Simon School of Business/University of rochester Spring 2012

SIMONBUSINESS

Simon research reveals the problem is much bigger than you think. Dean’s Medal Honors

Recognizing Two Exemplary Leaders

Established in 2008 in recognition of extraordinary service, philanthropy, and leadership to the Simon School, Dean Mark Zupan presented the Dean’s Medal to J. Peter Simon ’08S (LLD) and to Barry W. Florescue, BS ’66 to honor their personal and direct commitments to the School. The ceremonies were held in New York City and Florida in January and February and were attended by University President Joel Seligman, Simon School stu- dents, alumni, and friends. The presentation to Peter Simon was conducted during the celebration marking the 25th anniversary of the naming of the William E. Simon Graduate School of Business Administration. “It is with deepest and heartfelt gratitude that these honors are bestowed to Peter Simon and Barry Dean Mark Zupan presented the Dean’s Medal to J. Peter Simon ’08S (LLD) in New Florescue,” said Zupan in his presentations. York City on January 19, 2012, during the celebration marking the 25th anniver- sary of the naming of the William E. Simon Graduate School of Business Adminis- J. Peter Simon ’08S (LLD) tration. Pictured are (from left) Dean Zupan, Simon, and President Joel Seligman. Through his boundless generosity and steadfast lead- ership, Peter Simon has guided the Simon School to unsurpassed levels of excellence. Deeply and passion- ately committed to advancing the School’s vision, his service and philanthropy are aptly described as “inex- haustible.” Coupled with a successful career as a global financial executive, he has selflessly devoted time to serving as an advocate, advisor, mentor, and volunteer. As co-chair of the William E. Simon Foundation, he has perpetuated his father’s legacy and touched countless lives through community grants and student scholar- ships. Through his generous support, more than 50 exceptional students have been awarded Simon Lead- ership Fellowships. Dedicated to shaping the future success of Simon alumni, he has personally counseled students, provided invaluable internship and placement Pictured at the presentation of the Dean’s Medal to Barry W. Florescue ’66 on Feb- opportunities, and encouraged new recruits to join ruary 2, 2012, are (from left) President Joel Seligman, Florescue, and Dean Zupan. the program. An esteemed leader who inspires others, he delivered a compelling speech at the School’s 2008 Com- next generation drive his volunteer efforts and inspire others to mencement ceremonies. As chair of the Simon National Council take leadership roles as well. He has left an indelible impression and the Simon Executive Advisory Committee, his sage guid- on numerous students, generously providing scholarships and ance and strategic leadership have played an integral role in the fellowships to ensure they receive the same educational founda- School’s success. tion that helped launch his own career. Through his recent con- tributions, the Barry Florescue Undergraduate Business Degree Barry W. Florescue ’66 Program was created, which reestablished the business major he A highly successful entrepreneur and business investor, Barry pursued as a student here. His support of this innovative collabo- Florescue has made a transformational impact on the Simon ration between the Simon School and the College has brought us School and the University of Rochester at large. His incredible closer to our shared vision of “One University” and has ensured loyalty shines through in his amazing devotion of time, energy, his lasting legacy. His willingness to promote excellence in busi- and philanthropy. The pride and gratitude he feels for his Roch- ness education at the University of Rochester is unsurpassed and ester education have motivated him to take on key advisory roles has made him an enduring example of leadership and philan- as he helps direct us toward an “ever better” future. His love for thropy. The breadth of his commitment to excellence and his the University and his dedication to improving education for the alma mater knows no bounds. s Contents Spring 2012

2 Dean’s Corner 4 The Meliora Challenge Simon and the University prepare to “Make the World Ever Better” 8 Upfront Novy-Marx Earns Global Finance Research Prize Simon Earns High Marks From Financial Times Simon Offers New Full-Time Medical Management Master’s Degree International Graduate Business Conference at Simon in March CEOs, Executive of the Year Award to Highlight Simon 2012 NYC Conference Simon in the News 28 Research Highlights Just How Big Is Wal-Mart’s Impact? Online Extra Banks and Short-Term 12 simon.rochester.edu/ Borrowing Trading, Speculation, online-extra/ Negative Advertising: 30 and Bubbles in the Stock Market When the Going Innovative online simulation gives students firsthand experience Gets Tough, the Ads Alumni Leaders Get Tougher on how bubbles can occur in the underlying operation of financial Martin Mucci ’91S markets. By Charla Stevens Kucko Impact of Kodak’s (Executive MBA) Bankruptcy Filing President and CEO, Paychex Inc. Best and Worst 16 Super Bowl Ads P. Peter Nguyen ’03S (MBA) Supply Chain and 3PL Pension Deficit Disorder YellowJackets Shine in NBC’s Finance Manager, Cardinal Research by Simon School Professor Robert Novy-Marx, Health Inc. “The Sing Off” a leading voice in the national discussion over funding for public Marlene K. Puffer employee pensions, reveals a looming crisis. By Richard Zitrin ’86S (MS), ’93S (PhD) Photo Album Managing Editor, Global flickr.com/simongsb/sets Fixed Income Strategy, 24 latest photographs BCA Research from Simon School Curricular Innovations: activities and events 34 The Ever-Changing Classroom Alumni News Simon’s dynamic curricular innovations reflect the School’s Class Notes commitment to equip students with the tools and finesse to solve Mergers & Acquisitions real-world problems. By Sheila Livadas iStockPhoto Simon Business ◾ Spring 2012 1 Dean’s Corner

The State of the Simon School: “Aiming Higher”

