HERMES

MASTERS OF THE ARTS BY DIANA KATZ The management that makes for flawless performances and star-studded seasons at the Metropolitan Opera and the New York Philharmonic

FRIENDS, ROMANS, COUNTRYMEN Cognoscenti of Italian business, from venture capital to heavy industry, real estate to automobiles

HELD ACCOUNTABLE BY ITZHAK SHARAV Sizing up accounting distortions and audit failures, an expert does the math

FALL 2002

HERMES

Fall 2002

Features

6 MASTERS OF THE ARTS by Diana Katz From the Metropolitan Opera and the New York Philharmonic, reflections on life in the arts and the arts in our lives.

CHRIS LEE, NEW YORK PHILHARMONIC 12 FRIENDS, ROMANS, COUNTRYMEN The world’s great arts Powerhouses of Italian business discuss their careers, their home organizations, including country and the enduring value of a Columbia MBA. the Metropolitan Opera (left) and the New York Philharmonic 18 HELD ACCOUNTABLE by Itzhak Sharav (above), depend not only on An expert in the field explains how new measures will crack down artistic genius but also on virtuoso business leadership. on accounting irregularities—for now.

On the cover: 32 ENDPAPER: AN ETHICAL COMPASS by Russell L. Carson ’67 Left to right, James Levine, Navigating by one’s integrity, from the recipient of the artistic director, Metropolitan Opera, by Koichi Miura, and 2002 Botwinick Prize in Business Ethics. Lorin Maazel, music director and maestro, New York Philharmonic, by Chris Lee

Departments

Dean’s Message 2

Newsmakers 3

Alumni Relations 20

Class Notes 21 NEWSMAKERS

NEW INVESTING CENTER FURTHERS THE GRAHAM AND DODD TRADITION

he new Heilbrunn approach. His remarks pro- TCenter for Graham & voked an ardent follow-up Dodd Investing was formally discussion. launched on October 10 at “Value investing is a the 12th annual Graham & framework and philoso- Dodd Breakfast Seminar. phy,” Greenwald noted. “The Graham and Dodd “There is room to incor- tradition continues to thrive porate a wide range of at Columbia,” announced intelligent investors who Bruce Greenwald, the may not be strict Graham Robert Heilbrunn Professor SMITH BAER STUDIO and Dodders.” Professor Bruce Greenwald and Arthur J. Samberg at the of Finance and Asset Graham and Dodd Breakfast Seminar in October. Management and director has educated some of the of the center. School’s role as the leading chairman and CEO of investing community’s most The research institute resource for today’s invest- Pequot Capital Management, celebrated practitioners, furthers seven decades of ment professionals. who pointed out that including Warren Buffett, pioneering work in invest- This year’s breakfast although he is not a strict MS ’51, Lee Cooperman ’67, ing theory and practice at featured a keynote speech value investor, he does Mario Gabelli ’67 and the School. It has already by Arthur J. Samberg ’67, follow aspects of the Charles Royce ’63. implemented several major initiatives: the Walter Schloss Value Investing NOW ONLINE: CHAZEN WEB JOURNAL Archives have been estab- dding to its wealth of a specific global lished; three new value international business theme—for the first, investing courses are A resources, the School has Entrepreneurship: offered (and as “heavily launched the Chazen Web Case Studies in oversubscribed” as the Journal of International African Enterprise original courses, says Business (www.gsb.columbia. Growth. The journal Greenwald); and, to com- edu/chazenjournal), a pio- features articles and plement Greenwald’s neering initiative providing research papers by academic leadership, the analysis of international busi- students and center has hired administra- ness issues and fostering faculty members, tive director Erin Bellissimo. exchange among a global interviews with corporate members of the Chazen With such events as the community of business lead- leaders and reader feedback Society each year.” Graham & Dodd Breakfast ers, students and faculty online. Content can be down- Seminar, the center pro- members. Professor Elke Weber, who loaded by managers at motes the value-investing Led by students in the became academic director global companies, MBA principles of pioneers Chazen Society, the journal of the institute in August, students looking for study Benjamin Graham and is produced twice a year remarks that, among other resources and faculty mem- David Dodd, MS ’21; under the aegis of the things, “the journal provides bers seeking to supplement improves investing through Jerome A. Chazen Institute valuable training for the course materials. education, research and of International Business. group of distinguished MBA dialogue; and furthers the Each issue focuses on students selected to be

FALL 2002 HERMES 3 NEWSMAKERS

MBA POWER LUNCHES (AND BREAKFASTS)

