended taking the demic year – served as a precursor to managers. steps necessary to eliminate the Mutual fund pioneer John Bogle his fifth book, The Battle for the Soul Bogle, 75, offered extensive anec- shortfall of public, private, and indi- kicked off NYU Stern's 2005-2006 of Capitalism. The book examines dotes from the corporate, investment, vidual retirement plans, and reaf- Author Lecture Series with a rhetorical how, in Bogle's view, the business and mutual fund arenas. Among his firmed his desire to create a fiduciary jolt. The founder and former head of and ethical standards of investment, observations: there has been a failure society where citizen investors receive The Vanguard Group of mutual funds, corporate, and mutual fund America of corporate gatekeepers and a rise in their fair share.

NEW YORK TIMES REPORTER EICHENWALD fundamental element in the company’s collapse. INAUGURATES HAITKIN LECTURE SERIES Having read all of Enron’s board minutes and docu- ments since 1992, Eichenwald spoke authoritatively In October, New York Times reporter Kurt about the many foolish decisions made at the com- Eichenwald, who chronicled the demise of Enron in his pany. Enron, he noted, invested $12 billion in an best-selling book Conspiracy of Fools, delivered the assortment of ill-advised ventures, including a first Haitkin Lecture. Hosted by NYU Stern's Market, Ethics and Law Program, the liquid natural gas plant in India, retail distri- Haitkin Lecture aims to analyze issues of bution in Brazil, and an Internet broadband ethics and integrity in the practice of busi- business. All these investments were badly ness. It is made possible through the gen- planned, badly executed, and under- erosity of alumnus Jeffrey Haitkin (BS ’68). pinned by poor analysis, which com- Eichenwald, a two-time winner of the pounded the problems brought about George Polk Award for Excellence in Journalism, by a series of complicated, conflict- outlined the business judgments that brought about ridden deals constructed by Chief Enron’s epic failure and the moral lessons of those Financial Officer Andrew Fastow. actions. “The vast majority of what people believe “The question is ‘How did Enron happened, didn’t,” said Eichenwald, who estimated that stay afloat so long?’ not ‘How did it collapse incompetence and bad management were two to three so quickly?’” Eichenwald said. After all, neither times more prevalent than illegal activity. the company’s business model, structure, or managerial Eichenwald chronicled Enron’s transition from a sim- mindset actually worked. Enron had “a poisoned cul- ple oil pipeline company to an energy trading company, ture of arrogance” that silenced those employees who and cited the positive publicity that management questioned management. received in the press as a defining moment in the com- Calling himself “a proponent of financial history,” pany’s development. Enron’s senior managers, he said, Eichenwald urged students to learn from the Enron believed themselves to be so smart that they effectively debacle. “There are lessons each of you can learn,” he abandoned the work. Their collective arrogance was a said. He also cautioned, “We will be here again.”

Sternbusiness 7 sternInTheCity Stepping into the Shoes of a Cosmetic Giant

By Daniel Gross enues were more than $6.3 billion) with operations in 130 countries It can be a daunting challenge and more than 22,000 employees. for a non-family member The company has an to assume responsibility impressive portfolio of for a third-generation brands – Estée Lauder, family company – espe- Origins, Clinique, M·A·C, cially when your bailiwick Bobbi Brown, Donna Karan, includes running the firm’s etc. – that may seem to namesake brand. That’s compete with each other. the task John Demsey “The corporation is run as a (MBA ’82) faces as global portfolio of different brands president of the Estée with unique, dedicated Lauder Brand. brand management and cre- The Estée Lauder ative direction,” said brand is the heart of the Demsey. “Our philosophy is eponymous cosmetics com- that we would rather own pany, founded by Estée our competition than com- Lauder in 1946. While pete with somebody else.” Estée Lauder died in 2004 In 1998, Demsey was at the age of 95, the third named the head of one of generation of family lead- those brands – M·A·C. He ership – her grandson, built it into a $500 million William Lauder, is presi- business, and developed the dent and chief executive M·A·C AIDS fund into a officer of the company, son major fundraising force. Leonard Lauder is the “Companies at the end of chairman, daughter-in-law Evelyn Lauder is senior cor- the day are about people, they’re not just about prod- porate vice president, and granddaughter Aerin is the ucts, numbers, and cash flow,” said Demsey. “When you senior vice president, global creative directions of the can engage people toward a common goal, or raise Estée Lauder brand – carries on the tradition. awareness about issues, it creates a richer environment.” Demsey grew up in Shaker Heights, Ohio, attended Demsey also said that the Lauder family’s personal phil- Stanford University, and went to work at Macy’s after anthropic activities in areas such as the arts and breast graduation. He parted paths from most of his Stern col- cancer were one of the things that attracted him to the leagues in the class of 1982 by forgoing a career in company. “When I joined M·A·C, I saw the work that investment banking and returning to retail, working at was being done with AIDS as an incredible opportunity Bloomingdale’s, Saks, and Revlon before joining Estée to make a difference.” In addition to his current respon- Lauder in 1991 as the vice president of sales for the sibilities with the Estée Lauder brand, Demsey still runs West Coast region. M·A·C. At the time, the firm was privately held and relied For Demsey, the value of the Stern MBA has been in on a few large, powerful brands. Today, Estée Lauder is the thought process it has instilled. “It gives you a context a publicly traded multinational organization (2005 rev- of how to think, and how to gather the information and continued on page 10

8 Sternbusiness and I think before we came along, Little Kids Bring nobody had grasped what parents really want.” The parents have responded. Big Business In the year-plus that Kidville has been open, it has attracted By Stephanie Sampiere more than 3,000 members, most of whom live between At age 37, Andy Stenzler (MBA ’94) recently 60th and 96th Streets on Manhattan’s launched his fifth business. But the idea didn't come east side. While Stenzler says that moms attend the from a fellow Stern graduate, or from the bankers and majority of Kidville classes, dads also try to make them, venture capitalists he got to know while building the as do a fair share of nannies. restaurant chain Cosi. It came from a source closer to “We’ve become a real community,” said Stenzler. him – his wife, Shari Misher Stenzler (Tisch MA ’94). “You can’t choose when your friends have kids, so you Shari had a hectic music class experience with their have to make new friends that have kids the same age. first child, Kylie, which led the couple to create That’s one of the powers of Kidville. It has become a Kidville, New York City’s first urban campus for kids. community for moms to meet, dads to meet, and the In Manhattan’s cul-de-sac-less, concrete jungle, par- nannies to meet.” ents of small children continually seek ways to escape Kidville also offers New York City’s largest pre-school with their children from confining apartments. alternative program. Kidville University is a gradual sep- Kidville’s first location, on the Upper East Side, caters aration program that allows children to start classes with to the area’s more than 15,000 kids under the age of 5. their parents and then socialize with other children and With class names like “Big Muscles for Little Babies,” learn through different types of play. In the past year, “From Bach to Rock,” and “My Big Messy Art Class,” the class has grown from 20 to 105 students. Kidville is a one-stop shop for the one-month to five Kidville University, along with the other Kidville pro- set, offering music, gym, and art classes, as well as a gramming, was developed by the Stenzlers, along place for kids and parents to mingle, shop, and eat. with help from Andy’s mom. Iris Stenzler was The Stenzlers found that parents were looking a New York City public school teacher and for a single place that has all types of classes for day camp owner for more than 40 years. their children, so that they don't have to travel to After she retired, she became an informal different places for art, gym, and dance. Kidville advisor for Kidville, but missed the day-to- took this idea and added additional services for day interaction with children and came on parents who arrive early or have time after class, board full-time as an administrative such as a café for lunch and snacks, a retail store advisor. for buying birthday gifts and toys, and a salon In addition to the Stenzler for kids’ haircuts and moms’ manicures. family, Kidville was founded “Certainly there are a lot of competi- by two families close to tors in this space,” Stenzler said. “But NYU. Laurie Tisch, typically those competitors are either a continued on page 10 music guy, a dance guy, or a gym guy,

Sternbusiness 9 PHOTO BY MICHAEL MOLINOFF sternInTheCity

continued from page 8 continued from page 9 work as a business leader. Having the flexibility, business Honorary Chair of savvy, and sometimes the street smarts to integrate all of the Children’s this is what separates you from your competition.” Museum of His advice for those just starting out in the industry Manhattan, and Liz or looking to transition into it: “Do what you like.” And and Emanuel Stern, be willing to work on the periphery of businesses you're Leonard Stern’s son interested in. With fashion or cosmetics, he noted, there and daughter-in- are “all sorts of ways to get into the game” – in advertis- law, are investors in ing, publishing, retail, and management consulting. the business. So, “Sometimes you might be better served by not going too, is Rammy directly into the industry but by gaining your experience Harwood, current doing something else.” NYU Stern Langone Having celebrated its 60th birthday in March 2006, student and a for- Estée Lauder – like most other well-known brands – Andy Stenzler celebrates with his wife, Shari, and faces challenges. In the US, the waves of consolidation mer partner in their children, Kylie and Colby. and the decline of traditional department stores continu- Stenzler’s earlier ally disrupt established sales channels. Internationally, business, Cosi. Tennis stars Andre Agassi and Steffi “we're working to redefine the brand's regional rele- Graff, and Richard Chapman and Gordon Hamm, own- vance, particularly in Asia. International experience is ers of Garage Management Corp., are also investors in extraordinarily important and probably the most valu- Kidville. able thing I've learned over the last 10 years,” he said. Speaking about his time at Stern, Stenzler described “Take India and China for example. This is where we're how he was able to complete the Langone Program on all going to now in terms of how products go to market. an accelerated pace because of his lucrative first job If you can get international experience, it’s definitely selling commercial air conditioners at York something that will serve you well. It matters a lot now, International. “I was taking nine credits a semester at and it’s going to matter even more in the future.” Stern while I was working, and I got out in two and a Demsey believes that for all that has changed in the half years, with the first class that graduated from the global cosmetic industry, crucial aspects of the compa- new building (the Henry Kaufman Management ny’s culture, philosophy, and brands haven’t changed. Center).” The strategy for future success relies in part on looking Stenzler started Xando the year he graduated. backward. “We’ve really gone back to the DNA and the Xando later acquired Cosi, assumed the Cosi name, and things that made the brand a success.” That means went public. He also has been involved in the founding emphasizing, for example, the skin care for which Estée of GTN.com, an online training company, and was the Lauder herself was so well-known. head of SoLofts, a sister real-estate initiative to And success means continuing to develop new prod- CitiHabitats. Most recently, Stenzler teamed with fellow uct lines to appeal to new generations. Demsey worked NYU Stern alumnus, Kenny Lao (MBA ’04) to launch on the development of the Sean Jean Unforgivable fra- Rickshaw, a fast-casual dumpling restaurant. (See grance for men business with hip-hop impresario and STERNbusiness, Fall/Winter 2005) entrepreneur Sean “Diddy” Combs. The company In offering advice to other potential entrepreneurs, recently teamed with former Gucci and Yves Saint Laurent designer Tom Ford on the Tom Ford Estée Stenzler said: “Take as many risks as you possibly can. Lauder Collection, a re-interpretation of select iconic A lot of students at Stern are married or have young Estée Lauder products. This fall, the team will launch children, and it’s hard to take a risk, but you have to the TOM FORD beauty brand. find ways. There are ways to do it.” The challenge of maintaining an established brand So what’s next for the serial entrepreneur? In May, amid tough competition, while continually introducing Kidville will tap into the 15,000 kids on the Upper West new ones, may seem enormously complicated. But Side. Stenzler also sees Kidville expanding into a media according to Demsey, at root, it’s rather simple. “At the company with DVDs and books on the way. But for end of the day you win by having the right product at now, he is content heading to work with his wife and the right price at the right time.” two kids in tow. The rest is just gravy. 10 Sternbusiness Questions 8LESLIE ALEXANDER (BS '65),Owner, Houston Rockets

1. What has been the biggest change in the league and in ball and baseball, or football. Every player on my team is 20 the business of basketball since you bought the team in percent of my starting team. 1993? 5. The Rockets won the NBA Championship twice in your When I bought the team, there was much more upside in early days of running the team. What are the challenges in ticket prices and local television revenue. Now, the big repeating, especially with the salary cap? upside is going to be from selling out your building, selling sponsorships. Eventually, in the next five or six years, the In basketball, you can’t just sign whoever you want to sign. upside will come in the big increase in national television We have a salary cap. And we have a limit that says no sin- revenue, the use of the NBA in different channels such as the gle player can get more than 25 to 30 percent of the salary Internet, and revenue derived from other parts of the world. cap, depending on the years of service. That makes it much more equal for all teams, regardless of the size of your home 2. Forbes says the Rockets have appreciated in value market. I’m thrilled that we have this kind of structure in nearly five-fold since you bought the team, from about place, and that's one of the reasons the teams go up in value $75 million to $420 million. Are basketball teams good so much. investments? 6. Other than winning a championship, what financial or Yes. The nice thing about sports teams is the lack of volatili- performance metrics do you use to determine whether the ty on the downside. You won’t see a basketball team worth team had a successful season? $420 million one year fall to $350 million the next year. Ultimately, we’re in a content business, and we produce a lot Winning the championship is the only metric I care about. of shows – exhibition games, regular season, and playoffs – every year. What’s more, our sport seems to lend itself to 7. You’re a well-known supporter of animal rights. How global audiences in a way that, for example, baseball doesn't. do you integrate your interests in these areas into your management of the Rockets? Can the two spheres mix? 3. Every business in every industry wants to get in on the Chinese market. Is that why you signed Yao Ming, the I’m on the Board of the Humane Society. We give them free first Chinese player in the NBA? signage in our arena and free radio time. There are no animal products at our merchandise stores in the arena. And if It was a basketball decision, pure and simple. We had the you look at the menus in my restaurants, there’s no veal and first pick, and I just wanted the player I thought could lead no foie gras. I used to be a vegetarian, and I try to eat as lit- me to a championship more quickly. You have to remember tle meat as possible. Our concession stands do sell hot dogs, that the NBA has very strict limitations on what teams can and, of course, the balls are leather. I hear negative things do outside their own boundaries. Most of what we can do in about it once in awhile. But people appreciate it. China revolves around signage in our own arena. That said, our profile in China is very high. There are millions of fans 8. You were a large and early investor in First Marblehead there who live, breathe, and die with the Houston Rockets. Corp., which is in the student-loan business. Why did you think that was an attractive business? And have you been 4. Yao Ming’s new long-term contract means he accounts surprised at its growth? for 25 percent of the salary cap. Does it make you nervous Well, I met the people. And probably three-quarters of the to have so much of your payroll tied up in one player? success of a business are the people, not the product. You Sure it does. And Tracy McGrady has about 30 percent of it. could see that there was going to be a future in private lend- And right now, both of them are injured, and we’re suffer- ing to students, because the government was not going to ing. We’re not winning. My two best players aren’t playing. provide enough. But it took a long time. I invested in this You have to take tremendous risks to win, and this is part of company in the early 1990’s, and there were a lot of lean the business. This is another big difference between basket- years until it went public in 2004.

Sternbusiness 11 sternInTheCity

Peter Drucker, 1909-2005 THE MANAGEMENT THINKER'S YEARS AND WORK AT NYU STERN

Drucker’s Vibrant, Timeless Wisdom

THREE FORMER CHAIRMEN OF NYU STERN'S MANAGEMENT DEPARTMENT ASSESS DRUCKER'S LIFE AND WORK, AND HIS TWO FRUITFUL DECADES AT THE SCHOOL.

By Dale E. Zand, Richard Freedman, and David Rogers

Peter Drucker, perhaps the most influential management thinker of the 20th century, died on November 11, 2005, at the age of 95. Drucker, who taught at NYU Stern from 1950 to 1971, was a prolific author with a remark- able ability to communicate with executives in business, nonprofit organizations, and government. The business press referred to him as “the guru of management.” And while it was not a title he sought, it was apt. Through his 40 books and hundreds of articles, Drucker changed the way academics, managers, and laypeople thought about the corporation and its role in society. For his many contributions, he was awarded the Presidential Medal of Freedom in 2002. STERNbusiness asked several members of the NYU Stern community who knew Drucker and his work to participate in a virtual symposium on the impact he had on management – and on Stern.

12 Sternbusiness eter Drucker was born in Vienna in 1909 and was trained in political philosophy, law, and economics in Europe. He was a clerk in a Hamburg export firm, a security analyst in a P Frankfurt bank, and an economist at a London bank. His writing skills brought him to America in 1937 as a correspondent for several British newspapers. After the publication of his thought-provoking book The End of Economic Man (1939), which was favorably reviewed by Winston Churchill, Drucker became a professor of philosophy and politics at Bennington College in Vermont. In The Future of Industrial Man (1942), Drucker argued that the catastrophic effects of centralized state control in Germany and Russia leading up to World War II demonstrated that democratic socialism was a deeply flawed, unreliable political philosophy. He concluded that independent, effectively managed, industrial corporations held the key to human welfare in a democratic society.