“Failing to plan is planning to fail.” year, we have over 300 MS students, including 30 —Benjamin Franklin new MS in Finance in New York City, 77 across the two years of our Medical Management Master’s The Simon School aspires to be ever better in program, and 21 in our Technical Entrepreneur- terms of our impact on scholarship, teaching, ship and Management (TEAM) program offered and service. In 2008, our strategic plan, “Aiming in partnership with the Hajim School of Engineer- Higher,” outlined our pursuit of excellence in four ing and the Center for Entrepreneurship. key areas—Enrollments, Faculty, Improving Stu- We have also seen enrollment growth in our Ex- dent Employment Outcomes, and Enhancing Si- ecutive MBA program (to a combined 148 Execu- mon’s Financial Sustainability—intending to reach tive MBA students in Rochester and Bern) and in An assessment our goals by 2013. our three different part-time MBA offerings (non- of our five-year Now, with the recent launch of the largest fund­ matriculant, flexible, and Professional MBA). raising campaign in Simon’s and the University’s We also expect at least 60 students to major in strategic plan to history, we can assess the progress we have made undergraduate business in the College by 2017, pursue excellence thus far and reflect on how changes in market con- through the help of a $5 million gift fromBarry in Enrollments, ditions have affected our objectives. Florescue, a member of the University’s board of Faculty, and Although the graduate business education cli- trustees and a 1966 undergraduate accounting mate has changed tremendously since 2008, we alumnus. We envision the program as a feeder for Student are well on our way to achieving our goals. We are our School’s graduate programs, while helping to Employment strengthening enrollments, faculty, and resources bring both distinction and a diversification of our Outcomes through innovation and execution, while empha- product portfolio and revenue base. While Enhancing sizing our three comparative advantages—a small, highly personalized educational environment; an Faculty Simon’s Financial analytic, economics-based approach to manage- A leading faculty has long been one of Simon’s Sustainability ment teaching and research; and a focus on having core strengths. Ensuring the next generation of a meaningful impact on the understanding and faculty excellence is key. Our initial plan in 2008 effective practice of management and policy mak- was to grow our tenure-eligible faculty by 10 in Although the graduate business education climate has changed tremendously since 2008, we are well on our way to achieving our goals.

ing, while promoting the benefits of markets and five years. To date, we have already added nine and free enterprise. anticipate adding at least five more by FY ’17. The Let me share some of our results with you. nine endowed professorships established since 2007 have been a boon. Through this valuable sup- Enrollments port, we have recruited some of the best tenure- Overall, we have met the enrollment targets set in track candidates in the world—thought leaders in the Strategic Plan. The enrollment growth, how- their respective areas. ever, has come in some unpredicted places. For example, while full-time MBA enrollments Improving Student Employment Outcomes have grown from 119 incoming students in 2006 to This is the one goal of our 2008 Strategic Plan that 156 this year, the growth has slowed over the last has posed the greatest challenge to us, due to the three years as business schools in the United States recent macroeconomic downturn and its relatively have undergone three consecutive years of declin- harsh impact on the financial sector as well as em- ing full-time MBA applications (10 percent in the ployment opportunities for international students. most recent year). We have directed considerable effort over By contrast, specialized master’s (MS) enroll- the last several months to developing curricular ments have vastly exceeded our expectations. This and extracurricular improvements to meet the

2 Spring 2012 ◾ Simon Business challenge. In addition, we have seen tremendous improvement in placement results over the past year, thanks in no small part SIMON BUSINESS to the dedicated work of Bob Park and his Career Management Vol. 26, No. 1/Spring 2012 Center team. Dean In 2011, our full-time MBA employment rate was up by 22 Mark Zupan percentage points at Commencement and 15 percentage points Dean and Professor of Economics and Public Policy Admissions and Financial Aid three months out versus 2010. Rebekah Lewin ’02S (MBA) Of particular interest is that the placement rate for our in- Executive Director of Admissions and Administration ternational students was only three percentage points lower Advancement Christian Gordon than our domestic students three months post graduation. In Executive Director of Simon School Advancement addition, placement for our MS Finance students exceeded 80 Career Management Center percent three months out. Robert Park One of the extracurricular means to improve student em- Executive Director of Corporate Relations and Career Management Executive MBA Programs ployment outcomes has been our annual conference in New Carin Conlon ’99S (Executive MBA) York City. Last spring’s conference brought us a tremendous Executive Director of Executive Programs amount of publicity and recognition as one of the country’s Faculty and Research Rajiv M. Dewan, ’84S (MS), ’87S (PhD) thought leaders in finance. This spring’s conference, on May 3, Senior Associate Dean for Faculty and Research; Co-Chair, PhD Program

2012, will feature Jeffrey Immelt, chairman and CEO, General Finance and Operations Electric, and Jamie Dimon, chairman and CEO, JPMorgan J. C. Stevens ’98S (MBA) Executive Director of Finance and Operations Chase & Co., among other notable speakers. Information Technologies Alex Nakonechnyi Enhancing Simon’s Financial Sustainability Executive Director of Information Technologies Through higher enrollment, improved fundraising, and fiscal Marketing and Communications Keir Meisner discipline, we have achieved the target laid out in the Strate- Executive Director of Marketing and Communications gic Plan of a 5.5 percent endowment draw two years ahead of Masters Programs Delores Conway schedule, down from 9.7 percent in FY ’06. Faculty Associate Dean for Masters Programs; On Meliora Weekend, we also formally announced a fund- Professor of Statistics and Real Estate Economics raising campaign to raise at least $85 million for student schol- Program Development Ronald W. Hansen arships, faculty support, and program innovations; we have Senior Associate Dean for Program Development; William H. Meckling Professor of Business already raised $52.4 million in gifts and commitments. In ad- Administration; Director of the Bradley Policy Research Center dition, the Simon School now has 319 George Eastman Circle Editor (GEC) supporters. GEC members make a five-year pledge of at Charla Stevens Kucko Contributing Writers least $1,500 a year. Sheila Livadas, Sally Parker, Richard Zitrin