ot surprisingly, last summer in class instead of meeting with Kravis, was Nsummer when the internships, signed on. struck by Kravis’s efforts to Dean’s Office invited stu- Executive participants connect with students. dents on campus to dine included Daniele D. “We were treated like any with some of the world’s Bodini ’72; Russell L. other businesspeople,” he foremost business leaders, Carson ’67; J. Michael Cook; explains. “It was two hours “there was a mad rush to Leon G. Cooperman ’67; on a weekday morning, but sign up,” says Jonathan Charles E. Exley, Jr. ’54; he was clearly there for us.” Brolin ’03. Mario J. Gabelli ’67; The experience “made me Twenty members of the Nathan Gantcher ’64; realize for the first time the Board of Overseers and the Paul B. Guenther ’64; Ehud real power of the Columbia Executives-in-Residence Houminer; Ari Kopelman ’62; network,” says Lesley Program met with MBAs Henry R. Kravis ’69; Leanne Hayden ’03, who lunched in small groups over lunch Lachman; Peter K. Loeb ’61; with Bodini. She also or breakfast to offer insight Jerry I. Speyer ’64; Sabin gleaned “an inspiring into their success and dis- Streeter ’67; and Donald C. glimpse of what we might cuss students’ own goals. Waite III ’66. all become.” Nearly 200 January term– Brolin, who garnered a “There was an inherent entry students, who spend coveted place at a breakfast common bond,” says Peter Gingold ’03 of the rapport between students and both GE CHAIRMAN AND CEO IMMELT KICKS OFF SILFEN LEADERSHIP SERIES Carson and Gabelli—even though, he laughs, “We were all starstruck.” tudents, faculty mem- Europe. “We have the lux- The series is “part of a Sbers and guests filled ury to redefine the portfolio larger program specific to the Miller Theatre on for the next generation,” he the needs of January-term September 27 for a presen- said, naming health care, students,” says Safwan Masri, tation by Jeffrey R. Immelt, security and infrastructure vice dean of students and chairman and CEO of the businesses outside the the MBA Programs. “This is General Electric Company. United States as targets for one way to offer an oppor- Immelt shared his thoughts growth. tunity that they wouldn’t on a variety of topics rang- He advised students, “You have otherwise,” he adds. ing from the state of the have an opportunity in your Confirming it would be economy to leadership and lifetime to make a differ- offered again, Masri says, integrity in the workplace. ence. The most important “Almost every student who SMITH BAER STUDIO With GE for more than decision you’ll make during was here for the summer 20 years, Immelt was presi- structured methods for these two years is, Are you signed up for it.” dent and CEO of GE Medical change and continually going to be a giver or a Brolin laughs, “I was Systems, an $8 billion invested in “people, culture taker?” telling people the whole segment of the company, and systems.” GE spends Immelt, one of several day that it was worth the before he succeeded Jack $1 billion a year on executives speaking as part price of admission just for Welch in 2001. employee training. of the annual David and Lyn that breakfast. Those were Expounding on the man- Immelt said his goals Silfen Leadership Series, some expensive blueberry agement strategy of GE, include expanding GE’s attended the event with pancakes, but I think they Immelt said it followed a technology interests and Keith S. Sherin ’91, GE’s were worth it.” business model, drove a broadening its global reach, senior vice president, performance culture, especially in China and finance, and CFO.

4 HERMES FALL 2002 NEWSMAKERS

SEVEN APPOINTMENTS TO THE FACULTY

his fall, seven full-time Daniel Ames Kenneth Marc Giannoni Ayotte Assistant faculty members joined Assistant T Professor, Assistant Professor, the School, bringing with Management Professor, Finance and them outstanding creden- Finance and Economics tials. Their countries of Economics origin are diverse: Denmark, Israel, Switzerland, Turkey, For the past two years, Professor Ayotte is com- Professor Giannoni held an Ukraine and the United Professor Ames has been a pleting his PhD in the assistant professorship at States. postdoctoral research fellow economics department at the Federal Reserve Bank in Columbia’s psychology Princeton University. His before joining the School. department and the associ- general area of expertise is He received a PhD from ate director of Columbia’s corporate finance. In addi- Princeton University and a Center for Decision tion to studying bankruptcy BA in economics and an Sciences. Earlier, he was in and entrepreneurship for MA in economics and the psychology department his dissertation, Ayotte finance from the University at the University of researches patterns in exec- of Geneva. He is a dual California, Berkeley, where utive stock-option grants. citizen of Switzerland and he completed his PhD. Italy. His research focuses Ames’s research focuses on on macroeconomics, organizational behavior, monetary economics and cultural psychology, social time-series econometrics. inference and judgment.

Bjorn Oded Natalie Mizik Alp Jorgensen Koenigsberg Assistant Muharremoglu Assistant Assistant Professor, Assistant Professor, Professor, Marketing Professor, Accounting Marketing Decision, Risk and Operations

Professor Jorgensen taught Professor Koenigsberg, a Originally from Ukraine, A citizen of Turkey, at Harvard Business School citizen of Israel, is complet- Professor Mizik obtained Professor Muharremoglu before joining the School. ing his PhD in marketing at a BS and MS in economics joins the School from MIT, A citizen of Denmark, he Duke University’s Fuqua from the Moscow State where he is completing a completed his doctoral School of Business. After Institute of International PhD. He earned a BS in studies at Northwestern obtaining an MS in Relations. She is now industrial and operations University’s Kellogg School engineering from Cornell, completing a PhD at the engineering at the University of Management. He Koenigsberg worked as University of Washington of Michigan. Muharremoglu’s researches accounting-theory operations manager and in Seattle. Mizik’s research research deals with analysis issues with an emphasis on vice president of sales deals with marketing strat- and control of multi-echelon the accounting and regula- and logistics at an energy egy and its implications for inventory systems and tory implications of risk company in Israel. His a firm’s value. dynamic revenue manage- management. He received dissertation covers channel- ment and aircraft scheduling. an MS in mathematical eco- coordination topics. nomics from the University of Aarhus in Denmark.

FALL 2002 HERMES 5 CHRIS LEE, NEW YORK PHILHARMONIC

6 HERMES FALL 2002 ArtsMASTERS OF THE

BY DIANA KATZ

sked what brings acclaim to the world’s not that a cue was missed, but that no one could greatest arts institutions—such as the remember that it ever happened before.” Metropolitan Opera and the New York The Metropolitan Opera performs six days per A week (and twice on Saturday) for 32 weeks each Philharmonic—most admirers would cite world- class virtuosos, sublime performances, visionary season. For each performance, a team of hundreds— artistic direction and a history of premiering major stagehands, lighting designers, technicians, wardrobe artistic works. Less visible is the refined business managers and other professionals—works behind management at work—the the scenes with clockwork precision. In a typical financial, managerial and performance, 200 split-second cues result in a seam- operational leadership on less presentation to an audience that expects which artists and perfor- flawlessness. This level of mances depend. excellence means that an The business performance of the early curtain is literally a once- Philharmonic and the Met is overseen, in-a-lifetime event. Quite simply, respectively, by Paul Guenther ’64 and Montrone says, the Met is “a phe- Paul Montrone, PhD ’66. Both are life- nomenal operating entity.” long music aficionados. Having built A great supporter of the arts, prominent careers in the for-profit sector, Montrone is chairman and CEO of they chose to extend their expertise to nonprofit Fisher Scientific International Inc. in arts management. Their experiences illuminate the Hampton, N.H., which supplies products and ser- rewards of giving back, of being involved in the vices to clinical and research laboratories. He is a cultural life of New York City and the global arts director for numerous scientific and financial firms, community and of forging new paths. the Wang Center for the Performing Arts in Boston and the Foundation for the National Institutes of OPERA AND OPERATIONS EXCELLENCE Health. Montrone, whose son, Jerome, is a 1996 Something remarkable happened in April 2000 at graduate of the School, is a member of the Board of the Metropolitan Opera’s performance of Wagner’s Overseers, and his support established the Paul M. Die Walküre. As the Scandinavian god Wotan turned Montrone Professorship of Finance and Economics a vengeful eye upon his favorite daughter, the and the Paul M. Montrone Student Activities Center traitorous Brünnhilde, his wrath was interrupted by in Uris Hall. the curtain, which came down about 10 seconds He was asked to become president and CEO of early. The accident, caused by a miscue, not only the Met in 1999. “I’ve always been a music lover, as surprised the audience and performers by cutting is my wife,” Montrone explains. “Very early on, I’ve short Act II, it made Met history. been involved to try to give back both financially “What was extraordinary,” says Paul Montrone, and in terms of expertise and time.” president and CEO of the Metropolitan Opera, “was Because Montrone is concerned with the broad