Sternbusiness 13 sternInTheCity Peter Drucker, 1909-2005

A Lasting Impression n 1945, General Motors invited Drucker to study its inner workings, which gave him an unusual opportunity to When he was a PhD student at Stern, Henry Kaufman (PhD study management in action in a major corporation and '58), now chairman emeritus of the Board of Overseers at NYU led to his landmark book Concept of the Corporation. Stern, was one of Drucker's pupils. In a letter to Dean Thomas I After writing this book, he was no longer the arms-length Cooley last fall, Kaufman, president of Henry Kaufman & Co., political economist talking about the firm as an abstract entity. He had been inside the belly of the beast. And from that remembered his former teacher: point on, Drucker came to understand and appreciate the incredible I was fortunate to be a student of his in the 1950's. His impact management could have on society’s quality of life and eco- insights and perceptions left a lasting impression on me as they nomic well-being. did on so many others. In my time, his book, The Practice of Management, had already reached wide acclaim and quite a few Fruitful Tenure Drucker became deeply interested in management as a study in of the views that were expressed subsequently in his book, The itself. He was attracted to New York University Graduate School of Age of Discontinuity, were sprinkled in many of his lectures. Business Administration (GBA), as Stern was then known, in 1950 What perhaps stood out to me as most significant was his with its student body of working managers and executives who had capacity to spot important changes and structural develop- sufficient experience and motivation to appreciate both management ments that were bound to have an influence on management theory and practice. During his tenure at the School, Drucker wrote more than 10 books. Among them were several that established his and on economic behavior. That approach left its imprint on reputation as a leading thinker in management. His insights in these me. During my professional career, I have tried very hard to books are still current, almost half a century later. discern the differences between current developments in busi- Looking back, it is evident that his years at Stern were some of ness and finance and those of the past. his greatest and most productive. The Practice of Management Peter was also helpful to me in a personal way. He was (1954) examined the definition of management, its role in organizations and society, and why management matters. The Effective one of the six professors who questioned me for three hours, a Executive (1966) explored what makes executives productive and requirement for getting a PhD degree from the School. I started how they should manage the many demands on their limited off very poorly in my oral defense, but at midpoint I was capabilities and time. The Age of Discontinuity (1968) was allowed to go to the bathroom. Peter followed me and said, remarkably prescient. It foresaw the rise of global organizations, “Henry, your performance during the first half hour was terrible, the development of an interdependent world economy, the need to make the poor productive in all nations, and the dispersion of but you are beginning to recover, and if you now steady out, knowledge and its implications for education, you will pass the oral examination.” I always felt that was a work, and leadership. kindly thing for him to do considering I was just a fledgling Management: Tasks, Responsibilites, and junior banker at the time. Practices (1973) was Drucker’s magnum opus, a Peter Drucker was not one of the academic breed that often volume of almost 900 pages with 61 chapters. It was a stunning display of dominate life at a university. Nevertheless, he was a giant in the scope and depth of his analytic his field. Peter Drucker, Marcus Nadler, and several other talent and writing craftsmanship. professors at that time provided strong footings upon which The volume examined a huge the School was able to build an institution of even greater range of topics, including the elements of business perform- prominence. – Henry Kaufman ance, managerial work and skills, workers and worker

14 Sternbusiness productivity, top-management tasks, corporate strategies, organization structures, and business social responsibilities.

Unconventional Wisdom Although many of his ideas may seem conventional today, he broke new ground when he formulated them. The Economist noted that Drucker is “the one management thinker every educated person should read.” As a teacher, his probing analysis of management issues provided students with new insights and ways of studying problems. In an age when management and marketing were taught through formalistic prescriptions built around Weber’s classic model A Colleague Remembers of bureaucracies, Drucker broke the mold by focusing on the reality of problems managers faced in organizations. Ralph Davis’ The Robert (Bob) Kavesh (BS '49), who joined NYU Stern's Fundamental of Top Management (1951), then one of the most faculty in 1958, was Drucker's colleague for nearly a decade widely-used management textbooks, seems ancient and irrelevant and a half. compared to Drucker’s classic, The Practice of Management (1954), which is still fresh and vibrant today. Peter was the great one for ideas, notions, and concepts. I rucker formulated or expanded many of the basic have seen just about everything that he had written, and there concepts of modern management. For example, the is not a hint of an equation. During the 20-plus years that he role of profits as a cost of capital and fund for inno- was at NYU, the field of business education was changing, vation; the importance of decentralization rather D becoming more analytical and mathematical. And so there was than huge, centralized functional departments in large organizations; the liberation of entrepreneurship; the focusing a major difference between the Peter Drucker approach to power of management by objectives; the need to understand cus- thinking, and the later thinking. Some people may have said tomers and create products they want, rather than push the sale of that he seemed to be talking common sense. But it was much those the firm could manufacture but customers did not want; the more than that. When you go back, and you read some of his emerging importance of knowledge workers; the role of labor as a earlier works – like the GM study – you can see how profound creative human resource rather than a disposable cost of production; the centrality of executive integrity; and the need to reign in chief and meaningful it is. When I read the works of Peter Drucker, I executive pay. Any one of these themes could occupy the entire find myself nodding in agreement. career of an academic or consultant. Yet they and many others We both lived in Montclair, NJ, and we would get together rolled off Drucker’s pen year after year with new and more chal- from time to time for dinners, almost always at his house. At lenging insights. these dinners, he'd open up a discussion, and then it was He believed that nonprofit organizations, in addition to business and government, make crucial contributions to Peter Drucker almost free-associating. His mind was unbeliev- society. In his later years, he spent much time able. He would jump all over the place, from Japanese art to advising them, and he summarized his German novels, to philosophy. He was a learned man, and views in Managing the Non-Profit when given the opportunity to sit or stand at a pulpit, he was Organization: Practices and Principles superb. He did have an accent, and that lent a little more (1990). After his 22-year stint at the authority to what he said. In all the years he was here, I never School, Drucker accepted a posi- heard him say an unkind word about anyone. – Bob Kavesh tion at Claremont College in California. But he returned

Sternbusiness 15 sternInTheCity Peter Drucker, 1909-2005

annually to Stern until 1991 to conduct public seminars with panels of leading academics and practitioners. For two decades, Drucker headlined the Distinguished Seminar lecture series held every April. Along with invited guest speakers, Drucker held audiences of several hundred executives captive for two days. rucker described himself as a journalist, writer, and teacher rather than a traditional academic scholar- researcher. Because he was accustomed to the dead- D lines and pressures of a journalist, he said that first he wrote as much as he could about a topic of interest and, therefore, discovered what he didn’t know. He then set about filling the gaps. This approach worked for him because he was a voracious reader, a sensitive listener, and an insightful analyst. He could reach back in history and readily illustrate his points by citing examples in economics, economic theory, government, politics, and business in Europe, the United States, and Japan. Based on his experience, particularly as a writer who had to be creative while working alone, and his observations as a management consultant, he advised executives that “one can meet or one can work.” Of course he understood that some meetings were productive, but he called attention, in his pithy style, to the fact that many meetings were superfluous and accomplished little. Traditional academics faulted him for not following the scientific paradigm of verified hypothesis – that is, proposing a testable hypothesis, gathering and quantifying data, and analyzing the data to confirm or refute the hypothesis. Drucker recognized the value of academic research and his debt to it, but never pretended to be an academic researcher. He knew that his strength was in observation, analysis, and writing. He astutely pointed out that what is measurable is not necessarily significant, and what is not measurable is not necessarily insignificant. Extending this point, he warned executives that the advent of computers could overwhelm them with mountains of data. Time- Top: Students gathered in front consuming reviews of masses of backward-looking data would not of the original NYU GBA building, located at 90 Trinity necessarily reduce uncertainty, but they could distract executives Place near Wall Street, where from their task of developing the perspective and generating the Drucker taught many of his classes. insight that should lead the firm into the future. Center: GBA was located three Drucker’s distinctive contribution was in bridging the gap blocks from the New York Stock Exchange (pictured). between academic theory and the practice of management. He was a Bottom: Drucker taught at Stern master at providing the language, the concepts, and the metaphors from 1950 to 1971, and he returned annually until 1991 to that elevated the practice of management. He was unique in making conduct seminars for executives. management understandable and sensible to executives and millions of readers.

16 Sternbusiness Take a minute from your climb to the top to join ours.

60% and climbing. The Campaign for NYU Stern has passed the mid-way point in its goal of raising $150 million. Like you, we’re on an upward path of our own, defining the very best in business education, in the best city for business in the world, and we’d like you to join us. You know how valuable your degree has been to you. To continue to serve students well into the future, we have to fund important initiatives. These include recruiting and retaining top faculty; attracting the best students and making their education possible; funding academic centers, initiatives and programs; improving facilities and technological innovation. Invest in our future as you invest in yours. To make a gift to the Campaign for NYU Stern, simply email us at [email protected] or call 212-998-4161. For more information about the Campaign, go to www.stern.nyu.edu/giving.

Sternbusiness 17 LeadingIndicators

Ann Fudge And it takes a toll. When my mom passed away, a secretary who had worked for me for chairman and chief executive officer a very long time said, "I know you're going Young & Rubicam Brands to leave." And I just hadn't thought about it. But it took me two years from the time when I knew I needed to have a break to Randall Rothenberg: I'd like to start from my mind at the time. I got married in college actually doing it. And then when I took the the beginning. Where did you grow up? and had a child, and all I could think about time off, it was less about finding myself Ann Fudge: I grew up in Washington, DC. It was getting a job and working. And so I and more about being able to express was still a very segregated city, and there were applied to one school – Harvard – and I was myself in ways you don't when you're times as a kid that I saw separate water foun- accepted, and took a two-year deferment. working 24/7. I literally made a list of all tains. So you're looking at somebody who's the people that I wanted to see, the coun- very much a product of living through the RR: You went to General Mills out of busi- tries I hadn't been to, and the books I want- civil rights movement. ness school. ed to read. AF: The offer that I got from General Mills was the lowest offer I had, from a salary Since 2003, Ann Fudge has been RR: You went to Catholic schools. How did RR: Are you finding that it is a lot easier to that environment shape you? standpoint. But I was a married mom with chairman and chief executive be the CEO of a traditional company than a AF: I went to an all-black parochial school, two children, and so I thought both of what professional services company? officer of Young & Rubicam and then to a college prep school for girls, was going to be a good career and also Brands, a global network of mar- where I was one of 12 young black girls in a manageable from a family perspective. My “The most important thing keting communication companies school of several hundred. So it was a very husband and I moved to the Midwest – nei- the CEOs need to know is ther of us had ever lived there. But that includes Burson-Marsteller, interesting educational experience on many what they don't know. You levels. Being taught by nuns, combined with Minneapolis is one of the best-kept secrets Wunderman, Landor, Sudler and just can't walk in tomorrow my own parents' focus on education, I really in America. I never thought I would leave. I and decide that you're going Hennessy, and Y&R. She also had a feeling of self-confidence despite all the moved back to the East Coast and came to serves as chairman and CEO of challenges that faced people of color at that work for General Foods much later because to be a managing director Y&R. A graduate of Simmons time. my mother got ill. in a financial institution College and Harvard Business after doing marketing your RR: What did your parents do? RR: What can a General Mills teach a School, Fudge is a veteran of the whole career.” AF: My mother worked in government, as did young MBA that a Goldman Sachs can't? consumer products industry. She my father, so both of them had very good AF: At a consumer products company, you AF: I find it's something that is challenging rose through the ranks at General jobs, and we were fortunate, middle class. have to understand business from the inside me as an individual. There's something else Mills and General Foods, and Right before I started college in 1969, they out: buying your wheat at a good price, going on, too, that's particular to the kind of told me: “You're going to have opportunities packaging, ingredients, working with the became president of the $5 bil- service we're in. In the past, we've created that we never had, so don't think so narrowly FDA. If you're in a financial institution, advertising messages that people watched lion Beverages, Desserts, and about what your career opportunities are.” you're working a lot with numbers. and they decided they were going to buy Post Division of Kraft Foods, that product. Today, this generation wants to where she managed brands such RR: In the late 60’s, early 70’s, business was RR: Having a couple of little kids when be involved in the creation of a message. So as Maxwell House Coffee, Crystal not something that was held in high esteem. starting a career just can't be easy. How did you're no longer passive receivers of media. Did you know you wanted to work in corpo- you manage it? Light, and Altoids. In accepting We use this phrase, "Above and beyond rate America? AF: When you're young, you can do any- advertising," which is why I keep coming the Young & Rubicam Brands AF: When I went to college, my summer job thing that you set your mind to. A big part of back and talking about marketing communi- post, Fudge returned to the cor- experiences had been working in a depart- it is having a great partner. At the time, my cations because it's no longer just about a porate world after a two-year ment store, so I thought I would do some- husband worked at 3M, and he was on the TV spot. other side of town. We had split responsibil- absence. She also serves on the thing in retail. I worked as a buyer's assistant for about three months, and I knew that I ities. Nannies were nonexistent, at least for Board of Directors of General RR: Some people are just wedded to the never wanted to be a buyer. The night before us back then. And the one thing you prayed 30-second spot. So it would seem that a Electric and Catalyst. Thanksgiving, I was working in the store and I is that if your kid got sick, they'd get sick on real challenge for you as a leader is not was thinking, “I'm supposed to be with my the weekend. just to persuade clients to think differently, Fudge was interviewed by family.” Internships are fantastic. Even if they but to persuade your own people to think Randall Rothenberg, senior let you know what you absolutely do not want RR: So in 2001, you famously took time off differently. director of intellectual capital at to do. In November of my senior year in col- to find yourself. AF: Fortunately we have an incredible mix Booz Allen Hamilton and editor lege, my professor, Margaret Hennig, recom- AF: I wasn't lost. I moved back to the East of young people in the organization who live of Strategy + Business. mended I apply to business school. And it Coast because my mom was diagnosed with was probably one of the furthest things from a terminal illness. Then my father got sick. continued page 21

18 Sternbusiness Mel Karmazin chief executive officer Sirius Satellite Radio

Tom Lowry: Sirius has commit- MK: Our revenues this year [2005] are esti- “I remember thinking when ted $500 million over five years to mated to be about $230 million. That's up they first put a CB radio in bring over Howard Stern. How do from $67 million last year. That number is the car: 'Oh, my God, no you rationalize that investment in over $500 million in 2006. We've paid the one is going to be listening a single individual? money for the satellites. We've already paid Mel Karmazin: I've worked with for the programming. So as we get the rev- to the radio.' And I remem- Howard for 20 years. I first hired enue from new subscribers, roughly 70 per- ber when they put eight him. There aren't many talents that cent of that falls to the bottom line, to the tracks and then CD players can move an audience, and I think point where we've said we think we will in the car.” Mel Karmazin is chief executive Howard is one of them. The average cus- become free-cash flow-positive in the fourth tomer is paying about $117 a year. So if we quarter of 2006. So it's all about getting TL: It seems like Sirius has an announce- officer of Sirius Satellite Radio. get a million subscribers thanks to Howard, subscribers. And we get them in two ways. ment every other day for new channels. Do Founded in 1990, Sirius offers there's over $100 million a year we'll have. One is they buy a Mercedes, a BMW, a Ford, you guys ever say no? And what is the sort more than 125 channels – 67 Since the announcement, the awareness or a Daimler Chrysler, and we factory-install of filter for what will be a program and what level of Sirius dramatically improved to the satellite radio there. Or you go to Best Buy won't? devoted to commercial-free point where more people can name Sirius or Circuit City and say you want to have it. MK: Saying no is probably what we do music, and the remaining devoted than [competitor] XM. Our market share has most. There are just a bazillion requests for to sports, news, and talk shows. continually grown every single month. Our TL: If I'm an investor in Sirius, what kind of bandwidth. I think in the last 12 months, we stock has more than doubled since we benchmarks should I be looking for? Karmazin returned to his roots in added three channels. We added a Korean announced the deal, so the investor commu- MK: Probably the single most important channel because we thought the Asian pop- radio when he joined Sirius as nity believes it must be a smart decision. number at this stage in the company's ulation in the United States was growing CEO in 2004. From 1981 to 1997, growth is how you are growing subscribers. and underserved by media. And we added he was CEO of Infinity TL: You don't have an MBA. Give me some You want to take a look at ARPU, the “Cosmopolitan Radio” and “Martha Stewart sense of your business training and how Average Revenue Per User. And you want to Living Radio.” Broadcasting. After CBS's acquisi- that shaped you as a manager today? take a look at the churn because you want to tion of Infinity, Karmazin rose to MK: I was born not far from here, on 11th find out whether or not the subscribers are TL: Your former company, Viacom, is about become president and then CEO of Street between Avenue B and Avenue C, and canceling their service. You'd also look to to split the entertainment units and media I've lived in New York my whole life. I had see whether a company is using its stock to units. Is that a good decision? the company. When Viacom no plans of going to college. I was taking a make some acquisitions or to come back MK: I don't get it. I don't think that the deci- acquired CBS in 2000, he typing course, and the teacher, Mrs. Parker, into the market to raise money. I said when I sion is being made for any strategic reason. became president and chief oper- asked me if I wanted a part-time job after first started that our stock was like gold and It's being made to influence Wall Street. At a school. I had a part-time job after school in that I would not be using our stock. time when companies are consolidating, ating officer of the media con- a factory. And she said this was in an air- mergers are happening everywhere, adver- glomerate, whose properties conditioned office and that sounded really TL: Apple is in discussions now with car tising agencies are merging, Proctor & include CBS Television, MTV good. So I took the job. It paid $1.25 an makers to have the iPod put in as an option Gamble and Gillette are combining. Wal- hour, which was the minimum wage. And it in models. How is that not a threat to Networks, and Paramount Mart is becoming stronger than ever before. turned out to be an advertising agency. The Sirius? Why do you want to be weaker in negotiat- Pictures. Karmazin was inducted head of the agency and his sister – neither MK: I think everything is a threat. I've been ing against these companies? And why do into the Broadcasting Hall of of whom had kids – took me under their involved in the radio business for an awfully you want more cost? Fame in 2003. wing. And they convinced me to go to col- long time. I remember thinking when they lege while I was working full-time at the first put a CB radio in the car: “Oh, my God, TL: What do you worry most about at this agency. I stayed at that agency and became no one is going to be listening to the radio.” Mel Karmazin was interviewed point in your career? a partner. And when it was sold I went to And I remember when they put eight tracks by Tom Lowry, a senior writer for MK: The area that I concern myself about is work at CBS. and then CD players in the car. I think the making sure that whatever we say we're BusinessWeek, who covers radio experience, including discovery, is a going to do, we're delivering. And that our media and entertainment. TL: You've got more than 125 channels, different experience than listening to your integrity is there. When you're in an organi- charge a subscription fee, music is com- own music. zation, you've got a lot of people and all you mercial-free, and other programming isn't. need is one stupid person to do something. How do you end up turning a profit? continued page 21