Twenty-five years ago, on October 25, 1986, our School Art Director took on William E. Simon’s name. In my office hangs a framed Geri McCormick copy of the resolution by the board of trustees to rename the Graphic Design Steve Boerner Typography & Design Inc. School. The goals of the renaming, the resolution states, were Production Manager to recognize Mr. Simon for his leadership in business and pub- John M. Robortella lic service, to continue our advocacy in research policy analysis Copy Editor in government and business relations, and to build a financial Ceil Goldman Photography base appropriate for a top 10 business school. Annette Dragon, Brian MacDonald, John Smillie, Ria Tafani

These were lofty goals back in 1986, and I would argue they Simon Alumni News/Contributing Writers remain appropriate goals to guide us over the years to come. Kate Gruschow ’11S (MS), Kelly Rains, Joy Underhill With our proud history in mind and many notable successes with regard to our Strategic Plan realized over the past four Simon Business, Vol. 26, No. 1, ISSN 1077-5323 years, let us keep our sights on the future, the most important Published twice a year by the University of Rochester, William E. Simon Graduate School margin, as we work to build an Ever Better Simon. of Business Administration, 2-341 Carol G. Simon Hall, Box 270100, Rochester, s New York 14627-0100. Meliora! Office of Marketing and Communications: (585) 275-3736 (phone), (585) 275-9331 (fax), [email protected]. Postmaster: Send address changes to the William E. Simon Graduate School of Business Administration, 2-341 Carol G. Simon Hall, Box 270100, University of Rochester, Rochester, New York 14627-0100. © 2012 William E. Simon Graduate School of Business Administration, Mark Zupan University of Rochester Dean SMC 11-12-36

Simon Business ◾ Spring 2012 3 The Mission of the University of Rochester LEARN, DISCOVER, HEAL, CREATE— AND MAKE THE WORLD EVER BETTER

Meliora. Ever Better. It is more than Simon remains a center of cutting-edge the motto of the University of Rochester. It work in finance. TheJournal of Financial is a shared value and a way of life that has set Economics, the leading finance journal, and us apart as an educational community since the Journal of Accounting and Economics, one the University’s founding in 1850. of the top accounting journals, were both Meliora is the foundation of Rochester’s established and remain at the Simon School, mission to Learn, Discover, Heal, and as does the Journal of Monetary Economics. Create—And Make the World Ever Better. Meliora pushes us to think critically and Living Our Vision: analytically. Meliora inspires us to expand A Cross Functional Approach the limits of knowledge and tackle the most To Critical Issues in Management complex problems. Meliora galvanizes us and Political Economy to improve the health and well being of our William E. Simon believed that the Simon communities. Meliora moves us to expand School’s rigorous analytic approach would the imagination, to explore, to perfect, and shed light on the critical issue of his time: to innovate. the appropriate role of government in cre- At Simon, we are enthusiastic about our ating the ideal conditions for economic past successes and fulfilling the promise of progress. This remains pertinent today as we educating future business leaders who will face pivotal issues involving growing public exemplify the hallmarks of the University’s deficits, regulation of business, health care mission to make our School, our nation, and reform, effective corporate governance, the world ever better. executive compensation, entrepreneur- With this goal as our inspiration, the ship, wealth creation, sustainability, and the Simon School will play an important role in appropriate response to the financial crisis The Meliora Challenge. This Campaign calls and continuing economic challenges. upon the full measure of its intellectual and research capacity and the vision and generos- The Meliora Challenge ity of our alumni and friends. As President The Meliora Challenge is unprecedented in Joel Seligman explained, “A campaign of this the life of the University of Rochester. The magnitude will be measured not only by its Simon School, its alumni, and friends, are $1.2 billion goal, but also by its impact on ready to play leadership roles in its success. our University, the city of Rochester, and The University’s overall $1.2 billion the world.” Campaign will be led by Co-Chairs Rich Handler ’83 and Cathy Minehan ’68, Commitment to an Economics- both University trustees. We are proud Based, Analytic Approach to announce that Janice M. Willett ’78S Our analytic, economics-based founda- (MBA) will chair the Simon Campaign tion encourages a disciplined, data-driven Committee, which has identified five main approach to complex issues, enabled by our focus areas and a goal of $85 million for key remarkable faculty. The Simon School faculty, strategic initiatives: on a per capita basis, has long been one of the • Faculty Support most productive business school faculties. • Student Support Simon scholars have conducted semi- • Entrepreneurship nal work on agency theory, organizational • Program Innovation architecture, and positive accounting theory. • Facilities

4 Spring 2012 ◾ Simon Business For more information on The Meliora Challenge: The Campaign for the University of Rochester, visit: campaign.rochester.edu

Message from the Campaign Chair In the spirit of Meliora, we have The momentum to reach new heights