FALL 2002 HERMES 7 oversight of the business manage- license fees are a considerable ment of the Met, he says, “The source of revenue. scope of my responsibility crosses The Met is inherently different all lines.” The opera company is a from a for-profit business in two $200 million enterprise, not key respects: the central need to including a constellation of such satisfy a large number of highly affiliated entities as Lincoln opinionated constituencies and Center. The organization includes the criteria for evaluating the nearly all functional areas of a success of the organization. for-profit organization, including Montrone explains, “A corporation finance, budgets and endow- has heavy quantitative measures ments, management, marketing, and moderate qualitative mea- legal issues, operational issues, sures. At the Met, it’s the reverse.” Paul M. Montrone PhD ’66 human resource issues and Although less sharply defined, public relations. those measures are no less The Met employs a staff of exacting, especially because an 2,000 people, half of whom are international audience of critics, full-time, and there are 16 unions. patrons and other opera compa- About 150 directors sit on three nies keeps the Met under close boards, and there are multiple scrutiny. To be president and committees. The Met is also CEO of the Met is to play a crucial involved in plans for a $1.2 bil- role not just in the arts in New lion, 10-year renovation of Lincoln York but also in the global arts Center, which would remake the community. Montrone’s dedica- entire 16-acre campus (for its part, tion to the Met has a powerful the Met will gain much-needed and truly global influence. office space). At this writing, the Speaking about the influence of 11 organizations of Lincoln Center Montrone’s leadership on the are considering designs for the opera company, Lillian Silver ’88, redevelopment. director of development for the Under Montrone’s leadership, Met, notes that he “has brought the Met raises $75 million annu- more stringent quantitative mea- ally in donations. It remains a sures of evaluation to the Met, leader not only in opera perfor- employing various metrics to mance but also in performing arts gauge the effectiveness of the technology. The Met originated business functions.” She describes Met Titles, which allows the audi- Montrone as “thorough and ence to follow a translation of the intense” and adds, “he cares opera on small seat-back screens. deeply about every facet of the Major opera houses around the operations—poring over reports world are now implementing the and pushing all of the senior technology. The Met also devel- managers with whom he has oped a proprietary constituent contact to constantly higher levels management system, Tessitura of performance.” Software, which manages sub- Montrone knew even before scriptions, ticketing, fund-raising, taking the helm that “the Met contributions and other critical formula works”—and that the data. The innovation was so company owed its success to its successful that the Met now sheer perfectionism. This fact was licenses the product to other dramatically demonstrated in May

WINNIE KLOTZ, METROPOLITAN OPERA performing-arts organizations; 2002. On the eve of his formal

8 HERMES FALL 2002 exit from the opera world in a and a trustee or director with performance of Puccini’s Tosca, numerous other organizations in Luciano Pavarotti said he had both the nonprofit and for-profit come down with the flu. Already sectors. At Columbia, Guenther and seated were 4,000 patrons eager his family also established the to witness the final operatic Guenther Family Public and performance of one of the most Nonprofit Assistance Grants, which illustrious tenors in history. But provide stipends for MBAs launch- the up-and-coming star Salvatore ing careers in the nonprofit sector. Licitra, an exciting young tenor Guenther’s three children— straight from La Scala, substituted Matthew ’94, Elizabeth ’98 and for Pavarotti, making his Met Christopher ’02—each followed

debut two years ahead of sched- in his footsteps by earning a CHRIS LEE, NEW YORK PHILHARMONIC ule. The audience gave a standing Columbia MBA. Paul B. Guenther ’64 ovation, the press dubbed Licitra Guenther was invited to become “the Fourth Tenor,” and the Met chairman of the Philharmonic in was praised for having had the September 1996. Delighted and foresight to arrange such an out- honored, he was well aware of standing alternative plan. the huge responsibility involved: “How does that all happen?” The New York Philharmonic is Montrone asks rhetorically. His one of the leading orchestras in answer is the key to his and the the world. Celebrating its 160th Met’s shared success: “Operational anniversary this year, it is by far excellence.” the oldest orchestra in the United States and was founded the same WORKING IN CONCERT year as the Vienna Philharmonic. Paul Guenther realized several Like the Metropolitan Opera, the years ago that he had “done New York Philharmonic is an everything I wanted to do on Wall intensely international organiza- Street.” The president of the Paine tion—the orchestra performs Webber Group, Inc., the parent around the world, employs a company of the global financial services firm, Guenther had joined Paine Webber Incorporated in 1966 and served as chief adminis- trative officer, head of retail sales and head of investment banking. As president, Guenther says, “I didn’t lie awake at night saying I wanted to run Paine Webber.” He retired and became a full-time philanthropist. Today, in addition to serving as chair of the New York Philharmonic, he is chairman of the board of Fordham University, an overseer for Columbia Business School, a director for Lincoln Center, a director for Lenox Hill Hospital, chairman of the Frost