Sternbusiness 19 LeadingIndicators

content-rich website with 24 channels and Janet Robinson many, many more micro-sites. With president and chief executive officer NYTimes.com, Boston.com and About.com, The New York Times Company is now the The New York Times Company 12th largest parent company on the Internet. And the ad network that we can sell around Since December 2004, Janet Jacques Steinberg: Can you start by Then I became the advertising director of that is really very substantial. We also talking about why you wanted to become a Tennis. They asked me then to be the corpo- acquired About because the company has a Robinson has served as presi- teacher and why you decided to switch rate sales and marketing director for our great skill in search engine optimization that dent and chief executive officer careers? women's division, which included Family we wanted to have in-house. of The New York Times Janet Robinson: I always felt that teach- Circle, McCall's, and Child, which I did for ing was a calling that had great power. You about three years. In 1993, I became adver- JS: Help us understand why The New York Company, whose holdings have great impact on people's lives when tising director of The New York Times Times Company wanted to be a part owner include The New York Times, you are a great teacher. But after teaching Sunday Magazine, and about a year later of the Boston Red Sox. for 12 years, I felt it was very important for became advertising director and the senior JR: It's very important for us to be the one- The International Herald Tribune, me to listen to an inner voice that was say- vice president of all advertising for the stop-shopping mecca for advertisers in The Boston Globe, and more ing that perhaps it was time to do some- newspaper. In 1996, I was promoted to pres- Boston. We have regional newspapers in thing different. I had always been very inter- ident and general manager, and remained that area, we have Boston.com, and we felt than 15 other daily newspapers, ested in publishing and media, and so I there until 2000 when my responsibilities that it was very important for us to invest in television, and radio stations, a started interviewing at magazine companies expanded to include The Boston Globe and New England Sports Ventures, which owns and newspaper companies. the 15 regional newspapers we own. In a piece of the Red Sox, as well as the NESN portion of the Boston Red Sox, 2003, I became chief operating officer of the television network, which owns the rights to and several websites, including JS: What sort of reception did you get? I company. broadcast the Red Sox games and the mean, you had no real business experience. About.com. In more than 20 Bruins games. NESN has original program- JR: You learn to live with rejection. And in JS: Are there parts of the operation that you ming as well. When you have writers like years at The New York Times fact, you make rejection your friend, which were less familiar with when your responsi- Dan Shaughnessy, for example, at The Company, Robinson, a graduate is a bit of advice that I would give to every- bilities expanded? Boston Globe, you want to make sure that one. I interviewed for almost a year and a JR: Production. I had no idea what a print- their talents are leveraged over a variety of of Salve Regina College who half before I got the first position, which ing press looked like in 1993, when I took platforms. taught in public schools for sev- was at Tennis magazine. And there were over the advertising department of The some translatable skills from teaching. You Times. It was then critical to learn how print- “You learn to live with eral years, has held a series of polish your presentation skills, each and ing presses worked, and how important it is rejection. And in fact, you every day. You have to motivate children of to sell positions of ads effectively. I also had positions in the company's maga- make rejection your friend, all ages, which transfers very nicely to to become educated with regard to labor zine and newspaper divisions. becoming an executive with any company. unions because we are a union shop. which is a bit of advice that And you are also managing performance I would give to everyone.” She was interviewed by Jacques and expectations. When I finally secured a JS: The Times Company recently bought a Steinberg, a staff reporter at The position, it was after a very long interview 49 percent interest in Metro, a free daily New York Times, and the author in which I turned the tables, where I started paper in Boston. What was the rationale JS: This is not the easiest time to sit in The interviewing the interviewer. behind that? Times newsroom. We're in the midst now of The Gatekeepers. Jacques is JR: Metro International is a Scandinavian of our second round of job cuts this year. currently covering television. JS: What did that first job entail? company that brings free newspapers to the Can you talk about the behind-the-scenes JR: They gave me all the accounts that no US. Boston is a young community, a very calculations? one else wanted. They gave me the New strong college community, and we really JR: You always have to look at the two England territory knowing that I was from wanted to reach that younger readership. lines: your expense line and your revenue New England. So I traveled in my rented car And of course, on the Internet, we're seeing line. And when your revenue line is going from Vermont to New Hampshire to Boston free journalism as a model. So we're provid- through either secular or cyclical changes, to Rhode Island to all of the shoe compa- ing Metro's readers with some content from you have to make sure you're monitoring nies and broke a lot of new business. But it The Globe that really acquaints that reader- your expenses. At The Times, our greatest took a lot of hard work. ship with what The Globe may have to offer commitment is to quality journalism. So as well. when we have made cuts, we have made JS: Can you walk us through some of the them overwhelmingly on the business side milestones that followed in terms of your JS: Earlier this year, The New York Times of the operations. We're going through a moving up the ladder? Company bought the Internet company very disciplined approach to productivity JR: I became the national resort and travel About.com. Can you explain that to us? and efficiency within the business side of manager for both Golf Digest and Tennis. JR: We're thrilled with About. It is a very the organization. I hope we never get used 20 Sternbusiness to making announcements of buyouts and ourselves. We are on the radio now with Q: After September 11th, The Times was company to make sure we told the story. layoffs because it's not an easy thing to do. XM, for example. unparalleled in its coverage on what was And this company will always do that. going on in the world. How difficult was it JS: I hear constantly that the place where I Audience questions: to suddenly snap your fingers, develop a Q: Is The New York Times Company plan- go to work is endangered. Do you take a Q: What qualities helped you move up the new section, and have that run seamlessly ning to enter or serve the US Hispanic different view? corporate ladder? with the entire organization? market? JR: Everyone in the media business has JR: I think it's extremely important to love JR: The production side of things is very JR: We have lots of strategic planning heard this day upon day, year upon year. what you do. I think that I have a lot of per- versatile. We have 21 print sites across the activity underway right now with regard to When the telegraph came out years ago, the sonal drive. If people come to work unhap- country, and they have to turn on a dime. the Hispanic market. We have entered it in a newspapers were going away. Consumers py, and they're not passionate about what They are constantly on call. As far as the small way in Lakeland, Florida, with a are consuming news differently. But they they do, they don't really exude enthusiasm. sales and marketing in that particular weekly publication called, Vision Latina, don't necessarily choose just one medium. I walk through the revolving doors of the instance, "The Nation Challenged" was a that was launched last December. I think I think we need to realize that we are not Times Company everyday and I'm thrilled section that really didn't have many ads. there is a wonderful opportunity for the just a newspaper company; we are a news with what the next hours will bring. And I And this is another thing that I think we are Times Company to enter that market. We company that will leverage the content look for that in people I hire. extremely proud of. Certainly, the coverage just want to make sure we're entering it in across platforms. We constantly re-invent of Katrina that you saw recently was a real the right way, and in the right platform. commitment monetarily on the part of the

Ann Fudge continued and consume media very differently. They're look to and say, “I want to be like that.” But I work to live, you don't live to work. That engine that drove the record business. I'm helping us to think differently internally. And had a whole range of mentors. Mentors includes your family and all those other things. wondering if you have any plans at all to I've seeded a lot of them on different teams. don't have to be people who are senior to I'll never forget my mom saying once, before I work closely with the record labels so that I have a CEO breakfast once or twice a you. You could have a very wise person who went to college, “Whatever you choose to do, people could hear a song on Sirius and month, and I get young people from all the happens to be an assistant or a secretary in always put your family first. Because you can then download it? different companies in together so they can an organization who knows the ins and outs work at some place for 30 years, and when you MK: In the last two weeks I have met with meet and have somebody else to talk to in and can guide you. As for my leadership die, they'll sum up your career in two lines. the CEOs of three of the four major record another business. characteristics, I would like to think that I But your family is going to love you.” And that companies because I do think there are work at creating an environment where peo- just hit it all home again. Work hard. Trust me, things that we can do. They love us RR: There seemed to be a period where ad I'm not trying to say don't work hard. But if ple know what to contribute and ideally cre- because we are playing their music on our agencies decided they were going to be you can, keep it in context. ate opportunities for people to collaborate. I 67 channels. There is no country music entertainment companies. And now research try to be as inclusive as possible and to hear station in New York, but we have six coun- seems to be playing a greater role. Can you Mel Karmazin continued a lot of different viewpoints and then make a try music stations. There is no question talk about that? decision and move forward. Things are Audience Questions: that they would like us to make it possible AF: The differentiation for Young & changing massively. You cannot afford to Q: Inevitably you're going to have advertis- for their music to be sold or downloaded. Rubicam's brand is that we have a very strong just keep analyzing the situation without tak- ers asking to be part of your exclusive con- And we're open to that. asset called the Brand Asset® Valuator. It ing action. And so I like to think that I'm tent. How do you balance the attraction of looks at four pillars: differentiation, rele- decisive as well. those revenue streams with the desire to vance, esteem, and knowledge. It's a data- Q: What was the biggest challenge you keep that content free of advertising? base of thousands of brands with four quad- Q: At a large integrated company, do you faced while you were at Viacom? MK: We have more than 125 channels, 67 of rants. The lower left-hand quadrant is when think that most effective CEOs are ones with MK: The biggest challenge was the growth them don't have commercials, and won't, you're starting out, and where you want to technical expertise of the industry or ones area. If you're at $30 billion and you grow be is in that upper right-hand quadrant, with more general worldly knowledge? ever. So that means we have more than 60 revenues 5 percent a year, that's $1.5 bil- where the differentiation is strong and the AF: I think it depends on the kind of busi- radio stations, in essence, in every single lion, and it's sort of tough. I thought when knowledge is strong and the balance is just ness that you're in. The most important market in the country, where we can grow we did the Viacom/CBS merger, it was right. Our clients want to understand how all thing the CEOs need to know is what they advertising. We have “Out Q,” a gay and les- done. Game over. It was as good as it this works in a world where they have to don't know. You just can't walk in tomorrow bian lifestyle channel, and we're getting could get. I get a call on a Sunday night focus on their return on investment. and decide that you're going to be a manag- tremendous response from advertisers who from somebody telling me that AOL is ing director in a financial institution after want to be on that channel. I've said to peo- going to announce that they're merging Audience Questions: doing marketing your whole career. ple, “Short-term, 90 percent of our revenues with Time Warner. “Oh, my God. What does Q: Who are your role models and mentors, will come from subscriptions; 10 percent that mean?” And so Monday I'm at the and could you describe your leadership Q: I'm a first year MBA student. I have a from advertising. But I like two streams of office, phones are ringing, everybody is style? child, and I just started this program a few revenue as compared to terrestrial radio and telling me what to do: “You've got to go AF: I'm not sure I had that many role mod- weeks ago. What is your advice on juggling television, which are just advertising driven.” meet with the Yahoo people.” And Yahoo els. When I was growing up, there weren't a everything? stock was at $230. And I'm sitting there lot of people that looked like me that I could AF: I think you have to understand that you Q: In its heyday, terrestrial radio was the and saying, “What is going on?”

Sternbusiness 21 Prospectus

Japan Center Welcomes Nobel Laureate Kauffman Foundation Awards Grant to Berkley Center as Visiting Professor In November, The Ewing Marion Kauffman Foundation awarded NYU Stern’s Edward Prescott, the 2004 Nobel Laureate Berkley Center for Entrepreneurial Studies a three-year, $735,000 grant to support in Economic Sciences, has joined NYU Stern for and stimulate research on innovative entrepreneurship. the 2005-2006 academic year as the Shinsei This prestigious grant will fund the NYU Stern Berkley Center/Kauffman Bank Visiting Professor in Economics at NYU Foundation Entrepreneurial Project, to be led by William J. Baumol, Harold Stern's Center for Japan-US Business and Economic Studies. Price Professor of Entrepreneurship and Academic Director at the Berkley Center. Prescott, the W. P. Carey Professor of The grant was one of many recent honors for Baumol, who is renowned for Economics at Arizona State University's W. P. his research on entrepreneurship in economic renewal and growth. Last fall, he Carey School of Business, is working with colleagues in the economics depart- was inducted into the Accademia dei Lincei, the the oldest scientific academy in ments of both Stern and the NYU College of Arts and Science. In March of 2006, Italy. And the annual meeting of the Prescott and Stern's Japan Center hosted a conference on savings and the American Economic Association in Boston Japanese economy. in January featured three sessions in “It is an honor for the School that a scholar of Ed Prescott's distinction will be Baumol's honor – as well as an exhibition engaged at Stern for 2005-2006,” said NYU Stern Dean Thomas F. Cooley. “His of his paintings. presence and contribution to the Japan-US Center builds on the Center's collabora- With the support of other researchers at tions with other celebrated scholars in economics, including Nobel Prize-winning NYU and Stern, Baumol will use the professors Paul Samuelson, Robert Solow, and Robert Engle.” Kauffman Foundation grant to expand cur- Prescott, who has held teaching positions at Carnegie Mellon University, rent research efforts, to create rich databases University of Chicago, University of Minnesota, and University of Pennsylvania, is for use across the University and other aca- the author of more than 100 articles and is noted for his contributions to the theory demic institutions, and to produce useful of economic development and growth, banking, and financial markets, as well as to results for practitioners. “Entrepreneurship, business cycles and tax policy. especially when paired with innovation, is a He shared the 2004 Nobel Prize with Finn Kydland of Carnegie Mellon major stimulant of economic growth, and a University for their contributions to dynamic macroeconomics, specifically the powerful instrument for raising living standards and eliminating poverty,” he said. time consistency of economic policy and the driving forces behind business “With our research we hope to fill the gap in entrepreneurial research and inspire cycles. In 2003, Prescott received the Erwin Plein Nemmers Prize in economics. further work on this topic.” He is currently a fellow of the American Academy of Arts and Sciences and the Econometric Society.

Former TIAA-CREF Chief Named Executive-in-Residence Roy Smith and Ingo Walter Collaborate on New Governance Book John H. Biggs, the former chairman and chief executive officer of pension fund giant In January, Oxford University Press published a new TIAA-CREF, was appointed executive-in-resi- book by Roy Smith, Clinical Kenneth Langone dence at NYU Stern as well as executive fellow Professor, and Ingo Walter, Seymour Milstein in the Executive MBA program for the 2005-2006 Professor of Ethics and Corporate Governance and academic year. This appointment extends Dr. Strategy. In Governing the Modern Corporation: Biggs' engagement with the School, where he Capital Markets, Corporate Control, and served as NYU Stern's Citigroup Distinguished Economic Performance, Smith and Walter trace Fellow in Leadership and Ethics for the 2004- the evolution of corporate governance over the 2005 academic year. past century to reach an understanding of how Dr. Biggs, who received his PhD in econom- the system failed so horribly in the 1990's. They note that ics from Washington University in St. Louis, spent more than 20 years at TIAA- the professionals involved in running corporations and the financial CREF, the nonprofit financial institution that invests on behalf of employees of uni- system – executives, investment bankers, analysts – were hampered by deep-seat- versities and other nonprofits. A Fellow of the Society of Actuaries, he currently ed conflicts of interest. And they argue that politicized regulators also failed to per- serves on a number of corporate boards, including Boeing, where he chairs the form as expected. Smith and Walter conclude that all agents involved in the mar- audit committee, and J.P. Morgan Chase. He is also the chairman of the board at the kets, from investors to executives, must do a better job at being accountable for the J. Paul Getty Trust and at Emeriti, a nonprofit organization offering post-retirement fiduciary obligations they hold to shareholders, clients, and investors. medical benefits to college faculty.

22 Sternbusiness Professor Sargent to Head American Economic Association “His appointment as president-elect reflects the extraordinary prestige he has in the profession.” Thomas Sargent, William R. Berkley Professor of Economics and Business, Sargent, who joined Stern in 2002 from Stanford University, is an advisor to the was recently named president-elect of the American Economic Association (AEA). Federal Reserve Banks of Minneapolis, San Francisco, and Chicago. His current As president-elect, Sargent will oversee a variety of the association's activities, work involves developing models to understand persistently high European unem- including organizing its annual meeting and supervising the publication of the ployment rates, and using new statistical methods to characterize the changing AEA's many academic journals. behavior of the Federal Reserve since World War II and the responsiveness of the US “The American Economic Association is the premier professional organization economy to its actions. in economics,” said Luís Cabral, chair of the economics department at NYU Stern.

researchroundup Nicholas Economides, NYU Sided Competition of Proprietary vs. the market for PC operating systems. addition, his research paper, Stern professor of economics, continues Open-Source Technology Platforms and Assistant Professor of Marketing “Egocentrism Over E-Mail: Can We his research in telecommunications and the Implications for the Software Justin Kruger has been delving into Communicate as Well as We Think?” technology. His working paper, Industry,” co-authored with Evangelos the psychological implications of our co-authored with Epley, Jason Parker, “Quantifying the Benefits of Entry into Katsamakas (PhD '04), of the growing reliance on e-mail. In “What and Zhi-Wen Ng of the University of Local Phone Service,” co-authored with Fordham University School of Business, You Type Isn't What They Read: The Illinois, appeared in the Journal of Katja Seim and V. Brian Viard of Stanford was published in Management Science. Perseverance of Stereotypes and Personality and Social Psychology. University, quantified the savings reaped Among other results, the paper found Expectancies Over E-mail,” Kruger and The article argues that people may by New York State consumers due to that when a system based on an open- Nicholas Epley of the University of overestimate their ability to communi- competition in local telecommunications source platform with an independent Chicago Graduate School of Business cate effectively through e-mail, in services between 1999 and 2003. proprietary application competes with a showed that racial stereotypes and large part because the difficulty in Extrapolating the results nationwide, the proprietary system, the proprietary sys- bogus expectancies influence people's conveying tone and emotion online authors concluded that the annual con- tem is likely to dominate the open- impressions more strongly over e-mail may make it difficult for recipients of sumer benefit was $1.1 billion, until reg- source platform industry, in both market than in voice interactions. The article e-mail to appreciate the messages ulatory and legal decisions in 2004 killed share and profitability. This finding may was published in the Journal of being sent. the competition. His other paper, “Two- explain the dominance of Microsoft in Experimental Social Psychology. In shorttakes Martin Gruber, Nomura Professor May 2005. Sylla will give his presiden- Foreclosure Due to Exclusive Dealing,” Ghose's dissertation, "The Strategic of Finance, was elected to the board of tial address to the association of US at the association's annual conference in Impact of Electronic Secondary directors of the National Bureau of and international business historians at Oporto, Portugal. Luís Cabral, chair of Markets on Firm Performance, Market Economic Research (NBER), the nation's its meeting in Toronto, Canada, in June Stern’s economics department, delivered Structure and Social Welfare," exam- leading nonprofit economic research 2006. the closing plenary session at the con- ined the impact of Internet-based organization dedicated to promoting a Professor of Economics William ference. used-good markets on book publish- greater understanding of how the econo- Greene is co-investigator (as an At the annual meeting of the ers, retailers, and consumers. my works. The NBER's board of direc- expert in econometrics) of a major European Economic Association, held in In October 2005, Baruch Lev, tors includes representatives from the research project at the NYU College of Amsterdam, Mariagiovanna Philip Bardes Professor of Taxation leading US research universities and Nursing. The project, led by Christine Baccara, assistant professor of eco- and director of the Vincent C. Ross major national economics organizations. Kovner of the College of Nursing, will nomics, received one of the four Young Institute of Accounting Research, gave The NBER's past researchers include 16 study newly-licensed nurses in order to Economist Awards given by the EEA. a presentation entitled, “The Art and of the 31 American Nobel Prize winners track changes in their careers, and was The award cited her joint paper with Science of Valuing Intangibles and in economics and six of the past chair- recently awarded a $1.96 million grant Heski Bar-Isaac, “Power and Managing Reputation,” at the men of the President's Council of from the Robert Wood Johnson Organizational Structure under an International Sustainability Leadership Economic Advisers. Gruber will serve as Foundation. External Threat.” Symposium in Zurich. Held once the American Finance Association's rep- John Asker, assistant professor Anindya Ghose, assistant profes- every two years, this prestigious con- resentative on the NBER. of economics, was among the eight sor of information systems, received the ference was attended by approximately Richard Sylla, Henry Kaufman scholars who received the 2005 Young second-place prize in the 2005 ACM 250 corporate executives, policymak- Professor of the History of Financial Economists' Essay Awards from the SIGMIS Doctoral Dissertation Award for ers, non-governmental organizations, Institutions and Markets, became presi- European Association for Research in the best dissertation in the field of infor- and consultants. dent of the Business History Conference, Industrial Economics. Asker received mation systems at the International at its annual meeting in Minneapolis in the award for his paper, “Diagnosing Conference on Information Systems. Sternbusiness 23 TION BY GORDON STUDER ILLUSTRA

the burden of celebrity

When CEOs win coveted awards, it’s not necessarily good news for shareholders – or for the CEOs themselves.