As chair of the William E. Simon Graduate School of Business Administration’s por- tion of the University of Rochester’s $1.2 billion Meliora Challenge, I am enormously grateful to all of our alumni and friends who have supported our success thus far. We have raised more than $47 million toward our goal of $85 million. We have seen tre- mendous growth in all areas of our School, including more than $6 million donated and pledged to our annual fund and mil- lions of dollars more in support of scholar- ships and professorships. These gifts will help to ensure that the Simon School has the resources to recruit talented students, faculty, and thought leaders for years to Janice M. Willett ’78s (mba) come. Simon Campaign Committee Chair Our distinguished faculty and deans have done an outstanding job since the Graduate School of Management was founded to business school, or if your company is nearly 50 years ago. We were honored with looking to hire, think—and talk—Simon. William E. Simon’s name 25 years ago. As Second, there are five main areas of focus we enter the next 25 years under his impri- for The Meliora Challenge: faculty support, matur, I ask you to join me in taking respon- student support, entrepreneurship, program sibility for our School’s continued success. innovation, and facilities. I encourage you to You have produced great returns for the find an area that is meaningful to you and to School—the recent Financial Times rank- get involved. Because of our relatively small ings place us at 3rd in the world in finance, size, every gift and form of support is signifi- 4th in the world in managerial economics, cant. Forwarding a job opportunity to the 7th in the world in accounting, and 22nd Career Management Center, referring a stu- among all business schools in the United dent, supporting the School with an annual States. We are one of only 10 business donation, endowing a scholarship—all have schools in the world to have been ranked tremendous impact. in the top 10 in three or more categories— My role as chair of this Campaign has and it is heady company. In terms of salary given me an opportunity to connect with progression for our graduates, which is a many of my fellow Simon alums, friends, key metric related to the ongoing value and faculty, and staff. You never fail to inspire impact of the degree, we rank 4th in the me. Thank you for everything you do to United States, tied with Stanford. help us exemplify our University motto of We can compete with the best, and we Meliora, or ever better. have the momentum to reach new heights. But we can’t do it without your help. First, and most important, you can help spread the word. If you hear of someone applying

Simon Business ◾ Spring 2012 5 Message from the Dean The Campaign for Simon Your passion Simon School Meliora Challenge for simon strategic Initiatives will Guide Faculty Building on our strong tradition of schol- this campaign As President Joel Seligman has noted, arship support, we will continue to attract “Great universities are literally built pro- students who, like their predecessors, will Twenty five years ago, William E. Simon fessorship by professorship.” New profes- “learn how to think.” was drawn to our School because of sorships at the Simon School will help us • Merit- and Need-based Scholarships the decisive role we were able to play in attract and retain extraordinary professors • Fellowships and Sponsored influencing thinking and policy making who will enhance our reputation and vis- Internship Support in business and government. When he ibility through excellent research, teaching, • Student Club and Student Life Funding adopted our School and forever lent his public service, and outreach. • Expanded English Language and name, it was written in the founding char- • Professorships and Junior Faculty United States Culture Training ter that among other goals, “. . . this signifi- Fellowships in All Disciplines cant change is to . . . provide a clear signal • Research Funding Entrepreneurship of faculty interest to continue advocacy of The principal-agent framework—devel- research policy analysis in government and Students oped at the Simon School—states that business relations.” Additionally, William Simon competes in a global, hyper-compet- agents act more closely in consonance with E. Simon and the Board of Trustees hoped itive environment for top prospective stu- the interests of principals when they have a the School’s naming would build the nec- dents. A robust scholarship and fellowship direct interest. High risk and high poten- essary financial base to elevate our School program allows us to compete for students tial rewards drive extraordinary vision, alongside the very best in the world. with multiple offers, opportunities, and focus, and effort. Study of entrepreneur- William E. Simon and the Simon wide-ranging areas of interest. ship is one of Simon’s fastest growing areas family have done a great deal to advance our School. When I bestowed one of our highest honors, the Dean’s Medal, on Peter Simon, it was to commemorate his tireless service and generous philan- thropy in support of our efforts. It was fitting that this honor was bestowed on the 25th anniversary of our School’s nam- ing. We have much to be proud of in our storied past, and much work to do to reach our ambitious goals and live our establishing charter. It will only be with the support of a wide swath of our alumni base that achiev- ing our goals will be possible. I ask you to continue your generous support of time, talent, and treasure, and to join us if you have not yet done so. We welcome your participation, and require it to compete. Pick your passion, and choose to make a difference. A hallmark of the Campaign for Simon will be the creation of new professorships to help us —Mark Zupan attract and retain extraordinary scholars. In 2009, Toni Whited, pictured above, was named the Michael and Diane Jones Professor of Business Administration and professor of finance. The gift from Michael and Diane is an example of how the impact of professorships will enhance the Simon School’s reputation through research, teaching, public service, and outreach.

6 Spring 2012 ◾ Simon Business All gifts count toward The Meliora Challenge, a University-wide fundraising Campaign that was launched in October 2011 and runs through June 30, 2016.

and methods to this rich technological and • Simon in New York City Annual creative environment. The successful launch Conference of the Technical Entrepreneurship and Management (TEAM) program exemplifies Investment In Facilities partnership across disciplines. Because of the investment of William E. • Program and Course Development Simon and future generations of benefac- • The Mark Ain Business Model tors, Simon has an excellent facility for its Competition and Workshop current programs. For the longer term, the • The Simon School Student Incubator greatest facility need at the Simon School • Technical Entrepreneurship and centers around the need to build enhanced Management (TEAM) Degree extracurricular meeting, work, and com- Program Support munity gathering spaces. A diverse student • Simon Entrepreneur Association population, team-based academic approach, VC Fund and the pace of our academic schedule put pressure on community building. Program Innovation • Student Study and Gathering Space Further funding will allow for a wider array • Capital Markets Laboratory of programs, deepening our connections to • Endowment for the Simon The $3 million commitment to entrepreneur- global industry and enhancing the value of Media Room ship at the Simon School by Mark S. Ain ’67S our brand. (MBA) and Carolyn Ain strengthens all areas • Experience Simon Modules Specialty Initiatives of the program. • Technology Fund • George Eastman Circle Membership • Chartered Financial Analyst • Admissions Initiatives and involves rich collaborations across the Preparation Program • Student Career Placement Initiatives University. • Distance Learning Initiative Simon students and faculty are uniquely • New York City-based MS Finance positioned to bring management practices Degree Program