Valley YMCA in the Catskills region CHRIS LEE, NEW YORK PHILHARMONIC

FALL 2002 HERMES 9 COLUMBIA MBAS: MAKING ART WORK multinational group of artists and The orchestra’s most recent suc- lumni in the arts not only defy the MBA belongs to an international group cesses are doubtlessly the fruit of stereotype, they exemplify the breadth of of peer organizations. Chairing the its artistic preeminence, but they A talents that Columbia graduates con- Philharmonic, Guenther knew, owe also to Guenther’s insightful- tribute to business and society. Columbia MBAs was a historic opportunity. ness and dexterity as a business figure prominently in the arts. Most hold manage- Guenther consulted his wife and leader. When Guenther began his ment or marketing positions, but some are most trusted friends, including tenure as chairman, for example, professional artists, including photographer Dean Feldberg. “I called up Meyer he realized that he first needed to William T. Hillman ’84, best known for his experi- Feldberg, and I said, ‘What do you solve one key problem. “With the mental work. think?’” Guenther recalls. “There two most important things—the Graduates in arts management include David was silence on the other end of the financial strength and the artistic Gockley ’72, one of the most important figures in phone. And then Meyer said, ‘You excellence of the Philharmonic— American opera; for more than 30 years, he has don’t turn a job like that down.’” everything was fine,” he explains. led the Houston Grand Opera, which is renowned A lifelong music lover whose But “there were some real inter- for premiering new work. Amy Nederlander- father was a talented amateur personal relationship issues within Case ’92 is a producer of on- and off-Broadway pianist, Guenther professes no the organization.” plays. The rendition of the Diary of Anne Frank musical proficiency of his own He got to work addressing the she produced in 1998 was noted for its bio- but has shown great skill in chair- matter on every level of the orga- graphical accuracy and excellent cast (Natalie ing the Philharmonic. He plays a nization. Staffing changes and the Portman starred). key role on an international stage, arrival of Zarin Mehta as executive The fine arts have also drawn alumni. Susan both figuratively and literally. director improved the dynamics Jarrell ’98, second-place winner in the School’s Guenther joins the company on significantly. “I was here virtually A. Lorne Weil Outrageous Business Plan Compe- tour and has been all over the all the time, trying to get people tition, founded Get Real Art, a gallery that brings world with the orchestra. Most to work together and dealing together new collectors and emerging artists. impressively, he has doubled the with issues. What the job really Jeffrey H. Loria ’68 is president of an art dealer- Philharmonic’s annual fund in his entailed was being the day-to-day ship that specializes in 19th- and 20th-century six years as chairman. CEO,” says Guenther. master sculpture, paintings and works on paper. Lincoln Center is considering a In 2001, the Philharmonic As board members, alumni guide some of the $400 million renovation of Avery embarked on the crucial quest of principal U.S. arts organizations. A sampling Fisher Hall, home of the New finding a new conductor and includes David Zalaznick ’78, a director for York Philharmonic. A residency in music director to succeed the American Ballet Theater; Jerome Chazen ’50 for Vail is planned for next summer, acclaimed Kurt Masur. The search and the American Craft Museum; and the Philharmonic will perform and the final decision were to be Elihu Rose ’65 for Lincoln Center Theatre; in 2004 at the opening of the closely watched by the public, Russell L. Carson ’67, ’69, Burton state-of-the-art Gerry Performing the classical music world and Staniar ’66 and Lulu Wang ’83 for the Arts Center (now under construc- New York City, and Guenther Metropolitan Museum of Art; Leon Cooperman ’67, tion in Sullivan County, N.Y., on was intensively involved in the Carol Einiger ’73 and Jerry Speyer ’64 for the the site of the original Woodstock quest—one that would inevitably ; Arie Kopelman ’62 for the rock concert). have profound consequences on New York City Ballet; Susan Baker ’91, Peter The Philharmonic welcomed the business side of the organi- Hoffman ’63 and Philip Scaturro ’63 for the New Lorin Maazel as its music director zation in addition to the obvious York City Opera; Benjamin Rosen ’61 for the New this year, and this season’s perfor- artistic ramifications. York Philharmonic; Lionel Pincus ’56 for the mances include world premieres The Philharmonic announced in School of American Ballet; and Philip Geier, Jr. ’58 of five major works and guest January 2002 that its new music for the Whitney Museum of American Art. performances by such luminaries director and conductor would be Beyond the scope of this article are the many as cellist Yo-Yo Ma and pianist Maazel, known equally for his alumni in film and television, new and traditional Evgeny Kissin. A 160th-anniver- precise ear, phenomenal memory media and elsewhere in entertainment. Columbia sary concert in early December and powerful technical skills. MBAs are at the helm of an industry that height- will include works performed dur- Since his guest appearance with ens our quality of life and our understanding of our ing the orchestra’s inaugural the Philharmonic last year—a own and others’ experiences. concert in 1842. success according to critics and

10 HERMES FALL 2002 audiences as well as the orchestra certainly in New York—have performance, starring Placido itself—Maazel has enjoyed vigor- become very large, very complex,” Domingo, as a tribute to victims of ous support from the musicians. Guenther explains. “You have to the terrorist attacks. On three days’ Early in the search for a new con- be sensitive to what the organiza- notice, the Philharmonic prepared ductor, Guenther included tion’s mission is, whether it’s great a stunning rendition of Brahms’ musicians in the search process, a music or education or health care. haunting but hopeful German strategy that was as novel as it But a business background is Requiem in lieu of its own open- was successful. That this particular essential in the management. You ing-night gala. During the Met’s dynamic is so important to have to run them with all the busi- and the Philharmonic’s sold-out Guenther underscores how highly ness acumen you have.” performances, thousands gathered he values relationships within in Lincoln Center Plaza to view a organizations. MUSIC THAT RESONATES live relay broadcast. “I felt very strongly that the Ultimately, Guenther and The sense of comfort and orchestra should be involved Montrone provide something togetherness brought about by the in this, and I don’t think that’s larger and less tangible to the music and the public gatherings always been the case,” Guenther Philharmonic and the Met than was both remarkable and inim- explains. “You have to have the business leadership and manage- itable. The Philharmonic also musicians as an active part of the ment excellence. The arts, played a series of free lunchtime organization. They’re what the sometimes dismissed as mere chamber music concerts in New York Philharmonic is all entertainment or luxuries, play a Lower Manhattan and recorded about, and I felt that from the day singularly important role in all of an entirely American repertoire I arrived.” our lives—as was powerfully for the HBO film In Memoriam: “Coming from Wall Street, there demonstrated in the weeks after New York City, 9/11/01. are a lot of similarities. You’re September 11, 2001. To have the opportunity, dealing with intelligent, highly Great classical music has the through a premier arts organiza- motivated and highly skilled power to “bring a sense of calm tion, to enrich the cultural life of people. So it’s important that you to troubled waters,” Guenther New York City, as well as peo- give them a forum to exercise suggests, and that is true no ple’s lives worldwide, Montrone their abilities, but also you want matter what one’s background, explains, “is a great honor. But I to hear their input. Just because home city or nationality. “Great would say it’s more of a responsi- somebody plays a violin doesn’t music provides a certain aura that bility than a dream. I have taken mean he or she doesn’t have an helps people cope with tragedy,” this on as a kind of awesome opinion. It might be a very good he adds. responsibility.” one about what the direction of On September 22, two days prior this organization should be.” to its scheduled opening-night gala, Today, Guenther’s focus has the Met transformed a homage to shifted toward general oversight, Verdi into a $2.6 million benefit long-term planning and continued fund-raising. “All not-for-profits—