By James B. Wade, Joseph F. Porac, Timothy G. Pollock, and Scott D. Graffin

t is often difficult to deter- have since left. Conversely, uncon- are all focusing on the size, content, mine whether a firm's per- trollable economic downturns or and disclosure of executive com- formance is driven by the deteriorated conditions inherited pensation. excellence of its top man- from predecessors may lead to disap- Organizational research suggests agement team or by general pointing performances. And how that social devices are often invent- economic and organization- should such dynamics affect execu- ed by third parties to assess the abil- Ial conditions. After all, today's good tive compensation? After all, in ities of actors by creating a compe- fortune could result from a favor- today’s environment, investors, ana- tency ordering. The media play an able industry environment or from lysts, and regulators like the important role in constructing such the foresight of past managers who Securities and Exchange Commission orderings through certification con-

24 Sternbusiness tests, like Fortune’s Most tifications will be positively associat- ciated with CEO compensation. Admired list, US News and World ed with a firm’s future performance. If subsequent firm performance Report’s business school rank- On the other hand, CEO certifica- is high after a CEO has been pub- ings, Institutional Investor’s all- tion could theoretically be detrimen- licly recognized as competent, these star analyst teams, or Financial tal to future firm performance by earlier attributions will be rein- World’s CEO of the Year award. inducing overconfidence and hubris forced, and the certified CEO may But does it matter? Do the stocks in CEOs anointed as stars. CEOs obtain a compensation premium. of companies with all-star CEOs who have been successful in the past But if things go poorly, such CEOs perform better than those of other may overestimate the expected may actually be held more responsi- companies? Or does CEO star status returns from their corporate invest- ble and receive lower compensation bring with it negative consequences ment decisions, and may engage in than non-certified CEOs whose for firms, such as managerial firms achieve similar levels of overconfidence and hubris? “Do stocks of companies with all-star performance. Being recog- Do CEOs who top the lists CEOs perform better than those nized as a star CEO may thus receive greater compensation be a double-edged sword. than their colleagues who of other companies? Or does CEO star That leads to our final don’t make the final cut? Or, status bring with it negative hypothesis (Hypothesis 3): as former NYU Stern Certifications in the past will Professor Charles Fombrun consequences for firms, such as be positively associated with a has suggested, can being managerial overconfidence and hubris?” CEO’s compensation when the named a star create the “bur- firm's subsequent performance den of celebrity,” under which is high and negatively associ- high expectations about future per- expensive corporate acquisitions. ated with his or her compensation formance can lead to disappoint- Evidence suggests that overly confi- when the firm's subsequent per- ment? dent CEOs are more likely to invest formance is poor. in “pet projects” funded by internal Testing Hypotheses cash flows. This leads to an alterna- CEO of the Year We set out to examine these tive hypothesis (Hypothesis 1a): We set out to test these hypothe- questions by constructing several CEO certifications will be negatively ses by examining performance and hypotheses and testing them against associated with a firm's future per- compensation figures from compa- a data set. formance. nies in the S&P 500 and companies There’s good reason to believe second set of hypotheses whose leaders were named in that employing a star CEO could be deals with compensation. Financial World’s CEO of the Year valuable to a firm. As Fombrun has According to executive competitions. Each year, from 1975 noted, having a highly recognized compensation expert to 1996, the magazine surveyed CEO at the helm may reassure GraefA Crystal, many corporate over 1,000 peer CEOs and business stakeholders that the firm's future boards believe that high pay for star analysts, who rated between two prospects are bright and, in turn, CEOs is a wise investment in mana- and three thousand CEOs on crite- enhance the ability to attract higher gerial talent. Stakeholders may ria such as company performance, quality employees, increase lever- heavily weigh the outcomes of certi- the ability to increase competitive age over suppliers, and gain bet- fication contests when evaluating a position, leadership team and ter access to needed capital. CEO’s talent because they are likely employee morale, and contributions Certification awarded by experts to be perceived as one of the few rel- to the industry, community, and would seem to confer a positive atively neutral sources of informa- nation at large. In each industry, institutional reputation and lead to tion. Certified CEOs may thus be analysts and CEOs selected three increased prestige power for the able to leverage their high-status in bronze medal award winners. The anointed star. That influence in turn negotiating future compensation bronze medalists in each industry may allow CEOs to leverage their contracts with the board, or board were then grouped within 12 gen- knowledge and skills more effective- members may simply feel justified in eral business categories. Research ly and produce positive firm out- paying star CEOs more. We therefore directors at Wall Street’s largest comes. So our first hypothesis hypothesize (Hypothesis 2): CEO investment houses selected silver (Hypothesis 1) holds that: CEO cer- certifications will be positively asso- medal award winners for each

Sternbusiness 25 category. Finally, the editors of Financial World chose the single gold medal award winner from TABLE 1A among the silver medalists. Excess Market Returns Surrounding the Announcement of Medals Our sample included 278 com- Market Model Market Adjusted Model panies that were members of the Days N Abnormal Return T Abnormal Return t S&P 500 at the end of 1992, rang- -3 to -1 186 -0.17% -0.839 -0.04% -0.178 ing in size from $154 million to 0 to +1 186 0.28% 1.66* 0.38% 2.28** $351 billion in total assets. (We 0 to +2 186 0.47% 2.30** 0.64% 3.08*** began our sample in 1992 because 0 to +3 186 0.49% 2.06** 0.69% 2.90*** that was when the SEC significantly increased its reporting require- ments to require firms to report all TABLE 1B Daily Abnormal Market Returns Surrounding the Announcement of Medals elements of a CEO’s compensation.) We gathered panel data for Market Model Market Adjusted Model the five years starting in 1992 and Days N Abnormal Return T Abnormal Return t ending in 1996. The list of medal -3 186 -0.04% -0.38 -0.01% -0.09 winning CEOs in our sample con- -2 186 -0.01% -0.07 0.05% 0.44 tains many of the most well-known -1 186 -0.12% -1.01 -0.08% -0.66 and respected CEOs in the US, 0 186 0.03% 0.28 0.13% 1.07 including Jack Welch of General 1 186 0.25% 2.06** 0.26% 2.16** Electric and Lawrence Bossidy of 2 186 0.20% 1.65* 0.25% 2.12** Honeywell. 3 186 0.02% 0.13 -0.06% 0.46 First, we assessed the immediate reaction of firm certification on performance. If investors believe that TABLE 2 winning a medal conveys new infor- Long Term Excess Market Returns Surrounding the Announcement of Medals mation about the quality of the Market Model Market Adjusted Model CEO and his/her ability to positive- Days N Abnormal Return T Abnormal Return t ly influence the future cash flows of 3 to 30 186 -1.13% -1.79* 0.14% .223 the firm, one would expect a posi- 3 to 90 186 -3.36% -3.01*** 0.70% .625 tive stock market reaction in the 3 to 180 186 -7.07% -4.45*** 0.88% .553 days following the announcement. 3 to 240 186 -8.23% -4.48*** 2.38% 1.29 Using either a financial market model or a market index, we calcu- *= p<.10, **=p<.05, ***=p<.01 lated expected returns for each firm, and then subtracted the expected returns from actual returns. These differences are known as excess ment, the stock market reacted posi- favorably by the market, as (unexpected) returns and reflect the tively. The cumulative excess returns Hypothesis 1 suggests. extent to which the event provided calculated using both the market To investigate the longer term new information about the value of model and market adjusted returns effects of certification, we ran addi- the firm. We examined the impact of are positive and significant for the tional event studies over longer win- winning a medal on a firm’s excess intervals from zero to two days and dows (Table 2). Using the market returns in the days immediately fol- zero to three days. The daily excess model, we found in the 30-day win- lowing the announcement of the returns before and after the event, dow that the cumulative excess medal. As Table 1A shows, the (Table 1B) were positive and signif- return becomes negative and mar- excess returns in the three days icant one day after the event using ginally significant. By 240 days, the prior to the announcement of the both the market model and market return increases to -8.23 percent awards (days -3 to -1) were not sig- adjusted returns. Overall, our results and is highly significant. Combined, nificant. But after the announce- suggest these awards are viewed these results suggest that while the

26 Sternbusiness immediate effect of winning a from our data that this attribution more nuanced pattern of data is that medal is positive, over time this then leads the board to set up an certification does indeed create a trend reverses and becomes nega- evaluative “gauntlet” for the CEO in burden of celebrity. Simply main- tive, as Hypothesis 2 suggests. subsequent years, since certification taining a certain level of perform- has a positive impact on compensa- ance may not be sufficient for share- Compensation tion as long as return on equity holders of firms with celebrity Next, we looked into the rela- remains positive. If a company CEOs. Firms that employ star CEOs tionship between CEO star status achieves a negative return on equity, seem to have a higher expectational and compensation. We gathered star CEOs receive lower total com- hurdle to meet in order to be valued data on compensation from the pensation than non-medal winning positively by the market. While EXECOMP database. A CEO’s CEOs for an equivalent level of per- boards of directors seem to be more total direct compensation included formance. lenient in their expectations, they do salary, bonus, the value of respond more negatively to lower restricted stock grants, options “Investors initially bid up the price profitability when a star CEO is granted during the year, long- involved. term incentive payouts that year, of company stock after learning Overall, our results provide and all other types of cash com- about a CEO medal. However, cautionary information for corpo- pensation paid in that year. rate pay policies. Given that CEO When we ran the tests, we found shortly afterward they reverse course certifications do not appear to that winning a medal in the cur- and bid down the price.” have a short-term beneficial rent year increases a CEO’s pay effect on future profitability, the by approximately 10 percent and This general pattern of results argument that boards of directors each medal awarded in the previous suggests a more nuanced representa- should pay exorbitant levels of com- five years adds almost 5 percent to tion of the effects of CEO certifica- pensation to attract and retain star his/her total pay. We also tested tion on firm and individual outcomes CEOs whose firms have performed Hypothesis 3 by interacting medals than is suggested by our original well in the past may be somewhat won in the past with firm perform- hypotheses and the prior research misplaced. However, boards of direc- ance as measured by return on com- literature. Our results indicate that tors might be able to mitigate these mon equity, a measure commonly profitability is insensitive to CEO costs by making pay more dependent used as a basis for awarding incen- certification, at least over the one- on future performance. Ironically, tive pay. The interaction was highly year time window that we used in the overconfidence that past success significant and in the expected pos- our analyses. If CEO certification creates may provide a mechanism itive direction. Winning medals had has no short-term effect on the prof- through which boards can clamp a positive effect on a CEO’s pay itability of a company, then winning down on future compensation if a when accounting performance was a medal can only be, at best, a noisy star CEO fails to deliver. above zero but a negative effect signal regarding the relationship when it was less than zero. between managerial ability and JAMES B. WADE is associate professor learly, being certified had longer term profitability. And yet our of management and human resources at a positive effect on the results indicate that investors the University of Wisconsin-Madison, recipient’s compensation, respond immediately, and over the JOSEPH F. PORAC is George Daly Professor in Business Leadership at over and above any per- course of the year, to this signal in NYU Stern, TIMOTHY G. POLLOCK C formance differences that predictable ways. Investors initially is associate professor of management might exist between winners and bid up the price of company stock and organization development at non-winners. If a CEO’s compensa- after learning about a CEO medal. Pennsylvania State University's Smeal tion partially reflects the extent to However, shortly afterward, they College of Business Administration, and which a company’s directors value a reverse course and bid the price SCOTT D. GRAFFIN is a PhD candidate CEO’s abilities and contributions, down. Company boards seem to in management and human resources at this result suggests that certification respond quickly to CEO certification the University of Wisconsin-Madison. does indeed heighten the tendency as well, as our results on compensa- This research will be appearing in an of boards to attribute special com- tion show. upcoming issue of the Academy of petencies to the CEO. It appears One possible explanation for this Management Journal.

Sternbusiness 27 At family-controlled companies, appointing a son or daughter to take the reins may be an effort to carry on tradition and maintain control. But is it good news for shareholders? TION BY CHRISTOPHE VORLET ILLUSTRA

Heir Loss

By Morten Bennedsen, Kasper Nielsen, Francisco Perez-Gonzalez, and Daniel Wolfenzon

n the age of 21st-century control over 53 percent of publicly are arguably influenced by the pref- global capitalism, family traded firms with at least $500 mil- erences of controlling families, firms are surprisingly per- lion in market capitalization. which often struggle between hiring sistent. Thirty-five percent One of the most contentious a family or unrelated CEO. of companies in the issues surrounding family firms We set out to examine the role of StandardI and Poor’s 500 are con- relates to chief executive officer suc- the controlling family in CEO suc- trolled by founders or their descen- cession decisions. CEO transitions cession decisions and the conse- dants. Outside the United States, are likely to play a key role in deter- quences of family successions on research has shown that families mining firms’ prospects, and they firm performance. Relying on sever-

28 Sternbusiness al government and private sector quency of family transitions was 36 one of their children to the top post databases, we constructed a dataset percent, while for CEOs who had increased from zero (by construc- of financial, personal, and family had more than one spouse, the fre- tion) when they had no children to information on 5,334 successions quency was lower at 25.2 percent 11.9 percent when they had one between 1994 and 2002 in publicly (see Panel A). These results suggest child. At the same time, the fre- and privately held, limited liability that family conflicts might be an quency with which departing CEOs firms in Denmark. important factor in succession nominated non-child relatives to the We found that departing CEOs’ decisions. CEO position decreased by 7.5 per- family characteristics are strongly e also found that cent, suggesting that children crowd correlated with the decision to the frequency of out other family members. appoint a family or an unrelated family successions The gender of children was also a CEO. Family size, the proportion increased with the factor. Firms in which more than 50 of sons, and even the departing number of children percent of the outgoing CEO’s chil- CEO's marital history had a signif- W(see Panel B). It rose from 29.1 per- dren were male were 10.8 percent- icant impact on the identity of the cent for departing executives with age points more likely to have a successor. one child to 41.3 percent for those family successor than firms in which The performance results aren't with three children. less than 50 percent of the outgoing altogether encouraging for investors The structure of the family also CEOs children were male (see Panel in family companies, or for the fam- affected who in the family got pro- C). Outgoing executives whose first- ilies themselves. We found that fam- moted to the CEO position. We born child was male were 9.6 per- ily successions had a large, negative observed that the frequency with centage points more likely to leave impact on firm performance. For which departing CEOs nominated the firm to a family member than example, operating return on assets (OROA) fell by 1.4 points for firms that underwent family transitions TABLE 1: Frequency of Successions by Family Characteristics relative to firms in which an unre- TYPE OF SUCCESSION lated CEO took over the helm. This DESCRIPTION decline corresponds to more than 20 FAMILY UNRELATED percent of the average OROA, All Children Others which in our sample was 6.5 per- (percent) (percent) (percent) (percent) centage points. Moreover, as we will All 33.3 16.2 17.1 66.7 explain, this figure is likely to A. Number of spouses: underestimate the true negative 1 36.0 8.7 17.3 64.0 effect of family transitions. 2 or more 25.2 9.1 16.2 74.8

The Role of the Family Behind B. Number of children: the Firm 0 24.8 0.0 24.8 75.2 Overall, family successions 1 29.1 11.9 17.2 70.9 occurred in about one-third of our 2 32.1 16.2 15.9 67.9 sample (see Table 1). Contrary to 3 41.3 25.7 15.6 58.7 anecdotal accounts, not all family 4 or more 40.5 24.4 16.1 59.5 successors were children of the outgoing CEO. In almost half the fam- C. By gender ratio (male/children): ily transitions, a spouse, a sibling, or < 50 percent 28.9 10.7 18.3 71.1 even a parent was nominated to the > 50 percent 39.7 24.7 15.0 60.3 top post. The marital history of CEOs D. By gender of first born child: affected the choice between a Female 29.4 12.7 16.7 70.6 family and unrelated CEO. For Male 39.0 23.5 15.5 61.0 CEOs with one spouse, the fre-

Sternbusiness 29 those whose first-born child was of the organization, they might be difference-in-differences (DD) analy- female (see Panel D). more knowledgeable than outsiders sis by comparing the changes in hese correlations con- about the firm. On the other hand, performance of firms that name a firm anecdotal evidence outsiders are a self-selected group of family member to the CEO position that sons are preferred individuals with significant manage- to those of other firms that experi- to daughters at the time rial expertise. Also, family CEOs ence a succession by unrelated of succession, even in a might be affected by the potential CEOs. Tdeveloped country such as conflicts between family and busi- When we used the DD Denmark. The magnitude of these ness norms with regard to the alloca- approach, we found that firms that correlations are surprising given tion of management positions, pay, promoted family members experi- that Denmark ranks fourth among or other corporate resources. enced a decline in industry-adjust- 58 countries in gender equality, A simple way to evaluate the ed OROA of 0.1 percentage point according to data from the World Economic Forum, and has one of TABLE 2 Difference-in-Differences (DD) Analysis Using Alternative Performance Measures the highest female labor force par-

ticipation rates in the world. Type of Transition Nevertheless, these numbers are Differences in Family Unrelated Mean Difference- consistent with the low levels of in-Differences women among top management positions in Denmark, which in Industry-adjusted operating -0.0010 -0.0080*** -0.0141*** return on assets (0.0028) (0.0023) (0.0014) 2004 was only 25 percent, compared with 61 percent at middle Operating return on assets -0.0120 *** 0.0035 -0.0154*** level management positions. (0.0028) (0.0023) (0.0036)

In summary, we found that the Industry- and performance-adjusted -0.0009 0.0107*** -0.0098*** structure of the controlling family operating return on assets (0.0027) (0.0021) (0.0034) influenced the choice between a Industry-adjusted net income -0.0056* 0.0064*** -0.0120 *** family member and an unrelated to assets (0.0027) (0.0022) (0.0036) CEO, and that it also affected who inside the family was offered the Standard errors are presented in parenthesis *** and * denote significance at the 1 and 10 percent level, respectively CEO position.