The Meliora Challenge Simon Campaign Committee

Janice M. Willett ’78S (MBA) Mark Goldstein ’78 Kevin Pickhardt ’90S (MBA) Simon Campaign Committee Chair Placement Entrepreneurship George Eastman Circle Dana Hooper ’70, ’71S (MBA) Dennis Pidherny ’86, ’87S (MBA) Joe Abrams ’74S (MBA) Student Support Admissions Entrepreneurship Rufus Judson ’06S (MBA) Mark Quinlan ’82, ’85S (MBA) Peter Alpern ’96S (MBA) Facilities/Community Admissions Admissions Salvatore LaBella ’78S (MBA) David Reh ’67S (MBA) Jay Benet ’76S (MBA) Entrepreneurship Entrepreneurship Michael Braun ’71, ’72S (MBA) Evans Lam ’83, ’84S (MBA) Stephen Rogers ’90S (MBA) Student Support Daniel Lazarek ’91S (MBA) Michael Ryan ’81, ’84S (MBA) David Burns ’78S (MBA) Admissions Bob Lerner ’78S (MBA) J. Peter Simon ’08S (LLD) Entrepreneurship Kevin Collins ’82S (MBA) Martin Stern ’79, ’80S (MBA) Faculty Support Donna Matheson ’78, ’79S (MBA) Facilities/Community Building Program/Curricular Innovation Carol (John) Davidson ’88S (MBA) Stan Voudrie ’01S (MBA) Entrepreneurship Marty Murrer Entrepreneurship, Facilities/ Entrepreneurship Community Building Ronald Fielding ’73 (MA), ’76S (MBA) Carlos Naudon ’74S (MBA) Ralph Whitney Jr. ’57, ’73S (MBA) Philip Fraher ’93S (MBA) Entrepreneurship Alan Zekelman ’87S (MS)

Simon Business ◾ Spring 2012 7 Upfront

Novy-Marx Earns Global Finance Research Prize In recognition of his groundbreaking research in Times, The Wall Street Journal, and the Financial Robert Novy-Marx the field of finance, Robert Novy-Marx was awarded Times of London, among many others. Last year, he surrounded by his the American Finance Association’s Smith-Breeden testified before Congress on the topic. His research government pen- Prize for the 2010 Best Paper in The Journal of Fi- interests include asset pricing, industrial organiza- sions research in nance in areas other than corporate finance for his tion, public finance and real estate. his office in Carol study with co-author Joshua Rauh, “Public Pen- In addition to his most recent award, Novy-Marx G. Simon Hall. sion Promises: How Big Are They and What Are received the 2011 Spängler Institute for Quantitative (See the “Pension They Worth?” (http://papers.ssrn.com/sol3/papers. Asset Management (IQAM) Prize for the Best Paper Deficit Disorder” cfm?abstract_id=1352608) in the Review of Finance for his study, “Operating cover story on Novy-Marx, an assistant professor of finance at Leverage.” And his paper, “Hot and Cold Markets,” page 16 for an in- the Simon School, has recently garnered extensive won the 2009 Mill’s Prize for the best paper in real depth look at this national media coverage for his research on govern- estate economics. s research.) ment pensions in outlets including The New York

Simon’s Javaree Walker on Top Team Secret Santas Congratulations to Javaree Walker Faculty, administrators, staff, and ’12, who was a member of the winning students raised more than $15,000, team at the Syracuse Startup Weekend purchased gifts for 195 children, competition, a 54-hour event at which and donated about $700 worth of teams try to launch viable businesses. supplies to an area shelter during Javaree’s team won the first-place prize the 19th annual Secret Santa for Status Queue, a mobile application Program, organized by Simon solution to restaurant queue problems. Volunteers. Visit http://statusqueue.tumblr.com.

8 Spring 2012 ◾ Simon Business John Smillie (Novy-Marx); iStockPhoto (gift); Status Queue (phone) Simon Earns High Marks International From Financial Times of London Graduate Business The Simon School of Business is on the measured by the percentage change in sal- Conference rise according to an annual ranking of ary between pre-MBA and post-MBA. the world’s best business schools by the This is the 11th time that the Simon at Simon in March Financial Times of London. In its Janu- School has been ranked in the top 25 in Student leaders from the world’s top ary 30, 2012 issue, Simon is ranked 22nd the United States by the FT out of the 60 MBA programs will attend the an- among the top 25 business schools in the 14 times that the annual survey has been nual Graduate Business Conference, to U.S. (up from 26th last year) and 49th conducted. be held this year for the first time at the among the top 100 business schools in the “This international recognition from Simon School March 29–31. world (up from 52nd last year). In spe- the Financial Times is an honor and a true The goal of the conference is to bring cialty rankings, Simon rose to 3rd in the testament to our world-class faculty and students together from the world’s most world for finance (up from 6th last year) students,” says Dean Mark Zupan. “Our prominent business schools to share and 4th in the world for economics (up ultimate goal is to continue providing our best practices, discuss solutions to from 5th last year). Simon is also ranked students with a first-rate graduate busi- common issues, and promote a strong 7th in the world for accounting. In terms ness education while remaining commit- network among the participating MBA of salary progression, Simon is tied for ted to continuous improvement.” s students while enriching their educa- 4th in the United States with Stanford as tional experience. Varun Shah ’12, president of the Simon School Graduate Business Council, said Simon Offers New Full-Time that this year’s theme, “Size Matters,” aims to expose the influence of size and Medical Management Master’s Degree scalability on business decisions in to- The Simon School has introduced a full- analytical tools for individuals interested day’s changing marketplace. time Master of Science in Business Ad- in pursuing a career in health care apart “Size factors into how we lead our ministration degree with a concentration from the practice of medicine. World business schools, and eventually into in Medical Management. renowned Simon faculty members lead how we lead our businesses,” he said. “With the market demand for afford- program instruction in areas that include “This conference will give students the able, quality health care and the phas- finance, operations, marketing, and strat- opportunity to share best practices, be ing in of some important public policy egy, and how they apply to health care. inspired by industry leaders, and ex- changes mandated by Washington, busi- In addition to existing scholarships plore the global impact of our smallest ness skills are more crucial than ever for for the full-time Medical Management and biggest endeavors.” those involved in this growing sector,” master’s program, Simon has introduced Corporate sponsors to date are Con- said Dean Mark Zupan. “This new full- need- and merit-based scholarships for stellation Brands, EAI Technologies, time program complements our existing qualified applicants to the part-time Johnson & Johnson, Newell Rubber- part-time Medical Management master’s Medical Management master’s program. maid, and North American Breweries. program for working professionals in the The part-time program is an evening- Past conferences have been held at health care industry.” and weekend-based program aimed at business schools throughout the United The full-time curriculum is designed working professionals in the health care States and in Barcelona, Copenhagen, to provide in-depth perspective and the sector. s Singapore, and Taipei. s