FALL 2002 HERMES 11 ILLUSTRATIONS: STEPHANIE DALTON COWAN

12 HERMES FALL 2002 Friends,ROMANS, COUNTRYMEN

-- • -- Both in the banking and COLUMBIA BUSINESS SCHOOL’S Italian alumni are remark- in the industrial world, able, not just for their accomplishments as international my experience at Columbia has been considered business leaders, but for the panoply of industries they proof of solid professional represent and the prominent roles they play in the life of the preparation and capacity School. They include the CEO of Fiat and executives at Ferrari, to interact in a stimulating Alfa Romeo and Maserati—and that’s just the automotive and sometimes difficult environment. industry. They also lead major concerns in energy, finance, GABRIELE GALATERI DI GENOLA ’72 luxury goods and real estate, among many other industries. -- • -- Five members of the School’s Board of Overseers are Italian

alumni. Here, HERMES honors an exceptional group of alumni whose contributions to both Columbia Business School and the international business community bear recognition.

FALL 2002 HERMES 13 NEW DIRECTION FOR FIAT Galateri attests that he has relied POWER CHANGES In May 2002, Gabriele Galateri di on his Columbia MBA throughout In May 2002, Italian prime minis- Genola ’72 was named co-CEO of his career. “The professional train- ter Silvio Berlusconi asked Paolo Fiat S.p.A., the Turin-based auto- ing as well as the opportunity to Scaroni ’73 to lead Enel S.p.A., motive and industrial giant. A truly live in an environment of great one of Italy’s two state-controlled global brand, Fiat is most famous intellectual challenge—both energy companies. Having engi- for its automotive division, but the Columbia and New York—have neered an impressive turnaround company is also a major producer been extremely important to all of U.K. glassmaker Pilkington plc, of aircraft, trains and launching my subsequent experiences, both Scaroni is the ideal choice to head systems for spacecraft. in the banking and in the indus- the electricity giant as Italy’s econ- Galateri takes the helm of Fiat at trial world,” he explains. “My omy contends with deregulation an important juncture. Although experience at Columbia has been issues, changing labor laws and a Italians have a deep attachment to considered proof of solid profes- global economic slowdown. Fiat cars, the automotive unit has sional preparation and capacity to As a leader of turnarounds, been losing money for five years. interact in a stimulating and some- Scaroni champions the positive Some have speculated that the times difficult environment.” power of change. But he is also company’s survival depends on Galateri is a dedicated alumnus deeply thoughtful about the per- the unit’s being sold. and member of the School’s board sonal experience of undergoing A member of a prominent of overseers, and the great success transition. Affable and sincere, he Piedmontese family, Galateri of the 1998 Pan-European Reunion offers personal reflections on his earned a law degree from the in Venice was owed largely to departure from Pilkington: “I University of Rome and an MBA his own efforts and those of Paolo frankly undervalued how tough from the School before joining Scaroni ’73 (see next section, it’s been for me leaving my team, Banco di Roma, Saint-Gobain and “Power Changes”). after almost six years in the U.K.,” then Fiat. From 1986 to 2002, he Galateri recommends that he admits. On the other hand, he managed the investments of the current students “exploit every notes, “I’m a deep believer that Agnelli family, the founders and minute of their presence at change brings new energy. Your main shareholders of Fiat. Columbia—to gain a better blood runs faster in your veins, As CEO, Galateri is now estab- comprehension of business, to and this is always very positive.” lishing a long-term strategy for the communicate with their colleagues Within weeks of his appoint- company. Broadly stated, the com- from every part of the world and ment as chief executive, Scaroni pany is expected to reduce its debt, to link with the business commu- announced a restructuring plan sell its noncore assets, reverse its nity in the city.” The rewards are that streamlines Enel into five core losses and decide whether to sell self-evident, and he affirms that his business units (there had been Fiat Auto. He has yet to announce ongoing relationship with the 30): infrastructure and networks; any plans, but one certainty is that School has “always given me a sales; generation; telecommunica- Galateri—highly regarded in the great pride both in the business tions; and services. “The new international business community world and in my personal life.” organization simplifies the struc- for his financial acumen—is lead- ture, reduces the number of ing the company at a historic time. reports to me and [maximizes] synergies,” he explains. Today,