Performance Gap impact of family CEO succession on (see Table 2). In contrast, firms We next studied the performance performance is to compute the that chose unrelated managers for implications of family transitions. It change in firm profitability around the top position saw improvements is unclear from a theoretical per- CEO successions. A problem with in industry-adjusted OROA of 1.3 spective what impact family CEOs this approach is that it can potential- percentage points. This suggests should have on firm performance. ly fail to control for aggregate that family successions are associat- Family members could perform bet- changes in performance due to, in ed with 1.4 percentage points lower ter than other CEOs because they some cases, industry or aggregate performance relative to unrelated derive greater personal satisfaction trends, or mean reversion in per- successions. This decline is equiva- from the success of the organization formance measures. For example, lent to approximately 20 percent of and face higher levels of shame or the finding that performance wors- the average unadjusted OROA. We guilt in case of failure. Also, the ens after family transitions would repeated the analysis using three trust and loyalty established with not be informative about the compe- other measures of performance and, key stakeholders might be more tence of the incoming CEOs if all in all cases, found that firms that easily transferred to family execu- firms in the economy were experi- underwent family transitions trailed tives. And by virtue of having grown encing the same decline. A common others in performance. up close to the day-to-day business solution to this problem is to use a Do these results prove that fami-

30 Sternbusiness ly member CEOs are worse than ence, etc.) presumably also affect important. When we analyzed the professional managers? Not neces- performance. However, in our set- results, we found that indeed fami- sarily. The decision to appoint a ting, we were able to find such a ly member CEOs tended to be cost- family CEO is unlikely to be made variable: the gender of the first child lier in these environments. irrespective of a firm’s business of the departing CEO. Earlier, we The results demonstrate that prospects. For example, it is possi- established the strong impact of the family successions cause significant ble that non-family CEOs are gender of the first child on the prob- declines in firm performance. They appointed when an improve- also imply that qualified CEOs ment in performance is in “The results demonstrate that provide extremely valuable sight. If this were the case, we services to the organizations family successions cause significant would not be able to conclude they work for. In addition, the from our DD results that out- declines in firm performance. ... [But] findings suggest that primo- side CEOs are more compe- qualified CEOs provide extremely geniture rules that dictate who tent, since they were chosen in gains access to the helm of a firms that were expected to do valuable services to the organizations firm based on birth order or well. Conversely, it could be they work for.” gender, but not competence, that family members are can have disastrous conse- appointed to the top position quences for firm performance. in firms with superior business ability of family succession. In addi- For controlling families, the prospects. In this case, the effect of tion, it is difficult to imagine that lower performance caused by fami- family member CEOs on perform- the gender of the first child born to ly member CEOs might be offset by ance would be even more damaging the CEO directly affects firm per- the pride and satisfaction of keep- than our DD analysis suggests, formance. ing the firm in the family. However, since family members generated the Using this technique, we found this is unlikely to be the case for inferior performance while manag- that family transitions were more minority shareholders, who are ing the best firms. damaging to performance than our likely to suffer the most under fam- o isolate our results DD estimates suggest: family transi- ily member CEOs. The lower per- from such effects, we tions caused a decline in OROA of at formance of family member CEOs used an econometric least 4 percentage points. also indicates that other stakehold- technique known as We then investigated whether the ers interacting with family firms instrumental variable relative performance of family mem- should pay close attention to suc- Testimation. This technique involves ber CEOs varied with observed cession decisions as the competence estimating the effect of family tran- industry characteristics. A natural gap between family and unrelated sitions using only firms whose suc- place to start this analysis is investi- CEOs might be substantial. cession decisions were driven by gating if the gap in performance for some variable that does not affect family member CEOs differs in firm performance. By focusing on industries where such CEOs are rela- MORTEN BENNEDSEN is professor these firms, we eliminated the tively more common, and presum- of economics at Copenhagen Business aforementioned concerns that ably better suited for their positions. School, KASPER NIELSEN is a PhD other firm characteristics, such as We found that they were indeed less candidate at the Centre for Economic business prospects, are responsible detrimental to firm performance in and Business Research at the University for both the decision to name a those industries where they were of Copenhagen, FRANCISCO PEREZ- family member and for perform- more commonly found. Next, we GONZALEZ is assistant professor of ance after the transition. hypothesized that managerial skills finance and economics at the Finding such a variable is usual- are more valuable in certain eco- Columbia University Business School, ly difficult because many of the nomic environments, such as rapidly and DANIEL WOLFENZON is assis- factors that affect the choice of growing industries, where manageri- tant professor of finance at NYU Stern. CEOs (leadership skills, experi- al discretion might be relatively more

Sternbusiness 31 Enron’s Final

32 Sternbusiness Accounting

By Simi Kedia and Thomas Philippon

Large-scale earnings fraud doesn't just leave investors poorer – it leads to slower employment growth across the whole economy.

raudulent accounting by explore the way earnings manage- tors, revises previously reported pub- management is obviously ment affects the allocation of lic financial information. Of the costly for shareholders. resources. For example, it stands to companies, 645 were publicly trad- When earnings are restat- reason that fraudulent accounting ed. The number of identified restate- ed,F stocks typically fall sharply. would distort labor markets. The ments rose from 92 in 1997 to 225 in Take the dramatic case of Enron. general assumption is that in the 2001. “The proportion of listed com- On November 8, 2001, the former- case of earnings manipulation, inef- panies on NYSE, Amex, and NAS- ly high-flying energy company ficiencies arise automatically when DAQ identified as restating their announced it would restate earnings the hiring and investment decisions financial reports tripled from 0.89 for the period 1997 through 2001 are endogenous – and observable – percent in 1997 to 2.5 percent in and record a $1.2 billion reduction because the need to mimic the good 2001,” the GAO concluded. “From to shareholders equity. In the weeks types distorts all the observable January 1997 through June 2002, between October 16, 2001, and actions of the bad types. Bad man- about 10 percent of all listed compa- November 28, 2001, Enron’s stock agers who want to hide their poor nies announced at least one restate- plummeted from more than $30 to quality must not only manage their ment.” Moreover, later restatements less than $1 a share. The period of earnings, but also hire and invest involved larger firms: The average misreporting was characterized by like good managers. So firms man- market capitalization of restating substantial stock sales by Enron aging earnings hire and invest like companies quadrupled between 1997 insiders, who profited at the expense successful firms. As a result, fraudu- and 2002, from $500 million to $4

TION BY GORDON STUDER of other shareholders. lent firms end up larger than might billion, while the average size of list- During this same period, Enron be predicted given the fundamentals ed companies increased only about grew faster than any other firm in its of their business. Hence, one would 60 percent over the same period. ILLUSTRA industry. The book value of Enron's expect to see these firms shrink and he GAO also reported the assets nearly tripled, from $23.5 bil- shed jobs after they are exposed. reasons for the restate- lion in 1997 to $65.5 billion in ments. Errors in revenue 2000. At its peak, Enron employed Restatement Trends T recognitions accounted for more than 20,000 employees world- We tested this hypothesis by con- roughly 40 percent of the cases while wide. But after its restatement, structing an econometric model and those due to improper cost account- Enron shrank rapidly. Today, about applying it to a set of data on firms ing explained 16 percent. Issues with 500 employees remain, and Enron’s that restated their earnings. The loans, such as write-offs, reserves, creditors expect to receive about General Accounting Office (GAO) in and bad loans, accounted for 14 per- one-fifth of the estimated $63 bil- 2002 identified 919 financial cent of the cases. Issues with assets lion they are owed. restatements by 845 public compa- and inventories, such as goodwill, Enron is a typical – if somewhat nies from January 1, 1997, to June write downs, and valuation, account extreme – example of fraudulent 30, 2002, that involved accounting for another 9 percent of restate- accounting in periods of high finan- irregularities resulting in material ments. The remaining 20 percent of cial valuations. Much of the research misstatements of financial results. cases are linked to research and on earnings management has Such restatements occur when a development, mergers and acquisi- focused on how and why it happens. company, either voluntarily or tions, securities, reclassifications of But academics have been hesitant to prompted by its auditors or regula- debt payments, and related-party

Sternbusiness 33 transactions. It is useful to keep in “The growth of employment in tive TFP shocks. Moreover, as the mind that only 16 percent of the fraudulent firms was 3.7 percent sales in the restated period were restatements can be formally attrib- inflated by fraudulent accounting uted to actions by external parties, higher during the fraudulent for a large fraction of firms, the true such as the SEC or independent period. …The growth of employ- productivity probably increased auditors. Further, many firms did after the restatement. not mention in their reports the real ment was significantly lower Next we turned to the sub-sample reason for their restatements unless after the restatement.” of firms for which we were able to they were somehow forced to do so. collect information on the size of the Out of the 645 publicly traded age, industry, and initial size. And for restatement. When we ran the num- companies, 560 firms were covered every restating firm, we selected non- bers, we found that larger restate- by COMPUSTAT. For 539 of those restating firms that operate in the ments were associated with larger firms, we were able to obtain the same industry, and that are in the drops in employment and invest- beginning and end dates of the same initial book asset quintile. Next, ment. restated period, in addition to the we plotted the mean adjusted growth date on which the restatement was rates for four key variables: total Aggregate Growth announced. We also collected data market value, number of employees, What were the aggregate effects on the size of the restatement – the PP&E, and TFP. We found that the of earnings manipulation? A clear average annual impact of the market value of restating firms grew picture of the raw data can be restatement on net income – for 396 at a faster rate (5.2 percent higher) obtained by looking at the dynamics firms. The average ratio of restated than that of the control group before of the 111 firms that announced a earnings over lagged sales was -6 the restated period, at the same rate restatement in 2000, and the 120 percent, and 80 percent of the during the restated period, and more firms that did so in 2001. The num- restatements involved negative revi- slowly (4 percent lower) afterwards. ber of people employed in these 231 sions to reported net income. A similar picture emerged with restating firms over the period 1997 ext, we examined the respect to growth in PP&E and the to 2002 is displayed in Figure 1. growth rate in the number number of employees. The growth of The left panel compares the 231 of employees, in the rate employment in fraudulent firms was restating firms to aggregate non- N of property plant and 3.7 percent higher during the fraud- farm payrolls obtained from the equipment (PP&E), and the ratio of ulent period. And as predicted by the Bureau of Labor Statistics (BLS). capital expenditures to property model, the growth of employment Employment in restating firms rose plant and equipment for restating was significantly lower after the by 500,000 (25 percent) between and non-restating COMPUSTAT restatement. A similar dynamic is 1997 and 1999, and fell by 600,000 firms over the period 1991 to 2003. seen with investment activity. The (24 percent) between 2000 and According to these three measures, growth rate of investment – i.e. 2002. Over the same periods, total restating firms grew slightly faster PP&E – was about 5 percent higher non-farm payrolls went up by 6.7 than non-restating firms over the during the restated period and 6 per- percent and then down by 1.5 per- whole sample, but the differences cent lower after the restated period. cent. The relative increases and were very small relative to the stan- It appears that restating firms were decreases in employment for restat- dard deviations of these variables. growing rapidly in the years prior to ing firms are clearly much larger Unconditional dynamics of restating the restated period, and that these than for the economy as a whole. and non-restating firms, such as firms most likely misreported in potential concern in this market values and sales and total order to continue portraying them- analysis is that some firms factor productivity (TFP) growth selves as high-growth firms. drop out of the sample were also quite similar for restating Interestingly, the growth rates of A after the announcement of and non-restating firms. TFP and labor productivity were not the restatement, due to delisting or To compare the dynamics of hir- significantly different across firms bankruptcy. In the left panel, we ing and investment for restating and over time. As the period after the implicitly assigned zero employees firms around the restated period, we restatement is not associated with to firms that drop out. For instance, created a control group of non- lower productivity, it is unlikely that complete data for Enron is available restating firms that are matched in restatements were the result of nega- only until 2000. To the extent that

34 Sternbusiness grew more slowly when they Figure 1: Employment Dynamics of Firms Announcing Restatements in 2000 or 2001 belonged to an industry that NUMBER OF EMPLOYEES, IN MILLIONS had a lot of announced restate- INCLUDING EXITS RESTATING PAYROLLS ments in the preceding years. Interestingly, sales per employee and TFP grew significantly faster following a wave of restatements. In other words, fraudulent industries were characterized by high labor productivity growth together with negative employment and investment growth, even for firms that did not have to restate their earnings. Earnings manipulation isn’t just bad news for the shareholders of the companies directly involved. It can impact aggregate dynamics through two opposing 36 38 40 38 36 42 2.4 2.6 2.8 3 3.2 120 125 130 135 2.3 2.4 2.5 2.6 2.7 channels. On the one hand, the 1997 1998 1999 2000 2001 2002 1997 1998 1999 2000 2001 2002 inefficient allocation of resources RESTATING PAYROLLS RESTATING NON-RESTATE among firms, created by earnings management, tends to reduce aggregate activity. On the some firms drop out of the sample, Larger Impact other hand, greater hiring and invest- but, unlike Enron, continue operat- The dynamics of restating firms, ment by misreporting firms tend to ing, the left panel may overestimate which make them grow faster than increase aggregate activity and then the true dynamics. So we construct- comparable firms in the restated lead to depressed activity after the ed a constant sample of firms for period and slower afterwards, are wrongdoing is revealed. In other which we have complete data over also likely to impact other non- words, imperfect governance ampli- this period. This constant sample restating firms in their industry. fies business cycle dynamics. comprises 74 firms that restated in Some non-restating firms surely The period after the brief 2001 2000, and 96 firms that restated in engaged in earnings management, recession was characterized by frus- 2001. The right panel of Figure 1 but probably to a lesser extent than tratingly low job growth, as payrolls compares the employment in these firms that eventually had to restate. did not bounce back as they typical- restating firms to a constant sample Moreover, investors may draw nega- ly do when the economy starts to of non-restating firms in COMPUS- tive inferences about all firms that expand. Many economists and ana- TAT. As seen, restating firms grew belong to an industry where many lysts were mystified by the strange more rapidly than non-restating accounting frauds have been dynamics in the labor market in the firms from 1997 to 1999, and revealed, even if most of the firms post-bubble era. Our study, howev- declined much faster afterwards. were actually honest. This suggests er, suggests that it’s not unnatural Clearly, the truth lies somewhere that the announcement of a restate- for periods with high levels of earn- in between the left panel and the ment could have negative implica- ings restatements to be followed by right panel. If most restating firms tions for other non-restating firms in periods of jobless growth and low are like Enron, then the left panel is the industry. investment. the better approximation. If most We investigated the impact of SAMI KIDIA (PhD ’97) is assistant restating firms continue operating restatements on non-restating firms professor of finance and econom- with a reduced, but still significant, by creating a panel of industries ics at Rutgers University and number of employees, then the right using only the non-restating firms. THOMAS PHILIPPON is assistant panel is more appropriate. We found that non-restating firms professor of finance at NYU Stern.