Case Competition Highlights M&T CEO Speaks Early Leaders® Benefits at Kalmbach Lecture Undergrads learn the options that the Simon School has to offer, The Kalmbach Executive Lecture Series and the benefits of becoming an Early Leader ®—i.e., scholarships, continues to bring top management advantages of an early MBA, heightened potential for success— leaders to the Simon School. Among them through the Early Leaders Case Competition held annually since this academic year has been M&T Bank 2008. Last year, students from 15 colleges and universities convened Corporation Chairman of the Board and at Simon to compete for cash prizes by analyzing a case involving CEO Robert Wilmers on November 28, IT infrastructure and capabilities for Zara, a Spanish clothing and 2011, who discussed management and the accessories retailer. changing banking industry.

Courtesy M&T Bank Upfront

CEOs, Executive of the Year Award to Highlight Simon 2012 NYC Conference

JPMorgan Chase JPMorgan Chase CEO Jamie Dimon and speakers will examine the pivotal issues CEO Jamie Dimon, General Electric CEO Jeffrey Immelt facing the global economy and their im- recipient of the will be among this year’s business lead- pact. The Simon School has long been a Executive of the ers at Simon’s conference in New York thought leader in the public policy arena Year Award, and City. Leaders will exam­ine the topic: and the appropriate role of government General Electric Economic Action and the Management in society. CEO Jeffrey of Risk: Critical Decisions Hanging in This conference reinforces Simon’s Immelt (right) the Balance. commitment to discussing and discov- will be among This is the School’s third annual con- the conference ference and will be held at the Grand speakers. Hyatt in New York City on May 3. The event will include the presenta­tion of the Ex- ecutive of the Year Award to Dimon. Speakers and panelists, in­cluding senior execu- tives of major multinational corpo­rations, will address critical issues involving changes in global financial regula­tion, current regulatory is­sues and their impact, and risk management in today’s economy, among other key concerns. The conference will provide an invaluable learning and networking ering innovative solutions to the most opportunity for the more than 300 pressing economic issues facing our na- attendees including senior alumni tion and the world today. and industry experts. Key learn- Online registration and additional in- ings from the conference will be formation may be found at www.simon. a deeper understanding of global rochester.edu/nyc. Group and alumni economic policies and their impact discounts are available. on every major sector includ- For more information, contact the ing business, government, and Simon School Executive Programs of­ ce academia. at [email protected] or An impressive roster of call (585) 275-3439. s

Simon’s YellowJackets Tilson Earns Award Matt Francis ’12 and Jonathan Clinical Assistant Professor David Tilson’s Greenhalgh, PMBA, did Simon paper “Change and Control Paradoxes in proud as members of the Mobile Infrastructure Innovation: The Android University’s a cappella singing and iOS Mobile Operating Systems Cases,” group, the YellowJackets, when with Carsten Sørensen and Kalle Lyytinen, the group competed last fall was awarded the best paper award in the in a fantastic run on NBC’s Decision Technology, Mobile Technologies and popular show, The Sing Off. Service Science Mini-Track at the 2011 Hawaii Congratulations! International Conference on Systems Sciences.

10 Spring 2012 ◾ Simon Business Getty Images (Dimon); NBC Universal Inc. (Yellowjackets) Simon in the News

“If you’re not willing to cannibalize yourself, others will do it for you. Technology is changing ever more rapidly, the world’s becoming more globalized, so to stay at the top of your game is getting increasingly harder.” —Mark Zupan, dean of the Simon School of Business, on Kodak’s bankruptcy filing, as reported by the Associated Press in “Former Trailblazer Kodak Files for Chapter 11,” January 19, 2012. (Also reported by many other media outlets)