14 HERMES FALL 2002 Scaroni continues to immerse group in 1979, he was ahead of REINVENTING AND REENGINEERING himself in getting to know the his time. A sampling of Columbia’s Italian alumni company and develop his strategy. Having grown up in Rome, speaks to the broad range of talents they Scaroni believes he owes a great Bodini came to the School in his bring to the global business community. deal of his success to his business mid-20s with degrees in engineer- Notable Italian alumni in Europe include education. “I can tell you that I cer- ing and architecture. He intended Giuseppe Ciardi ’81 of Park Place tainly wouldn’t be here today if it to learn English and acquire a Capital, Ltd., and of the School’s Board of wasn’t for my MBA at Columbia,” strong foundation in business. Overseers, Ruggero Magnoni ’77 of he attests. “It changed the perspec- Rather unintentionally, he was also Lehman Brothers (based in London), tive I had in life. From that time accumulating the consummate Diego Visconti ’76 of Accenture Italy and on, I took an international view. I background for a pioneering career Andrea Zanconato ’79 of Bulgari. made an enormous step forward in in real estate. He did not find him- A common focus is maneuvering within my sense of business culture. And self drawn to real estate finance, the increasingly integrated European I learned a pragmatism which was however, until he had graduated Union. Gian Luca Braggioti ’79 of not something you learned in from the School and begun work- MyQube, which finances and supports the Italian universities.” ing for Eastdil Realty, the real estate development of high-tech companies, com- Scaroni, an active member of division of Blyth Eastman Dillon. ments, “Doing business in Italy does not the board of overseers (he plays Bodini was driven to seek pri- exist anymore; we do business in Europe.” an integral role in the School’s vate European institutional Carlos Fedrigotti ’77 of Citibank Milan Pan-European alumni reunions), investors for Eastdil clients’ real finds that the deregulated home market suggests that his Columbia educa- estate projects in the United pushes businesses to “look beyond the tion continues to this day. “The States. “The real estate market was Italian competitive landscape in order to successfully compete against the best university is looking ahead much very dull—there was very little enterprises anywhere in the world.” He more than companies, because cash. We had to find it where we adds, “Italian business is moving rapidly to they are preparing students for the believed the cash was.” Bodini adhere to the highest international stan- next 20 years,” he explains. “To modestly adds, “I think I wasn’t dards of transparency and corporate be part of this now is very pioneering anything—it was more governance.” rewarding. The School is always an act of desperation.” After six New competition, regulations and on the edge of what’s going to years, he launched American possibilities demand innovation. happen. It’s a window for me to Continental Properties in 1979. By Paolo Gagliardo ’90 of Alfa Romeo in understand how the world will 2000, 40 percent of the firm’s Italy, part of the Fiat Auto Group, sees the change.” assets were European, and 60 per- Italian character as part of the restructuring cent were in the United States, process “in the sense that once what needs INDUSTRY-BUILDING with a total value of billions. to be done is understood, we are particu- Although today it is standard for Bodini, a member of the board larly quick in deploying what we said we real estate development and of overseers, has been a stalwart were going to do. It’s the ability to reinvent investment firms to operate on an supporter of the School’s MBA and reengineer as much as possible.” international scale, when Daniele Real Estate Program. The founder Bodini ’72, of the program’s advisory board chairman of American At top, l. to r., Daniele Bodini, Paolo Scaroni, and writer of one of its first cases, Continental Properties, created his Gabriele Galateri di Genola, Massimo Tosato. international real estate investment he was the catalyst for building

FALL 2002 HERMES 15 the program into the first-rate -- • -- Kathleen Swan, senior associate offering it is today. He believes a I certainly wouldn’t be director of admissions, confirms career in real estate is especially that virtually every year a significant here today if it wasn’t for suited for entrepreneurially percentage of the international minded MBAs. “For someone my MBA at Columbia. MBAs hail from Italy. interested in finance, which is It changed the perspective There are 23 Italian students on Wall Street, and real estate, which campus in the MBA and Executive I had in life. From that time is Manhattan, New York provides MBA Programs. Ranging in age a special opportunity,” he says. on, I took an international from 27 to 39, they arrived from Bodini credits Dean Feldberg for view. I made an enormous such cities as Milan, Turin and building a strong “esprit de corps” step forward in my sense of Rome. They are graduates of some that keeps alumni involved: “You of the most prestigious Italian graduate from the School 30 years business culture. schools, including Bocconi ago,” he says, “and you still feel PAOLO SCARONI ’73 University and the University of like you belong to the School.” -- • -- Rome, and many were engineer- ing or economics majors. REALIZED DREAMS hopes to unveil “a more slimmed- Executive MBAs work in market- In the mid-1970s the Italian edu- down organization —much more ing, health care, consulting and cation system was in flux, and nimble and interconnected with strategy, and while half lived in Massimo Tosato ’80 decided to suppliers and markets.” The moti- New York before enrolling, the leave the country. Tosato, who vation, he says, is to be poised to other half relocated from European manages Schroders plc’s world- “fight the Bear!” cities. Columbia’s Italian MBAs wide retail business from London, Today, Tosato’s connection with sustain a dynamic chapter of says he was determined to find a the School, both as an alumnus NOVA, an international association more receptive arena for the pur- and member of the board of over- for Italian MBAs that cultivates suit of his business dreams. He seers, is important to him. “My their network, promotes job chose Columbia Business School personal ties with the 1980s classes opportunities and holds an annual because it offered “a direct social are strong as ever,” he says. “A conference (this year’s was held in and professional connection with dozen or so of us have maintained Boston in early November). vibrant and buzzing New York.” close personal friendships which While following in the footsteps After selling Compagnia Internaz- now extend to partners and chil- of previous generations of Italian ionale di Investimenti (Comnivest), dren, and we frequently holiday MBAs, these students will undoubt- his investment and private banking together. The sense of belonging edly blaze new trails and leave company, in the early 1990s and to the School and to the group that their mark on their homeland, their taking a year off to travel, Tosato shared common dreams in their adopted city and their alma mater. joined Schroders in 1995. Today, youth creates a very strong bond.” They will graduate with a degree after the sell-off of the company’s that holds a higher currency than nearly 200-year-old investment ITALIAN MBAS TODAY ever before, career opportunities banking concern, he is introducing Columbia Business School in North America, Europe and widespread changes in the asset continues to attract the future beyond and a wealth of ever- management division. By 2003 he powerhouses of Italian business. growing alumni connections.