Sternbusiness 35 Peer to Peer Student Life in Washington Square and Beyond

Committee of 200 and BNP Paribas Award Scholarship to NYU Stern MBA Student

In December, the Committee of 200 (C200), the organization of leading women business owners and corporate decision-makers, and French bank BNP Paribas presented a $25,000 Scholar Award to Stern MBA student Nagina Sethi. The C200/BNP Paribas Scholar Award is given to a first-year, woman MBA student whose pre-business school track record and first-year transcript indicate that she will be an outstanding business leader. The award was presented by C200 member Kathryn Swintek (MBA '79), head From left to right: Ann S. Moore, chairman and CEO, Time, Inc.; Kelly Thomas, co-president, of US Leveraged Finance Group, BNP Paribas, at The C200 Fall MBA Outreach Stern Women in Business; Nagina Sethi, and Kathryn Swintek. Seminar for women MBA students hosted by student club Stern Women in Business (SWIB) at NYU Stern. The seminar, “Managing Your Career, Your Brand, Nagina Sethi has an undergraduate degree in molecular and cell biology from Your Life in a Changing World,” included Stern women MBA students and more the University of California at Berkeley. Before coming to NYU Stern, she worked than 40 C200 members who are leaders in a variety of industries, from banking as a consultant for Kaiser Permanente where she helped start a nonprofit women's and insurance to professional services, technology, and manufacturing. birthing center for underserved families in Oakland. The scholarship award includes a 10-week paid internship at a C200 mem- At Stern, Sethi has become involved with SWIB, which enables her to share ber's company and weekly one-on-one mentoring sessions with the C200 mem- experiences, make connections, and mentor other women. She notes that she is ber during the internship. In addition, C200 has committed to Stern women MBA “extremely interested in meeting women business leaders, since one way for me to students 30 other internship opportunities at C200 member companies, during succeed is by learning from other women who are already successful.” which preeminent business women will mentor selected students. C200 holds MBA Outreach Seminars twice a year – fall and spring – at select- “Nagina epitomizes the C200 leader of the future,” said Mary G. “Trudi” ed business schools, including Babson, Carlson School at The University of Williams, area executive vice president of Arthur J. Gallagher & Co. and C200's Minnesota, Carnegie Mellon, Columbia, Duke, Emory, Harvard, Kellogg, Santa co-chair for the MBA Outreach Seminar. “She hopes to parlay her Stern MBA Clara University, Thunderbird, University of Michigan, UNC-Chapel Hill, degree into a career assisting low-income and underserved populations in the US Vanderbilt, and Wharton. C200 has reached more than 11,000 women via the and abroad. Her passion for helping others exemplifies a commitment to foster- Outreach Seminars and has awarded more than $500,000 in scholarships in con- ing both social and business goals.” junction with the program.

MBAs Go Behind the Following the tour and dress rehearsal, students attended an NYU Stern marketing panel moderated by Deputy Dean Russell Winer and featuring Stern Scenes at the Met Opera Professors John Czepiel, Peter Golder, Eric Greenleaf, and Joel Steckel. The panel addressed the issue of declining opera attendance among young adults and request- In its ongoing efforts to provide stu- ed student recommendations for increasing attendance. One student suggested dents the opportunity to leverage New York bringing in musical artists that are popular among today's youth, and mentioned the City as a learning experience, NYU Stern recent example of Metallica playing with the San Francisco Symphony Orchestra. offers a unique case study. For the fifth After the panel, students participated in a question and answer session with the year last fall, students in the required MBA Met Opera's general manager, Joseph Volpe. Volpe, who began his 40-year career at core course, Managing Organizations the Met Opera as an apprentice in the carpentry department, shared his perspectives taught by Professor Richard Freedman, on arts management and responded to student suggestions about how to improve studied the organizational challenges faced the organization. Under Volpe's direction, the Met Opera has experienced a period by the Metropolitan Opera, the world's of unprecedented success, culminating in a record 29 operas produced in the 2005- largest opera company. In September, they 2006 season. visited Lincoln Center for a backstage tour “Only at Stern and only in New York could I have had the experience of seeing and an in-depth look at the inner workings of one of New York's leading cultural and listening to Plácido Domingo, a legend among opera singers, and having a dis- institutions. cussion with the general manager of one of the best opera houses in the world,” At the Met Opera, the students visited the costume, electric, carpentry, and said Álvaro Cañil, a first-year MBA student and opera aficionado. The Met Opera props departments, and learned how each unit contributes to the organization. visit confirmed the connection between business and the arts, and encouraged Cañil Students were also given the rare opportunity to observe a dress rehearsal of the to announce that he was working on starting an opera club at Stern. “Getting such season's opening night gala, which included Act I from Le Nozze di Figaro and an in-depth view of the opera was a great experience, and hopefully it has planted Act III from Samson et Dalila. the seed of opera in many other students,” he said.

36 Sternbusiness NYU Stern and Wharton Join Forces to Promote broad, global business focus that opens, not closes, career doors,” said Sally Benefits of Undergraduate Business Education Blount-Lyon, vice dean and dean, Undergraduate College, NYU Stern School of Business. “Now more than ever, business knows no borders. It impacts every aspect of modern life, from politics and international relations to trade, religion, Each fall marks not only the start of the semester, but also the kick-off to the and culture.” college tour season, during which eager parents and The Schools introduced their initiative through two their teenagers check out campuses and curricula, events, one in New Jersey and one, for women exclusively, determining which school will be the perfect fit. in Philadelphia. The more than 200 students and parents During this past season, NYU Stern School of who attended had the opportunity to hear from and speak Business, in partnership with the Wharton School of the with the deans, alumni, and current students from Stern University of Pennsylvania, took advantage of this cap- and Wharton. Visit www.discoverbusinessnow.org for a tive audience to educate them about what it means to “virtual” undergraduate business experience. study business at the undergraduate level and how NYU Stern's Undergraduate College is one of the doing so broadens career opportunities. Through their most prestigious, popular, and competitive programs joint educational initiative, “Discover Business Now,” these two leading under- among college aspirants. Applications are up 11 percent for the coming academic graduate colleges stressed to high school juniors and seniors the value of an year, and average SAT scores for the current freshmen class reached 1422, the undergraduate business program and why it should be a consideration during highest in the program's history. In addition to offering a liberal arts-infused busi- the college search. ness curriculum, Stern's Undergraduate College uniquely leverages New York City “What's exciting about studying business at the undergraduate level is that as part of its educational experience. it offers the best of both worlds – a solid liberal arts grounding infused with a

Erik Kimel (far right) and his Peer2Peer Tutors team. Student-to-Student Tutoring Means Business company after her two children were successfully tutored by Peer2Peer. Eager to expand the company into New York City and beyond, Kimel decided In 2004, while in a calculus class during his senior year of high school, NYU to test his business plan by entering the Stern Berkley Center for Entrepreneurial Stern sophomore Erik Kimel (BS '08) took notice of both his bright classmates Studies' Maximum Exposure Business Plan Competition, which annually awards and his peers who could use their help. And he came upon the idea of creating a significant funding to the team with an innovative and developing concept. The tutoring service by and for students. He placed an ad in his local Montgomery only Stern undergraduate student to have made it past the first round, Kimel County, Maryland, newspaper, offering himself as a tutor. Within six months, placed third in the finals of the 2004-2005 competition. Kimel had created a network of 25 tutors and formed his company Peer2Peer Losing the competition inspired Kimel to fine tune his business strategy, Tutors. which resulted in the introduction of M.O.M.s and a badly needed website. At the Peer2Peer is built on the premise that students learn best from other students 2005 NYU Entrepreneurship Conference, he was introduced to Reflexions Data, an who have taken the classes, know the teachers, and can relate to clients. This con- interactive design company, which helped him build a website that allows the cept hit home with both parents and students, and by January 2006, the company company to attract new tutors, sell tutoring sessions, and track appointments. had served more than 100 clients in elementary, junior, and high school, Kimel said he sees Peer2Peer as “a company that empowers students,” and employed more than 80 student tutors, and provided more than 2,500 tutoring one that is “a network and a part of the community.” sessions in subjects ranging from algebra to Chinese. Revenues had grown an “I love my work, and for as long as I can do it, I will,” he said, adding that he astounding 90 percent by the company's second year. is grateful to Stern Professor Kenneth Preston for mentoring him and that he cred- Managing the Maryland-based company from his dorm room in New York, its his Stern education with helping him to grow his business properly. 19-year-old Kimel travels to his home state once a month, and works full-time If Peer2Peer continues to mature as Kimel has, he just may have the lasting over his holiday breaks. This year he hired Management Operational Mentors business he envisions. (M.O.M.s) to control everyday operations, such as scheduling tutoring sessions and networking with local schools. The first M.O.M, Ann Connelly, joined the Sternbusiness 37 Alumni Affairs Alumni News & Events

3 4 5

1. From left to right: Mark Kozhin (MBA '00), Alumni Council Chair; Thomas Cooley, Dean; William Berkley (BS '66); Chairman of the NYU Stern Board of Overseers. 2. The 2005 Alumni Ball Committee. 3. Sally Blount-Lyon, Vice Dean and Dean of the Undergraduate College (center right); Lawrence Banks (BS '55) (right); Susan Salgado (PhD '03), Alumni Council member (center left), and her husband, Jason. 4. Michael Rosenberg (MBA '55), President of the NYU Alumni Association. 6 5. Russell Winer, Deputy Dean (right), with Mike Hehir (MBA '79), Alumni Council member. 7 8 6. L to R: Mary Ellen Georgas (MBA '93), Alumni Council member; Robert Goodman (MBA '80), Alumni Counci member; Shelly Greenbaum (BS '71); Susan Greenbaum (BS '71, MBA '78), Associate Dean of the Undergraduate College. 7. James Flynn (MBA '89) and wife Myrna traveled in from Northampton, MA, and danced the night away. 8. The chocolate fondue fountain was a popular gathering spot that evening. 9. L to R: Jeanne Marano, Executive Director of Alumni Affairs, with former Alumni Council 9 Chairs Susan Jurevics (MBA '96) and Christine Schneider (MBA '94). 38 Sternbusiness Stern Alumni Have a Ball Throughout the night, alumni enjoyed a private On December 3, 2005, more than 750 members of viewing of the Museum’s permanent collection, includ- the Stern global alumni network gathered at The ing Paul Cézanne’s The Bather and Vincent van Gogh's Museum of Modern Art for the Fifth Annual Stern The Starry Night, as well as special exhibitions, includ- Alumni Ball. The gala, which has become a holiday tra- ing Safe: Design Takes On Risk, Elizabeth Murray and dition, brings together alumni, faculty, administrators, Beyond the Visible: The Art of Odilon Redon. and friends to celebrate the Stern community and its Mark your calendar for December 2, 2006, for the New York City location. Sixth Annual Stern Alumni Ball, which will be held in New York City.

Building a Stern Career Network In addition, the Career Advisory Program allows Visit the Career Center in SWAP to sign up for the alumni to locate a mentor as well. The advanced search new Career Advisory Program (CAP). CAP is the online tool allows mentors to be selected based on specific cri- career mentoring program where alumni can volunteer teria, including industry, company, location, degree, to serve as mentors for fellow alumni and/or current year, and more. students. Through one-on-one interaction, which can be “We are excited to offer the new Career Center mod- via e-mail, phone, or in-person meetings, alumni share ule in SWAP. If you haven’t yet signed on to the Stern their knowledge and experiences, providing industry online community, now is the perfect time to take insight into organizational cultures from established advantage of this outstanding benefit,” explained professionals. Jeanne Marano, Executive Director. “We encourage CAP offers alumni the ability to select preferences alumni to participate in this program as another vehicle regarding their interest in mentoring, including how to further build and strengthen SternNet – the NYU many mentees they are able to assist each month and Stern global alumni network.” which constituencies they will serve, such as undergrad- The Career Center also offers links to online uate seniors, part-time, full-time, or executive MBA stu- resources, job postings, alumni resumes, and more. For dents, and/or alumni, as well as their preferred method additional information about CAP, contact Sheri Pillo, of contact. Senior Associate Director, at [email protected] or (212) 998-0671.

A Global Community With 70,000 alumni working in over 100 countries, Save the Date Stern graduates constitute a truly global network, with Reunion 2006: alumni worldwide providing information, advice, and Back to Business networking opportunities to fellow Stern graduates and current students. May 11, 2006 The Office of Alumni Affairs serves as the gate- NYU Stern Reunion Receptions way to SternNet – the NYU Stern global alumni for the MBA Classes of 1981, 1996, network. The Office provides dynamic and inno- and 2001, and the vative content-driven programming, along with a Undergraduate Class of 2001 host of benefits and services, helping Stern alum- in conjunction with ni get involved and stay connected to the School NYU Alumni Reunion Weekend and to each other. May 12 - 14, 2006 Visit www.stern.nyu.edu/Alumni to learn more For more information visit: about alumni programming, communications, and www.stern.nyu.edu/Alumni opportunities to get involved. Sternbusiness 39 Alumni Affairs

Regional Groups Lend Their Support Australia, Boston, Germany, Mexico, Philadelphia, featuring remarks from Professors Ingo Walter and Roy and the West Indies are just a few of the 59 regional Smith. alumni groups in the NYU Stern global alumni network. The Los Angles Regional Group also teamed with This fall saw a bevy of activity among the regions, student groups this winter. The Media and including many partnership events supporting student Entertainment Association (MEA), an MBA student activities and recruiting initiatives. organization, held a reception in conjunction with their MBA student organizations traveled around the annual Los Angeles TREK, bringing together alumni world, from DC to Hong Kong, with hundreds of and current and prospective students in West alumni demonstrating their support. In addition, MBA Hollywood. During the TREK, MEA visited Fox, Admissions visited nearly 40 cities worldwide to Warner Bros., ActiVision, Disney, and the Los Angeles recruit top talent for the MBA programs, with more Lakers. than 250 alumni playing an important role by partici- A complete overview of regional activities for the pating in recruiting events, sharing their experiences 2005-2006 academic year is listed in the following with prospective students, and securing corporate Regional Roundup. sponsorship. The NYU Stern Alumni in Mexico Regional Group, chaired by Ricardo Dadoo (MBA ’84), hosted two Get Involved events this year. In September, alumni gathered in Visit www.stern.nyu.edu/Alumni to locate a group in Mexico City for dinner following an MBA Admissions your vicinity. For more information about regional presentation, enjoying the opportunity to network with groups or to start one in your area, contact the Office of each other and to hear an update on the School from Alumni Affairs at (212) 998-4040 or e-mail Deputy Dean Russell Winer. In January, the EMBA [email protected]. Global Study Tour held a student and alumni reception

Alumni Leaders Travel from Around the World for the Regional Leaders Summit In December 2005, regional leaders from Australia to Houston traveled to NYU Stern for the Regional Leaders Summit. The Summit offered an opportunity to hear updates from the School and share best practices. Alumni capped off the Summit with a reception at the NYU Torch Club, where they were joined by Deputy Dean Russell Winer (middle row, second from left) and Jeanne Marano, Executive Director of Alumni Affairs (middle row, right). Several leaders stayed to enjoy the Fifth Annual Stern Alumni Ball, which took place the next evening at The Museum of Modern Art.

40 Sternbusiness Regional Roundup Catching Up With…

Tri-State New Jersey alumni attended receptions in Short Hills and the Meadowlands, which featured Susan Greenbaum, Associate Dean for the Undergraduate College, and Deputy Dean Russell Winer, who provided a presentation on marketing. In addition, recent graduates gathered in Jersey City for a networking reception. Alumni in Connecticut, Long Island, and the New Peter Jansen (right) with members of the Westchester Regional Group at the February event. York metro area all attended NYU in Your The Westchester/Fairfield Regional Group Neighborhood events. NYU President John Sexton spoke Situated on the outskirts of Manhattan, the NYU at the New York metro event, and NYU Professor Stern Alumni in Westchester/Fairfield Regional Group rep- Ronald W. Zweig was featured in Long Island. resents nearly 7,000 alumni. This group, chaired by Peter Jansen (MBA ’99), has seen a host of activity over the last United States few years, from local wine tastings and annual golf tourna- Alumni in Boston gathered at the Federal Reserve ments to faculty presentations and events featuring John Sexton, President of NYU. Bank to hear a presentation from Cathy Minehan (MBA The Westchester/Fairfield Regional Group has been espe- ’77), President of the Federal Reserve Bank of Boston. cially busy this year. In November, alumni and faculty Boston alumni also joined MBA students for the members gathered at the Doral Arrowwood Facility in Rye Association for Investment Management (AIM) TREK. Brook, NY, for a reception featuring Dean Thomas Cooley, In Washington, DC, alumni met with students from the who presented an update on the state of the School and Emerging Markets Association (EMA), and gathered for noted that Stern intends to re-establish a presence in Westchester. In February, alumni gathered at Crabtree’s a career event and reception featuring a speaker from Kittle House Restaurant in Chappaqua, NY, for a presenta- Robert Half International. Los Angeles alumni attend- tion entitled “Scoundrels and Scandals” by Professor George ed the NYU in Your Neighborhood entertainment indus- Smith. try panel on “The Future of the Hollywood Studios,” “With so many alumni in the tri-state area, we enjoy an while alumni in San Francisco met with students from enthusiastic and strong local community,” said Jansen. “We are fortunate to have not only the proximity to the varied the Technology and New Media Group (TANG). Dean and robust programming that takes place on campus, but Winer met with alumni in Dallas and Philadelphia. also regional events where our local alumni can network in MBA Admissions also presented in Dallas. their own backyards. I recognize the increased effort by the Office of Alumni Affairs to build Stern’s presence in the International Westchester/Fairfield community, and I look forward to Alumni in Buenos Aires and Santiago gathered with teaming with them and getting more alumni involved.” current students participating in the “Doing Business In…” course. Hong Kong alumni met with students on Benefits for Alumni: the Asian Business Society (ABS) TREK, while alumni in Princeton Club of New York Welcomes NYU Alumni Seoul and Tokyo met with students traveling with the In the midst of bustling Midtown Manhattan lies the Princeton Club, a quiet haven TRIUM MBA program. In Moscow, alumni met with stu- in the middle of one of the world's premier cities. The Princeton Club offers exclusive membership opportunities to alumni, faculty, and administrators of New York University. dents on the EMBA Global Study Tour. Alumni in Membership fees vary based on year of graduation and geographic location. Mumbai gathered for a reception featuring Dean Club amenities include: formal and informal dining rooms and bar, business Thomas Cooley. In Isreal, Tel Aviv alumni gathered with center, lounges and library, fitness center, facilities for private functions, full program current and prospective students, while NYU alumni and of events, overnight guest accommodations, and reciprocal benefits at more than 65 current and admitted students in Jerusalem attended a affiliated clubs. presentation by NYU Law Professor Moshe Halbertal. The Princeton Club of New York Alumni in Germany enjoyed a presentation by Professor 15 West 43rd Street New York, NY 10036 London Edward Altman, and alumni met with students (212) 596-1240 from the European Business Society.