“They were thinking about taking a busi- “It’s not fun for most ness with 60–80 percent profit margins of us to live through, and going into consumer electronics but if you’re in the market to supply where 5 percent is pretty good.” liquidity, like Goldman —Lawrence J. Matteson, executive professor of business administration, on Kodak filing for Chapter 11 as reported by the Financial Times of London in “Tech Powers and a Harsh Lesson in Sachs, you’re seeing Survival,” January 31, 2012. (Also reported by many other media outlets) high volume, wide bid- ask spreads—that’s “He is really good at not only empowering a silver lining. The employees, but using teams effectively, brokerage industry is which turns loose powerful tools for one I would expect to customer satisfaction. He is also able to profit going through get his people to buy into his vision and this process.” philosophy, which is an important part of —Clifford W. Smith Jr., Epstein Professor of successful leadership.” Business Administration and professor of finance and economics, who specializes in —George Cook, executive professor of marketing, as reported by Investor’s Business Daily trading and risk management, as reported in “Container Store CEO Kip Tindell Gets Things Organized,” November 16, 2011. by Reuters in “Fickle Markets, Volume Surge a Boon to Brokers,” August 11, 2011. (Also reported by Yahoo! News and Wall Street and “Two of the top 10 employers in the state Technology) of New York are Cornell University and the University of Rochester. Think about that.” Analysis of IRS —Delores Conway, professor of statistics and real estate economics, as reported by Reuters in “Bargains, Stability Abound in College Towns: Coldwell Banker,” November 15, 2011. data shows a (Also reported by International Business Times) “movement toward “This is an opportunity for Google to jumpstart the less inequality.” market, in pricing and innovation.” —Ronald Schmidt, Janice M. and Joseph T. Willett Professor of Business Administration —Abraham Seidmann, Xerox Professor of Computers and Information Systems and Operations for Teaching and Service, on Bloomberg Management, as reported by The New York Times in “Google’s Big Bet on the Mobile Future,” Radio’s “Bloomberg Surveillance,” August 15, 2011. December 15, 2011.

Simon Business ◾ Spring 2012 11

Trading,

Speculation,and Bubbles In the Stock Market Innovative online simulation gives students firsthand experience on how bubbles can occur in the underlying operation of financial markets. By Charla Stevens Kucko

ven the most seasoned traders are sometimes befuddled by the dynamics of the stock market. What may seem obvi- ous—that stock prices rise and fall based on information— is only the first layer of complexity when it comes to the market. As an innovative experiment, Abraham Seidmann, Xerox Professor of Computers and Information Systems and Operations Management at Simon, decided to give students in his Information Systems for Management courses some hands-on experience with the stock market through an online simulation (www.tradewindbusiness.com) he developed. The simulation is based on extending the research by renowned economist Vernon L. Smith. In this double-auction simulated market, two dozen teams of two to three students are trading with each other over the Web in a way designed to mirror what happens on the New York Stock Exchange or NASDAQ. Each team is given one type of dividend-paying stock (e.g., IBM, Apple, or Microsoft) and together, they decide whether to submit market orders or to use bid or ask orders, and at what prices. Stu- dent traders earn money from dividends, capital gains (losses), and buyback. “Asset values are driven by the market, but when students play the game, they learn that their behavior also has a significant impact on stock price—even generating a stock

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Seidmann’s data shows that the average stock price per round isn’t market bubble,” explains Rajib Saha, Simon PhD candidate and as predictable as students may think when they begin his online graduate teaching assistant in Seidmann’s course. “Trading isn’t simulation. investing, and the students learn that hands-on very fast.” “This mimics the complex dynamics and the uncertain- ties of a real-world experience,” says Seidmann. “The students discover concepts such as ‘negative market impact,’ which are otherwise hard to explain—and besides, everyone loves trad- ing stocks! It gets you an immediate reward.” Not only is it fun, but what the students discover is counter- intuitive to their preconceived notions about how the market operates. “Most students get frustrated after playing the game and realize they played it poorly,” Seidmann explains. “When the stocks rise in price, students often mistake such price mo- mentum for information. It’s called competitive irrationality.” Seidmann compares navigating the stock market to playing golf. “It’s one thing to play Wii golf,” he says. “It’s another thing to go out on the golf course and play on a windy day, with the sun in your eyes. It’s a completely different experience.” The key benefit for students is that they discover the com- plex role played by information technology in successfully running financial markets. They also learn how stock market bubbles emerge unexpectedly, even with a team of well-edu- cated, rational traders. Seidmann believes that such innovative experiential learning leads to better critical thinking and com- munication skills and facilitates mastery of the course material. Seidmann started developing the experiential learning soft- ware some nine years ago, and implemented the stock trading version in his course over the past six months. So far, students find it to be challenging, and almost addictive. “In the beginning of the game, students start trading at lower prices, followed by much higher prices. By the end of the game, prices drop sharply, contracting toward the fundamental asset value,” explains Mariya Bondareva, Simon PhD candidate

14 Spring 2012 ◾ Simon Business Bloomberg/Getty Images Stock Volume Per Round

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 ROUND and graduate teaching assistant. “If you explain this through theoretical models, it is hard to understand the price dynamics, but through the game, students realize [ex-post] that they were behaving irrationally—and that has had a major impact on the stock price. The price drop is a real wake-up call for most of the students.” Seidmann also teaches the course at the Executive MBA Program at the University of Bern. “Some of our executive stu- dents are bankers, and you would expect them to be aware that market bubbles happen, but they aren’t always aware,” Bonda- reva says. “Professor Seidmann has very practical insight and the ability to get into complicated theory and show the main intuition of it. It’s very surprising.” This innovative simulation exercise provides an outstanding interactive framework to fa- cilitate discussion of the critical role information systems play in facilitating rational expectations, discounting, backward in- duction, and speculative price bubbles. What distinguishes the game from other common educa- tional media such as books or videos is the degree of interactiv- ity. In this market, the students must continuously respond to unexpected events driven by other students in the simulated world. The students’ actions then affect the way that the simu- lation unfolds. That is a unique tool, and other business schools are taking notice. Seidmann has had requests from faculty at Seidmann brings the coursework to life other leading business schools to use this simulation in their through a combination of teaching and courses. Previous simulations that he developed have been hands-on experience in his Information used at Duke University, the University of Calgary, Georgia In- Systems for Management course. stitute of Technology, and in Israel. The premise of active learning is simple, Seidmann says. “Ninety percent of what we see, hear, and practice, we remem- ber. Instead of teaching in the abstract, we need ways to make learning more engaging. Besides, who says sophisticated learning can’t be fun?” s