16 HERMES FALL 2002 Pan-European Berlin2003 Reunion

oin Columbia Business School Committee Chairs MEYER FELDBERG ’65 Professor and Dean, graduates from around the world CÉSAR ALIERTA ’70 Columbia Business School, President, Telefónica S.A., New York in the historical Mitte district of Berlin Madrid HENRY R. KRAVIS ’69 for the sixth Pan-European Reunion. JEAN-LUC BIAMONTI ’78 Founding Partner, J Kohlberg Kravis Roberts & Co., Details are available on the reunion Web Managing Director, Goldman Sachs International, New York site at www.gsb.columbia.edu/paneuro. London ALEXANDER RIESENKAMPFF ’61 JEROME A. CHAZEN ’50 Senior Partner, CMS Hasche Sigle, To receive an invitation, visit the reunion Founder and Chairman, Frankfurt Chazen Capital Partners, LLC, Web site and request one online by New York PAOLO SCARONI ’73 December 31, 2002. For questions, please CEO, Enel, S.p.A., HEINZ DÜRR Rome contact the Office of Alumni Relations by Chairman of the Supervisory Board, Dürr AG, JERRY I. SPEYER ’64 phone at (212) 854-8815 or by e-mail at Berlin President and CEO, Tishman Speyer Properties, Inc., [email protected]. New York SAVE THE DATE OCTOBER 17–19 NORMAN EIG ’65 Vice Chairman, Lazard LLC, SIDNEY TAUREL ’71 New York Chairman, President and CEO, Eli Lilly and Company, MICHEL M. FAVRE CFT ’75 Indianapolis Former CEO, Tamedia AG, Zurich

FALL 2002 HERMES 17 by Itzhak Sharav Held sing his bully pulpit as SEC chairman, Arthur ULevitt pointed out in September 1998 the importance of Accountable “transparent, timely and reliable financial statements.” RESPONDING TO ACCOUNTING DISTORTIONS AND America was in the midst of a AUDIT FAILURES IN CORPORATE AMERICA roaring bull market and a good three years away from the Enron debacle and other disclosures of accounting distortions and audit failures. Levitt warned, “If a com- pany fails to provide meaningful disclosure, the bond between shareholders and the company is shaken: investors grow anxious, prices fluctuate for no discernible reason and the trust that is the bedrock of our capital markets is severely tested.” We know now all too well of companies that failed notoriously the test of “meaningful disclosure” and of the punishing blows they suffered as a consequence in the marketplace, to the point of bankruptcy and imminent extinc- tion. Investors, concerned about future bad news, wonder whether the last shoe has fallen. And since we have read about earnings restatements by such companies as AOL Time Warner and Xerox, questions have been raised regarding the validity and useful- ness of our accounting model. That model is the collection of U.S. generally accepted account- ing principles (GAAP), which these companies claimed to have followed in the preparation of the financial reports—now subject to revision. And these reports were attested to and blessed at the time by auditors from the Big Five accounting firms. We are facing a problem, no doubt. But it should be

18 HERMES FALL 2002 approached from a proper per- accounting model. Two of the intends to deduct employees’ spective. Most public companies major ones are (1) overstatement stock-option expense on its in the United States have been of revenues and earnings, often income statement. The Inter- submitting to the SEC and their accompanied by a rampant national Accounting Standards stockholders periodic informative manipulation of income and Board had already passed a draft financial reports based on GAAP cash flow from operations, and resolution to that effect, and the that contain useful data and are (2) understatement and lack of FASB has taken preliminary free of any taint of scandal. full disclosure of actual and steps in that direction as well. We should also realize that potential liabilities a company It may turn out that the audit failures are not necessarily might be exposed to, having guar- accounting scandals, a companion proof of faulty accounting stan- anteed another party’s obligation to the stock market upheaval, dards. In the cases of Waste or having engaged in various had a silver lining after all: these Management and Enron, the off–balance sheet financing scandals have become a catalyst Arthur Andersen auditors first arrangements, such as the for change and improvement in either objected to or expressed creation of special purpose financial reporting by public com- serious reservations regarding entities. (The Enron SPEs are an panies. This is not surprising— their clients’ improper accounting extreme case in point.) the same had happened in the treatment and lack of disclosures The good news is that the aftermath of the stock market of certain transactions—in other Financial Accounting Standards crash in 1929. The more things words, their violation of GAAP. Board (FASB) has been moving change, the more they remain the But they yielded to clients’ pres- on these fronts. It is likely to same. sure for fear of losing the account. tighten the rules and provide As a result of the Sarbanes- guidelines for a comprehensive Oxley Act of 2002—assuming it and consistent approach to rev- Professor Itzhak Sharav, a former will be faithfully enforced— enue recognition. Also, two auditor with Ernst & Young, has chances are that such crass recently issued exposure drafts, taught accounting at Columbia pressure on auditors will lessen upon final approval, should limit Business School since 1974. substantially and might indeed significantly the opportunities for Frequently consulted as an expert become a thing of the past (since exclusion of liabilities and their by the media, he has published CEOs and CFOs will have to cer- nondisclosure in the financial articles in various accounting tify SEC-mandated reports under statements. journals as well as Barron’s, the threat of both civil and crimi- We should also learn from the the New York Times and the nal sanctions). fact that political intervention has Wall Street Journal. The accounting firms, restricted occasionally affected our account- to a very limited menu of non- ing model, at times with negative audit services to their audit results—as in accounting for clients, will be overseen for the employees’ stock options. These first time by an oversight board should and would have been with “real teeth.” The board will deducted as an expense on the be authorized to impose penalties income statement but for a reaching $15 million and to ban wrongheaded Senate action, firms from auditing public com- spearheaded by Senator Joseph panies altogether. Intentional Lieberman almost a decade ago, violation of auditing standards in that rejected an FASB resolution this new, as yet untested, environ- to that effect. ment may be tantamount to a The tide has now turned in professional hara-kiri. reaction to public revulsion. It is There is no question, however, no longer a novelty to hear an that the recent accounting announcement by one company scandals exposed several short- or another (Procter & Gamble, comings and weaknesses in our General Electric, Coca-Cola) that it