Sternbusiness 41 classnotes

1930s Leadership Insights, published in October sold to McDATA in June of 2005. During Barbara Bacci Mirque (MBA '82), of 2005 by University Press of America. his tenure, he grew the wide-area storage Pearl River, NY, has been named Margaret R. Thrailkill (MS '38), of networking business revenue from $65M Executive Vice President of the Spokane, WA, was recently named to $360M. Association of National Advertisers Honorary Board Member of the North Idaho 1970s (ANA). College, Coeur d'Alene, Idaho Robert S. Loffredo (MBA '75), of Thomas M. Super (MBA '70), of Foundation after 30 years of membership Westwood, NJ, was recently appointed Antonio Rodriquez (MBA '82), of Eatontown, NJ, was recently appointed to and participation. Financial Consultant at A.G. Edwards & Malibu, CA, has been appointed Senior the Corporate Advisory Board of Amedia, Sons. Vice President of North American a provider of switched Ethernet ultraband Operations for Warner Brothers. In his 1950s solutions for the Triple Play Access Raymond W. Dusch (BS '76), of East new role, he will be responsible for US Market. He is the Chief Technology Setauket, NY, has been appointed to the sales, finance, operations, sales plan- Sterling D. Sessions (MBA '50), of Officer of NHC Communications, which Board of Editors of LJN's Equipment ning, and the Canadian offices. He previ- Ogden, UT, recently co-authored the book, designs and manufactures remotely con- Leasing Newsletter, published by Law ously served as US Senior Vice A History of Utah International, published trolled cross-connect devices commonly Journal Newsletters, a division of President of Finance for Warner by the University of Utah Press. used by telecommunications carriers. American Lawyer Media. He has written Brothers. numerous articles for the newsletter and Gustav Schachter (MBA '56, PhD Anthony C. La Russo (MBA '72), of other equipment leasing publications over Kenneth Brown (MBA '83), of '62), of Brookline, MA, a Professor Naples, FL, recently published his first the last 25 years, and recently completed Weston, CT, has joined ABCO Emeritus of Economics at Northeastern book, Management: Ready Aim Fire. He his three-year tenure as a member of the Refrigeration Supply Corporation as CFO. University for the past 40 years, has co- has over 30 years of business experi- Legal Committee of the Equipment authored a book, Cultural Continuity in ence, has served as Adjunct Professor, Leasing Association of America. Murray S. Kessler (MBA '83), of Advanced Economics, with Saul and has written numerous articles. Engelbourg, a Professor Emeritus of History Bedford Corners, NY, has been named Gabriel Hawawini (PhD '77), of President and COO of UST and has been at Boston University. Richard Berman (MBA '73), of New Fontainebleau, France, Dean of INSEAD elected to the Board of Directors. Prior York, NY, has been named CEO of and periodically a visiting professor at to this, he was President of UST's prin- Stan West (MBA '56), of Lake Worth, FL, NexMed Inc., a developer of transdermal Stern, received France's highest award - cipal operating subsidiary, US was reappointed to the Consumer Advisory products based on its proprietary drug La Légion d´honneur - this January in Smokeless Tobacco Company (USSTC). Panel of the Palm Beach County Water delivery technology. He has served on Paris. The award is an Order of Chivalry In his new role, he will be responsible Utilities Department for which he also the Board of Directors of NexMed since first established by Napoléon Bonaparte for UST's major operating subsidiaries, chairs the Administrative Hearing Board. 2002 and has over 35 years experience and is conferred by France's president USSTC, and International Wines & He was also certified by the Supreme Court in venture capital, management, and upon French citizens and foreigners for Spirits. He also oversees UST's corpo- of Florida as a County Court Mediator. In merger and acquisitions. addition, The Florida Bar Association outstanding achievements in military or rate communications, investor relations, civil life. and government functions. appointed him to its Grievance Mediation Robert G. Hill (BS '73), of and Fee Arbitration Committee for the 15th Pittsburgh, PA, has been named the Martyn R. Redgrave (MBA '78), of Robert Angell (MBA '84), of Circuit (Palm Beach County). 2006 Renaissance Communicator of the New Albany, OH, has been appointed to Sherborn, MA, was recently appointed Year by the Public Relations Society of Chief Administrative Officer of the Limited Director of Small Business Practice for America's Pittsburgh Chapter. This 1960s Brands. Accounting Management Solutions award honors practitioners for excellence (AMS). He previously owned a consult- Norman J. Politziner (BS '64), of in communications. He is currently the Thomas McConnon (BS '79), of ing firm which provided interim execu- Monroe, NJ, is the President of NJP Vice Chancellor for Public Affairs at the Commack, NY, has been elected to the tive and advisory services to executive Associates, a company that specializes in University of Pittsburgh. Board of Directors of the Rotary Club of teams and boards of directors. estate planning and benefits packages for New York. business owners and high net-worth indi- Ernesto M. Ordonez (MS '73, PhD Eric Litzky (BS '84), of DeMarest, NJ, viduals. '76), of Pasig City, Philippines, was has been elected by the Board of elected Vice President of the ASEAN 1980s Directors of American International William H. Turner (MBA '66), of Upper Federation of Cement Manufacturers. He Group (AIG) to service as Vice President Montclair, NJ, was recently appointed to is currently the President of the Cement John W. Burns (MBA '82), of of Corporate Governance. He has also serve on the board of directors for Manufacturers Association of the Sudbury, MA, was appointed by the been named Special Counsel and Ameriprise Financial, formerly American Philippines. Board of Directors of GlycoGenesys Inc., Secretary to the Board of Directors. Express Financial Advisors. He is the Dean to the additional positions of Interim of the College of Business at Stony Brook Thomas G. Hudson (MBA '74), of Chairman of the Board of Directors and Nancy Corporon (MBA '85), of University, in Stony Brook, NY. Boulder, CO, was recently appointed to Treasurer. He is currently the firm's Columbia, MD, was recently affiliated as the Board of Directors of Incentra Senior Vice President and CFO. a realtor with RE/MAX Exclusive in the Ed Konczal (MBA '68), of Piscataway, Solutions Inc. He was most recently Baltimore/Washington, DC, area. NJ, co-authored a book, Simple Stories for Chairman and CEO of CNT, which was

42 Sternbusiness Matthew Flynn (MBA '85), of office. He joins Signature Bank from Hartsdale, NY, has been appointed CEO of Bank of America where he served as Money Handler Hanley Wood. He was previously Senior Senior Vice President of middle mar- Vice President, CFO at PRIMEDIA. ket lending. David A. Handler is Senior Jason Mannis Palmer (BS '85), of Marianne Sciolino (MBA '88), of Managing Director at Bear Stearns. Huntington, NY, has been elected to the New York, NY, has started an artist man- He joined the firm in 2000. As Board of Directors of the New York State agement firm, Sciolino Artist Founder and Co-head of Bear Society of Certified Public Accountants, Management (SAM). Stearns Global Communications the oldest and largest state accounting Technology and Software Group, association in the nation. He also serves Joel E. Kadis (MBA '89), of Newton, as President of Palmer Computer PA, was recently named Partner of which has handled more than $25 Services Inc., in Huntington, NY. Linear Retail Properties, a retail real billion in financing and advisory estate acquisition and operating compa- assignments, Handler works with Christopher J. Policinski (MBA '85), ny. He joined the firm in 2004 as Senior clients in the United States, of Shorewood, MN, has been named Vice President of Leasing and Asset Europe, and Asia on mergers and President and CEO of Land O'Lakes Inc. Management after spending five years as Regional Director of Asset David Handler (BS '88, MBA '90) acquisitions of communications David Gross (MBA '86), of Louisville, Management for Wellsford Commercial technology companies. He is also CO, has been named Chief Financial and Properties Trust, a Goldman Sachs-affil- a member of Bear Stearns’ President’s Advisory Council. Administrative Officer at RGL Forensics iated company. Prior to joining Bear Stearns in 1995, Handler was Accounting & Consultants. He previously employed by Jefferies & Company as Vice President. He served as RGL's Director, US Finance. Richard A. Reich (MBA '89), of was promoted to Managing Director in 1998, with respon- Arcadia, OK, was recently promoted to Raj Mitra (MBA '86), of San Dimas, Senior Vice President of Corporate sibility for overseeing the firm’s Technology Group and CA, was named Senior Director of Thales Finance at Banc First. Formerly, he was New York Investment Banking office. Navigation, a subsidiary of the Thales the Director of Risk Management at OGE For the past 12 years, Handler has been a member of Group, a EUR 10 billion French electron- Energy Corporation. the Board of Directors of Penn National Gaming, the ics company. nation’s third largest gaming company. In 1998, he became Mark R. Patterson (MBA '86), of 1990s a member of the Board of Directors and of the Executive Bronxville, NY, and his teammates Committee of the New Group, a highly-regarded nonprofit Jeff Haveson (MBA '90), of obtained second place in the 24 Hours of organization that promotes the arts in New York City. He Monmouth Junction, NJ, has started a Daytona race. His race car carries the new financial planning firm, Matrix also administers the Grosevnor Foundation, a charitable NYU Stern logo, among others. Financial Advisors LLC, based in trust he founded that supports numerous local and nation- Princeton, NJ. Bernard Tubiana (BS '86), of New al nonprofit causes. York, NY, has been promoted to Principal A dual degree graduate of Stern, Handler speaks of an Patrizia E. Micucci (MBA '90), of of Deloitte Consulting LLP. “incredible program that more than exceeded my needs.” Foggia, Italy, was recently featured in The Wall Street Journal's “Women to He is an active alumnus, currently serving on the Carlos T. Blanco (MBA '87), of Watch” report as one of the top ten Undergraduate Dean’s Advisory Council, a non-overseeing Caracas, Venezuela, has been named managers to watch in Europe. She is affiliation that assists in shaping the College’s direction, President of Centennial de Puerto Rico. the Managing Director, Head of and he encourages current students to take advantage of all Investment Banking in Italy, for Lehman Robert Matza (MBA '87), of that the School has to offer. “Stern has made so many rad- Scarsdale, NY, has joined GoldenTree Brothers Holdings. ical changes for the better over the past 20 years, probably Asset Management as President. He will more than any other top business school over the same Thor Bjorgolfsson (BS '91), of have responsibility for business manage- period of time,” he says. ment, administrations, operations, and London, England, was featured in the finance, and will help determine the Financial Times (London Edition) and Passionate about his work, Handler takes pride in his strategic direction and growth of the firm. was listed in Forbes as Iceland's first success in a highly competitive industry. “My clients are He most recently served as President and billionaire. A global entrepreneur, among the leaders in the technology sector, so having cred- COO of Neuberger Berman, as well as a Bjorgolfsson is Chairman of ibility and respect among a discerning client base has been member of the Management Committee at Burdarasa, an Icelandic financial hold- very rewarding.” He stresses that investment banking new- Lehman Brothers. ing company, is a partner in an Icelandic investment company, and comers should reflect on their reasons for joining the indus- David M. Saunders (MBA '87), of owns large stakes in a Russian beer try. Handler advises that “while investment banking can Stony Brook, NY, was recently appointed company, Icelandic generic pharma- yield monetary rewards, it is very difficult to have a long Group Director and Senior Vice President ceutical company, the National Bank of and successful career on Wall Street without being pas- of Signature Bank's Melville, Long Island, Iceland - Landsbanki, and telecom sionate about what you are doing.” Sternbusiness 43 classnotes

companies in the Czech Republic and Philip Lam (MBA '94), of Closter, NJ, Bulgaria. recently accepted a job to head up the US Digital Projector operations for Yappa Corporation, a 3D Keith Kaplan (MBA '91), of Ramsey, Web technology and creative services NJ, was promoted to Vice President, company headquartered in Japan. In Hollywood, youth is a peren- Marketing and Product Development at nial obsession. But in December Comtex News Network Inc., a provider of Steven Berns (MBA '95), of Short 2005, as Fast Company magazine electronic real-time news and content. Hills, NJ, was recently promoted to was compiling its list of the 10 Previously, he held the position of President and CFO and appointed a hottest minds in Hollywood, it Director of Product Development and was member of the Board of Directors of MDC included an entrepreneur with instrumental in the introduction of various Partners. In this new role, he will work more than 40 years of experience new products and in the development of more closely with MDC Partners' operat- under his belt. new corporate branding campaigns. ing businesses, and will continue to be As Co-founder, Chairman, responsible for overseeing MDC and Chief Executive Officer of Ronald D. Kazel (BS '91), of Partners' financial management and cor- Access Integrated Technologies Arlington, VA, has been named a porate development teams. Inc., Bud Mayo heads a pioneer- Managing Director of Annaly Mortgage Management Inc. Michael K. Clark (MBA '95), of New Bud Mayo (BS '64) ing company that is leading the way for the transition from film York, NY, has co-founded Stinson Patrick E. Phelan (MBA '92), of Elk Partners, a marketing consultancy/agency to digital in the movie industry. AccessIT provides propri- Grove, CA, recently joined North Bay that specializes in interactive and direct etary software and services for movie producers, distribu- Bancorp as Executive Vice President and marketing. tors, and exhibitors. Mayo conceived the idea for AccessIT CFO. He will oversee financial matters of while serving as President and CEO of Clearview Cinemas North Bay and its subsidiary bank, The Jason O. Hirschhorn (BS '95), of LLC, which he founded in 1994 and sold to Cablevision in Vintage Bank, and its Solano Bank divi- New York, NY, was recently named Global 1998. sion. His responsibilities include finan- Chief Digital Officer at MTV Networks. He “The melding of technology and entertainment, and the cial and regulatory reporting, financial will be responsible for coordinating opportunity to lead the industry into the digital era was analysis and planning, general ledger MTV's digital media efforts. irresistible,” says Mayo. “AccessIT is a culmination of all management, budgeting, capital manage- my professional and educational experiences, from finance ment, asset/liability management, fixed Robert H. Von Furth (MBA '95), of to technology to entertainment. This kind of opportunity assets, and accounts payable. Northampton, MA, recently joined Ryan only comes around once in a lifetime.” Becks & Co., an investment firm, as “My vision is to provide a global exchange of main- Lawrence Handen (MBA '93), of Managing Director. He will be responsi- Potomac, MD, has recently joined Insight ble for originating, structuring, and exe- stream products in every language to and from every coun- Venture Partners, a venture capital firm cuting transactions for consumer prod- try,” he continues. “Currently, content is only coming out of exclusively focused on the global software ucts and services companies and will Hollywood, with hardly anything coming into the United and Internet services industries, as oversee the expansion of the firm into the States. In the digital era, this will all change.” Managing Director. He will be responsible restaurant, grocery, and food sectors. Mayo is a serial entrepreneur. He began his career with for deal flow execution and management Prior to joining the firm, he was a IBM as a computer salesman and later co-founded more in Insight's newly launched Insight Managing Director of Deloitte & Touche than a dozen computer services companies. He was the Venture Partners V. Previously, he was a Corporate Finance LLC. Founder, Chairman, and CEO of Clearview Leasing Managing Director at VantagePoint Corporation, a lessor of computer peripherals and telecom Venture Partners, where he managed Pialy Aditya (BS '96), of New York, equipment. Between 1994 and 2000, he built Clearview investments in the software, Internet, and NY, recently received her MBA from Cinemas from an eight-screen operation into a 300-screen media sectors. Harvard Business School. chain, whose outlets included the Ziegfeld Theatre in New York City. He also served in various senior corporate Claudia Harris (MBA '93), of St. Natalie A. Birrell (MBA '96), of finance positions on Wall Street. Louis, MO, and husband, Noel, welcomed Westfield, NJ, has recently joined Arden daughter Isabella Keyvan, on August 26, Asset Management Inc., a leading fund of “The atmosphere at Stern really awakened my entrepre- 2005. hedge funds manager, as Managing neurial spirit,” says Mayo. “At the Undergraduate College Director with the responsibility for work- there were so many students with so many goals and Steffin Gorig (MBA '94), of Munich, ing to enhance the firm's technology, dreams, it was contagious. My advice to others who wish to Germany, was named Managing Director infrastructure, risk management, strategic launch their own venture is to find your passion. I keep a of Mondi Packaging, a release liner pro- planning, and new product platform, quote from Ralph Waldo Emerson posted outside my office duction company. portfolio operations, and investment door as a reminder: ‘Nothing great was ever accomplished processes. Previously, she was a without enthusiasm.’ ”