FALL 2002 HERMES 19 ALUMNI RELATIONS

ALUMNI CLUBS R. Glenn Hubbard, the Russell L. The Austria/Germany/Switzerland Carson Professor of Finance and club’s annual meeting in May in Economics and chairman of the Vienna featured Bernd Schmitt, profes- President’s Council of Economic sor of marketing and executive director Advisers, spoke at a reception for of the School’s Center on Global Brand alumni and prospective students in Leadership. The former vice mayor of Washington, D.C., on November 4. Vienna and senior executives from Also on November 4, Columbia Law IBM and RZ Bank also spoke. School Professor David Schizer More than 200 alumni gathered addressed a gathering of Business and in June to discuss the rebuilding Law School alumni in Chicago. of Lower Manhattan at an event The Paris club holds gatherings the sponsored by the New York Alumni first Tuesday of every month. Steering Committee and the School’s After a successful fall networking Paul Milstein Center for Real Estate. event, the Boston club is planning a The Toronto club held its first and a gala dinner with David Columbia Insight Series. annual garden party in June. The club Montgomery, former Times Mirror Co. For additional club information, visit hosts a monthly dinner event. CEO, in October. www.gsb.columbia.edu/alumni/clubs. The Hong Kong club hosted a dinner The Oslo club held an event in AFRICAN AMERICAN ALUMNI in July with Christopher Cheng ’79, October featuring 1968 SIPA graduate ASSOCIATION (4A) chairman of the Hong Hong Chamber Jens Ulltveit-Moe, president of the of Commerce, as keynote speaker. Confederation of Norwegian Business The 4A has reorganized with a new Awi Federgruen, the Charles E. and Industry. leadership team—cochairs Michelle Exley Professor of Management, was In October, Dean Feldberg spoke to DeFossett ’95 and Joy Williams ’01— the featured speaker at an event spon- alumni in Amsterdam at an event and advisory board. sored by the Israel club in Jerusalem hosted by S. W. W. Lubsen ’71, a YOUNG ALUMNI COUNCIL in July. member of the executive board of The London club held a barbecue at Heineken N.V. Led by cochairs Billy Driscoll ’01 and the home of Peter Alis ’71 in July, a The San Francisco Bay Area club Michael Preis ’01, the council serves as reception for Dean Feldberg hosted by sponsored a forum on social sector a bridge between current students and Lord David Sainsbury ’71 in August innovation in October. graduates from the past 10 years. The group facilitates alumni involvement in admissions, student events, fund-rais- ALUMNI CAREER SERVICES ing and career development.

The Office of Alumni Relations is sponsoring a Career Event Series on various THANK YOU, CLASS OF ’02 . . . aspects of career planning in the current economic environment. The first event, for devoting your Class Gift—$601,443, in October, featured executive search consultant Ken Cole speaking on “The Truth with 90 percent participation—to About Senior Executive Job Hunting.” Career coach Wendy Rothman presented enhancing the School’s alumni out- three workshops at the School in November and December. reach. For the third year in a row, We offer online Career Services through the outplacement firm Drake Beam Columbia had a higher dollar amount Morin (www.dbmcareerservices.com). Some resources are free of charge; others are pledged than any other business school. offered to alumni at a discount. For more information or to obtain a DBM security key, please contact us at [email protected] or at (212) 854-8815. If you know of an opening that would be appropriate for our students or alumni, please submit it to our online job database. Just go to www.gsb.columbia.edu/ alumni and click on “Job Posting Form.”

20 HERMES FALL 2002 An Ethical Compass

Columbia Business School awarded the 2002 Botwinick Prize in Business Ethics to Russell L. Carson ’67. With a special interest in early education and economic devel- opment, Carson is a dedicated philanthropist whose earnest and generous giving underscores his professional integrity. His many philanthropic commitments include founding and serving as cochair of the Inner-City Scholarship Fund. Accepting the award on October 11, Carson shared his thoughts on business ethics.

am sure that all of you, like I, have been In 1978, I left Citicorp to start Welsh, Carson, shocked and angered by the steady stream Anderson & Stowe with Pat Welsh and Bruce Iof revelations about unethical behavior by Anderson. We agreed at the outset that our firm corporate executives. In thinking about what went would be a model of ethical behavior, because that wrong, several issues come to mind. was one of our shared core values. There was a widespread breakdown in the sys- We have always had a rule that any partner can tem of American corporate governance—the turn a potential investment down for any reason. historical system of corporate checks and As we have gotten larger, we have had to balances failed when it was put to the tighten our commitment procedures—but test of unlimited management expecta- not the policy that once the firm makes a tions. Boards of directors, investment commitment, we honor it. We still bankers, commercial bankers, believe that a handshake is more valu- accountants and lawyers, who able than a contract. We treat our fellow should have been the watchdogs on partners and our employees, as well as management, instead became cheer- our investors and the management of the leaders and willing accomplices of companies we own, with mutual respect. management. Management of some public companies became confused about We recognize that we have a responsibility the ownership of corporate assets; they treated that goes far beyond profit and loss, and we try their companies as sole proprietorships and took or to weigh the interests of all constituencies in tough used assets that they were not legally entitled to. decisions. Most important, many individuals lost their ethical While our primary responsibility is to maximize compass. They either failed to or lost the ability to the financial return of our investors, we also distinguish the difference between right and wrong, acknowledge that when we own or control a legal and illegal, and ethical and unethical. business we also have responsibilities to minority In thinking about my own career, my first break shareholders, lenders, creditors, employees and was being born to exceptional parents who had an the communities in which the business operates. uncompromising view of what is right and what is Finally, business is not a zero-sum game, and wrong. Columbia gave me an invaluable grounding a good deal is one in which each party feels like in the basics of business and the tenets of ethical a winner. At the end of the day, we would like behavior, [and] my first boss at Citicorp impressed Welsh, Carson, Anderson & Stowe to be viewed not upon me that while it was okay and nonfatal to only as a financially successful firm, but also as one make a bad decision that lost the bank’s money, that others in the business community would prefer

doing something that compromised the bank’s to do business with. MIKE FISHER/ILLUSTRATIONWEB.COM reputation would be an immediate career ender. Russell L. Carson ’67 is a founder and general part- ner of Welsh, Carson, Anderson & Stowe, one of the largest private investment firms in the United States.

32 HERMES FALL 2002

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