44 Sternbusiness Managing Director and COO of Deutsche Robert Reitz (MBA '97), of Orem, UT, Frank F. Lin (MBA '98), of Las Vegas, Lori M. Rutt (MBA '98), of Bank's Absolute Return Strategies Group. has been named CFO of Whole Living, a NV, and Desiree Marie Acosta (MBA Edgewater, NJ, and Alvaro L. Serrano manufacturer and distributor of all-natu- '99), of Las Vegas, NV, were married on were married in New York City on Kevin Ma (MBA '96), of Columbus, OH, ral whole foods. He has direct sales September 3, 2004. August 19, 2005. and his wife, Margie, welcomed a son, experience in Singapore, Hong Kong, Stephen Stanley Ma, on May 17, 2005. Malaysia, and other international mar- Sharon Simon Mahan (MBA '98), of Daniel M. Cohen (MBA '99), of New Kevin was also promoted to Director of kets. He also spearheaded a successful Anaheim, CA, and husband, George, York, NY, recently returned to the private Leveraged Loans for the Office of entry of a US-based company into the welcomed a son, Nathan Thomas, on sector after a three-year term in the Investments Group at Nationwide Japan market. February 28, 2005. Bloomberg administration, working at Insurance. the city's economic development corpo- Jed Fishback (MBA '98), of South Michael B. Munter (MBA '98), of ration. He now works for ING, financing John A. MacPhee (MBA '96), of Orange, NJ, and wife, Breena, welcomed Scarsdale, NY, has recently been promot- development projects throughout North Ridgewood, NJ, was promoted to their son, Jordan David, on September ed to Vice President of Operations for America. President of the Branded Products 29, 2004. CareOne LLC, New Jersey's largest pri- Division at Par Pharmaceuticals vate owner and operator of long-term Lisa C. Markowitz (BS '99), of Allentown, PA, and husband, Dr. Moshe Companies Inc., and elected a corporate care and assisted living facilities. Markowitz, announced the birth of their officer by Par's board of directors. In his new position, he will continue to develop marketing and sales strategy and establish first priorities for the branded business, His Life, His Card including identifying new markets and new products. Travelers take the American Express card with them all over the globe. The company behind the card also has a way of mak- Yvonne K. Briggs (MBA '97), of ing sure its executives see the world. Brooklyn, NY, has recently been appointed to Vice President of Business Development In his 27 years with American Express, Massimo Quarra has at IRIS International, a manufacturer and worked in Latin America, Asia, and Europe, where the Italian marketer of automated IVD urinalysis sys- executive serves as President of the company’s European offices. tems and medical devices used in hospi- Quarra joined the company in July of 1979, after receiving an tals and laboratories worldwide. Her role MBA in international finance from NYU Stern, and spent the includes identifying, evaluating, and exe- early portion of his career working in a variety of finance posi- cuting potential strategic initiatives in the tions in both Latin America and Asia. He returned home to Italy area of new technologies and product in 1987 to serve as Chief Financial Officer of American Express opportunities. Massimo Quarra (MBA '79) Italy. Throughout this tenure, he continued to broaden his pro- Jonathan Eng (BS '97), of New York, fessional repertoire to include systems, operations, marketing, sales, customer service, and NY, recently joined IBM Business relationship management. Consulting Services in the Financial “Finance is a great starting point for a career in general management,” he says. “But Markets Practice. In addition, he married to succeed, you need to ensure that you gain a solid understanding of the other compo- Alice Teng at the Four Seasons Maui on nents of business as well.” May 27, 2005. Quarra was appointed Managing Director of American Express Italy in 1993, Regional President of Southern Europe in August 2000, and President of Europe in July 2004. John T. Matwey (MBA '97), of New “The most exciting and challenging thing about working internationally is learning the York, NY, was recently appointed as different aspects of various cultures,” he remarks. “Conducting business in different cul- Director of Risk Management and Portfolio Services at Tremont Capital Management tures and adapting and tailoring global strategies to specific countries is essential in order Inc. He will be responsible for managing to win in the marketplace.” several long-term initiatives for the firm's Quarra continually calls on the experience and knowledge he has gained throughout his investment management group, including career and at NYU Stern. “Receiving an international finance degree from NYU Stern real- enhanced development and implementa- ly prepared me for a career in global business,” he says. “At Stern, I was exposed to a wide tion of Tremont's risk analytics platform. variety of cultures and students. In addition, New York City is one of the greatest interna- He joins the firm from RiskMetrics Group tional cities in the world. Just being in the city on a daily basis and experiencing everything Inc., where he had been a director in the the city has to offer helps set you on the path to being a citizen of the world. I have made Alternative Business Division. excellent contacts during my studies at NYU and I have kept in touch with many of them.” “Working internationally was my goal when I left Stern,” he continues. “Combining my business education with the opportunities American Express has offered me has helped me achieve this goal.”

Sternbusiness 45 classnotes daughter, Talia Esther, on June 21, 2005. Early Adopter Stacey Widlitz (MBA '99), of New York, NY, was appointed Managing Director for Ann N. Reese is Co-director at the Center for Adoption Policy Pali Research. She will serve as a retail (CAP), which she co-founded in 2001. CAP’s mission is to provide analyst covering specialty retail equities. Prior to this, she was a retail analyst at research, analysis, advice, and education to practitioners and the Fulcrum Global Partners. public about current legislation and practices governing domestic and inter-country adoption. Prior to creating CAP, Reese spent more than 25 years in 2000s finance. After graduating from the University of Pennsylvania in 1974, Reese joined the Bankers Trust training program as one of Kjerstin E. Barley (MBA '00), of San the few women preparing for a career in commercial banking. At Carlos, CA, was recently appointed Senior that time, the only commercial banking positions available were in Vice President at Origination, where she the Middle East, where women weren’t allowed to travel. Reese will be responsible for developing client asked to be placed in the foreign exchange trading program, and Ann Reese (MBA '82) relationships within the technology sector. landed on the foreign exchange desk. This experience led to a job She has more than 12 years of experience offer from her client, Union Carbide. in technology and finance, most recently She later worked as the Treasurer of Mobil Europe and as the Executive Vice President serving as Investment Banking Vice and Chief Financial Officer of ITT Corporation. Now, Reese serves on the Board of Directors President for Bear Stearns. of Merrill Lynch & Company, CBS, Jones Apparel Group, Sears Holdings, and Xerox. Reese attended Stern part-time while working at Union Carbide and Mobil Oil. “I got a Yuri Brodsky (MBA '00) and Tammi tremendous amount out of the part-time experience,” says Reese. The MBA program Stegeman Brodsky (MBA '00), of New exposed Reese to people working in different disciplines, giving her a better sense of how to York, NY, welcomed their first daughter, advance her career. “Before, ‘networking’ was just a word; Stern taught me how to net- Elizabeth Kathryn, on March 23, 2005. work.” Siranoush Dervogormiyaciyan (BS In June of 2000, Reese and her husband, Stanley, expanded their family of three sons, '00), of Cliffside Park, NJ, recently (now 15, 19, and 22) by adopting two Romanian toddlers. Their son and daughter were received her MBA from London Business developmentally delayed as a result of their time spent in institutions, and they needed School. She moved back to New Jersey in speech and physical therapy. By the end of 2000, Reese had left her job to devote herself to fall 2005 and has taken a position with her children’s rehabilitation. Booz Allen Hamilton. Frustrated by the process of her inter-country adoption, Reese founded CAP with a lawyer who also has a blended family. “There are 413 million orphans in this world, with Stephane Kirkland (MBA '00), of Paris, half a million in foster care in the US alone, and 6 million adoptees here,” says Reese. “My France, has been appointed to the Board of goal is to find a permanent home for every child who needs one.” Directors of SPE, the second largest Reese considers her decision to adopt and to create her nonprofit organization among the Belgian electricity and gas company. best she has made. “Adopting Ileana and Traian brought so much to our family, opened my eyes to a need I didn’t know about, and [through CAP] helped me find a niche where I could William F. Sawyer (MBA '00), of make a difference in the world.” Brooklyn, NY, recently joined Leerink Attributing her career success to serendipity, Reese says, “I was lucky enough to be given Swann, an investment banking firm that opportunities, and smart enough to take them.” She insists that she didn’t map out a rigid provides healthcare equity research for path to reach the top ranks of finance. “My career was a lot of small steps. I never worried institutional and high-net-worth clients, about titles or money, but focused on interesting experiences; the rest followed.” Perhaps the as Director of Specialty Pharmaceuticals. He will focus his research efforts on best advice that Reese can offer to those seeking to follow in her footsteps is to “focus on the generic manufacturers. Previously he opportunities, not the roadblocks.” worked at Merrill Lynch on an Institutional Investor-ranked specialty pharmaceutical research team. (MBA '00), welcomed their daughter, training to Chinese junior- and mid-man- Shahid Khan (MBA '01), of Princeton Grace Louise, on May 5, 2005. agement professionals. Junction, NJ, has joined Interactive Garvis Toler (MBA '00), of Rockville, Broadband Consulting Group LLC, a MD, recently joined the Center for Danny Bao (MBA '01), of Shanghai, Marcus Hadden (MBA '01), of South consulting firm advising top manage- Financial Research & Analysis as Director China, and Josh Kurtzig (MBA '04), Orange, NJ, and wife, Tasia, announced ment in the broadband-related sectors of of Sales and Marketing. In addition, he and of Beaverton, OR, have launched a new the birth of their son, Maximilian John, cable, mobile, technology, and digital his wife, Samantha Cherney Toler educational venture in Shanghai. The on March 30, 2005. media, as Partner. He will be responsible company, China Business Institute, aims for leading major client engagements and to provide English-based business

46 Sternbusiness for the firm's thought leadership and public Ashwin Ramji (MBA '03), of Arcadia, relations activities. CA, has accepted a position as Senior George Forman (BS '39, MBA '52) Strategy Analyst at Provision Ministry Joel H. Ettinger (BS '40) Andrew Pancer (MBA '01), of Tenafly, Group, a nonprofit company located in Jerome L. Langer (BS '40) NJ, has been named COO of About.com, a Irvine, CA. William N. Roth (BS '47) content website which is a part of The New Joseph H. Gardner (BS '49) York Times Company. Poupak Sepehri (MBA '03), of Boston, Robert Warshaw (BS '49) MA, has accepted a position as Global Kendrick B. Tibbetts (BS '50) Gregory Wilmore (MBA '01), of New Communication Manager for GE Industrial In Memoriam York, NY, was married to Barbara, on July Sensing. John J. Winkopp (BS '50) 30, 2005, in Lake Placid, NY. Floyd L. Simmons (BS '56) Breyt L. Coakley (MBA '04), of New Samuel L. Pettit (BS '58) Sandra Delmonte (BS '02), of Forest Hartford, NY, and wife, Jane, announced Michael Mendelson (BS '64) Hills, NY, and Raphael Frydman (BS the birth of their daughter, Olivia Jane, on Deborah W. Solnit (BS '66) '02), of Forest Hills, NY, were married on December 1, 2005. Evelyn Gutman (BS '74, MBA '77, PhD '85) May 7, 2005. Jan Stackhouse (MBA '87) Petter Nore (MBA '04), of Oslo, Charles Miller (MBA '02) Olivier Neant (MBA '02), of Paris, Norway, has been named General France, and his wife, Miki, are pleased to Secretary of the International Gas Union, Rachelle S. Curry (MBA '04) announce the birth of their first child, Julia effective October 2007. The announcement Ayumi, on April 13, 2005. was made in Beijing on October 19, with 81 delegates from member countries and Lukas Neckermann (MBA '02), of associate members from most of the Save the Date Munich, Germany, was recently quoted in world's oil and gas companies present. Florence 2007: Handelsblatt, a German newspaper, in an He is currently the head of Hydro's office Global Alumni Conference article entitled “Is an MBA from US in Moscow. June 8-9, 2007 Business Schools Still Worth It?” While giving credit to the development of European Peter Williams (MBA '04), of Additional details will be available programs, he stated that US MBAs are still Commack, NY, has been named Global in the coming months. the “be-all and end-all of MBAs.” He is the Head of Hedge Fund Technology for UBS. Visit www.stern.nyu.edu/Alumni Regional Leader for the NYU Stern Alumni for updated information. in Germany Regional Group.

SEND US YOUR NEWS News to Share with NYU Stern Classmates Do you have a new job or promotion? An award, honor, or achievement to share? How about a marriage, new baby, or adoption? Let other alumni know about the things happening in your life. Send us your news online through Class Notes in SWAP – the Stern Worldwide Alumni Platform – at www.stern.nyu.edu/Alumni, or mail in the following ÑEWSform, and we will publish it in an upcoming issue of STERNbusiness. Name

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Home Address Please send or fax this form to: Office of Alumni Affairs NYU Stern School of Business Work Phone Home Phone 44 West Fourth Street, Suite 10-160 New York, NY 10012-1126 Preferred E-mail Address Fax: 212-995-4515

Sternbusiness 47 PastPerformance

Half-Centennial Commerce was divided roughly estate, backed by a large gift from equally between day and evening the Tisch family. Working with Retrospective students. The classes were large famed architect Philip Johnson, who and practical. Many members of designed Tisch Hall, was one of the By Daniel Gross the faculty did not have doctorates, highlights of Gitlow’s tenure. and they focused more on teaching “Johnson told [former New York Abraham (Abe) Gitlow joined the application of business than on University President] Jim Hester NYU Stern when it was, conducting academic research. “It that it was a pleasure to do business in his words, an academic with us because we knew “factory,” focused on giv- what we wanted, and con- ing thousands of New sequently he had a very York City residents the clear mandate,” he said. skills necessary to assume Over time, the Stern important roles in the School acquired a more emerging US post-WWII global outlook and a larg- workplace. When he er and deservedly earned retired 40 years later, reputation for attracting Stern had grown into a students from all over the highly diversified institu- world, and equipping tion with an international them with the tools need- reputation for excellence ed to become leaders in in academic research and today’s global economy. teaching. “If you tell someone that An Air Force veteran Dean Abe Gitlow circa 1977 you're an alumnus of and Columbia PhD, Gitlow Stern, there’s a little arch- joined the School of Commerce, was a true school of opportunity,” ing of the eyebrow, a kind of nod, Accounts & Finance (as NYU Stern’s he said. “And a very large number and a great deal of respect,” Gitlow Undergraduate College was then of the city’s accountants, attorneys, remarked. known) in 1947. and businesspeople in all spheres of At 87, Gitlow is retired, but “It was a huge, educational facto- industry graduated from that hardly retiring. In 1995, he wrote ry – and I don’t mean that in a pejo- School.” the Stern history, NYU’s Stern rative way,” said Gitlow, who served But over time, as demographics School of Business: A Centennial as dean of the School of Commerce shifted, the School’s mission and Retrospective. And last year, Gitlow, from 1965 to 1985. With student ambition changed. With that who lives in Miami Beach, pub- ranks swelled by former GIs, “there change, new resources were attract- lished Corruption in Corporate were about 10,000 students regis- ed. Gitlow was named dean in America: Who is Responsible? Who tered. The graduating classes domi- 1965. Over the next two decades, Will Protect the Public Interest? nated the Commencement exercises the School’s academic reputation (University Press of America). As he of the University.” grew – “with professors like Ernie looks up north, he likes what he The offices, then in Shimkin Hall, Kurnow, Mike Schiff (PhD ’47), sees. “The Undergraduate College were similarly packed. Faculty mem- Bob Kavesh (BS ’49), and Jules today is a place for smart, ambi- bers shared desks. Backman (BS ’31, MBA ’33, PhD tious kids who are going to be the “There were completely open ’35), the School began to make creators of a greater society,” he department offices we referred to as what became an extraordinary concluded. bullpens,” he recalled. transformation,” Gitlow said. At the time, the School of The School acquired more real DANIEL GROSS is editor of STERNbusiness.

48 Sternbusiness CALENDAR OF EVENTS For the most up-to-date information on events, visit the Office of Alumni Affairs website at www.stern.nyu.edu/Alumni or contact the Office at (212) 998-4040 or [email protected].

UPCOMING EVENTS April 22 10th Annual All-University Conference on Self-Employment, Business Ownership & Entrepreneurship 8:00 am – 6:00 pm; Schimmel Auditorium, Tisch Hall 25 Reality Investing at Stern: The Michael Price Student Investment Fund 6:00 pm: Presentation, Rm 2-60, Kaufman Management Center (KMC); Networking Reception, Barr-Kawamura Commons (Rm 5-50), KMC May 16, 17 Salomon Center's Credit Risk Conference: “Recent Advances in Credit Risk Research” 18 Author Lecture Series: Ben Friedman on “The Moral Consequences of Economic Growth” 6:00 pm; Schimmel Auditorium, Tisch Hall 18, 19 NYU Pollack Center for Law and Business Directors' Institute Thursday, 6:30 pm: Welcome Reception; Friday, 8:00 am – 5:00 pm: Conference; Kimmel Center; www.stern.nyu.edu/clb 19 Lifelong Learning Workshop: Real Estate with Professor Harry Chernoff 8:30 am – 1:30 pm: Lecture, Rm 2-60, KMC; Luncheon, Douglas B. and Joseph H. Gardner Commons (The Commons), KMC June 15 Alumnae Network Author Lecture with Barbara Stanny, author of "Secrets of Six-Figure Women" and "Overcoming Underachieving" 6:00 pm; The Commons, KMC

GRADUATION AND ALUMNI REUNION WEEKEND May 9 Undergraduate Baccalaureate 6:00 pm; The Theater at Madison Square Garden 10 Graduate Precommencement 12:00 pm; The Theater at Madison Square Garden Grad Alley 5:00 pm; West Fourth Street, La Guardia Place, and the NYU Plazas 11 NYU Commencement 12:00 pm; Washington Square Park MBA Class of 1981, 1986, 2001, and Undergraduate Class of 2001 Reunion Receptions 6:00 pm; KMC 12 NYU Alumni Association Awards Dinner 6:30 pm; The Roosevelt Hotel, New York, NY 13 Entertainment, Media, and Technology Panel: “Changing Channels: Reaching Consumers Through Today's Media” 11:30 am – 1:00 pm; Schimmel Auditorium, Tisch Hall Luncheon with Dean Thomas Cooley 1:30 – 3:30 pm; The Commons, KMC All NYU Alumni Reunion Gala Dinner Dance 7:00 pm; Grand Hyatt Times Square, New York, NY

STERN ALUMNI PROGRAMMING April 22 Recent Graduate: NY Cares Spring Clean-Up Day 9:30 am – 3:00 pm 25 EMBA Global Study Tour Student & Alumni Reception in Rio de Janeiro, Brazil May 4 First Thursday: Recent Undergraduate Alumni Happy Hour 6:00 pm; Midtown July 13 Undergraduate Alumni Summer Beer Blast 6:00 pm; Rm 5-50, KMC August 17 MBA Alumni Summer Beer Blast 6:00 pm; Rm 5-50, KMC

“NYU IN YOUR NEIGHBORHOOD” Reservations required. For complete information, visit the website at www.nyu.edu/alumni. May 1 San Diego, CA May 23 Houston, TX 2 San Francisco, CA June 6 Boston, MA 4 Los Angeles, CA NON-PROFIT ORG. U.S. POSTAGE

New York,Paid NY permit no.7931

Office of Public Affairs 44 West Fourth Street, Suite 10-160 New York, NY 10012