John Smillie Simon Business ◾ Spring 2012 15 Research by Robert Novy-Marx, assistant professor of finance at the Simon School and a leading voice in the national discussion over funding for public employee pensions, reveals a looming crisis. By Richard Zitrin

obert Novy-Marx is no stranger to the spotlight, national media, Congress, and state capitals for their studies that having performed on the global stage as a profes- claim public pension plans across the country are vastly under- sional triathlete. Now, the Simon School assistant funded and that states are not investing enough today to cover professor of finance is in the spotlight in a vastly their eventual pension obligations. Instead, they are banking on different arena—economics—as a leading voice the uncertainty of bullish markets in the future to take care of the in the national discussion over funding for public problem. Novy-Marx and Rauh’s research shows more than a $3 Remployee pensions and what Novy-Marx believes may well be a trillion funding shortfall for state pensions, roughly $2 trillion looming crisis. more than had been the conventional wisdom. Novy-Marx and his research colleague, Joshua Rauh of North- “That’s about $2 trillion extra in what I view as just another western University, have received considerable attention in the form of debt; it’s just that it’s off-balance-sheet debt and allows

16 Spring 2012 ◾ Simon Business state and local governments to circumvent their own balanced- liabilities based on what you expect to get on your assets—create budget requirements,” Novy-Marx says. “If states recognize a lot of nonsensical conclusions and allow states to avoid having less pension liabilities than they actually have, they can use the to invest as much as they should be putting into pension plans money that they don’t contribute to the pensions to fund current today, Novy-Marx says. operations. That’s borrowing from future taxpayers if you think “The problem with that is at some level you’re saying that the the pensions are going to get paid. It’s just like debt; the states market has the price of today’s assets wrong,” he says. “Stocks are going to have to pay those at some point in the future.” have higher returns than bonds, so if you own more stocks, you The root of the problem to some extent, Novy-Marx says, is have a higher expected return, and the government account- that states follow an accounting practice prescribed by the Gov- ing guidelines tell you that you can discount your liabilities at a ernmental Accounting Standards Board, a nongovernmental or- higher rate and you owe less. But, of course, the market values a ganization, that says their pension obligations are much smaller. dollar stock and a dollar bond the same way, and there’s a reason Most states use what Novy-Marx and Rauh contend is an unrea- for that; it’s because they account for the risks associated with sonably high discount rate—8 percent—when calculating the holding stocks. The government accounting guidelines tell you value of their public employee pension plans. Novy-Marx and basically to completely ignore those risks, so that the riskier the Rauh suggest that a more conservative, risk-free rate of return assets states get into, the better their balance sheets look, be- should be employed. Using the interest rate on Treasury securi- cause it allows them to write down their liabilities.” ties as of January 2009, Rauh and Novy-Marx determined a total The accounting standard that states use sets up a false equiva- value of pension liabilities that show a $3.2 trillion deficit. lence between pension payments, which are extremely likely The basic rules that most states go by—discount your to be made, and the much less certain outcome of a risky

Simon Business ◾ Spring 2012 17 18 Spring 2012 ◾ Simon Business investment portfolio, Novy-Marx and Rauh wrote in a 2009 ar- ticle in the Journal of Economic Perspectives. “We started crying that the sky was going to fall down in mid-2008, before the big asset drops,” Novy-Marx says. “There are people now on the other side—the National Association of State Retirement Administrators in particular—that are say- ing this isn’t a liability problem at all, it’s an asset problem, the markets dropped, they’re going to rebound, things are going to be fine.”

he National Association of State Retirement Administrators has been highly critical of Novy- Marx and Rauh’s research, calling their projec- tions “unrealistic” and referring to their research as “hyperbole and distortion.” The association says the two economists’ research contains “bear- Tish and pessimistic estimates about future economic events,” and that, in the wake of the “Great Recession,” states and local municipalities are examining and adjusting pension benefit lev- els and financing structures to restore reserves and long-term sustainability. “[Novy-Marx and Rauh] rely on methods and assumptions regarding retirement benefits for public employees that are theoretical and that lack practical application to retirement policy and administration,” says Keith Brainard, the associa- tion’s director of research. Novy-Marx, of course, believes Professor Novy-Marx’s otherwise, and says the public research focuses primar- pension issue, while not as bad as ily on asset pricing, both Medicare, is a big problem nonethe- theoretical and empiri- less—bigger than Social Security, cal, though he also works and getting worse. At the state level, in industrial organiza- the pension issue is a medium-term tion, public finance, and problem, he says, and states are bet- real estate. He holds ter equipped to cope because they a bachelor of science have much more ability to tax than degree in physics from local municipalities do and are able Swarthmore College and to “cram down” their problems on a PhD in finance from the substate entities. University of California– “As the pension pressures become Berkeley (Haas School big, states are going to be able to of Business). handle them in the near term, but they’re going to reduce aid to cities and counties in the same way that the federal government in the last few years has re- duced aid to states,” Novy-Marx says. The problem already is apparent on the local level, he notes, pointing to Harrisburg, Pennsylvania’s attempt to default. Also, New York City is spending 12 percent of its operating budget on paying its pension promises, and that figure is growing at 20 percent annually, Novy-Marx says. “If your pension promises are growing on a flow basis at 20 percent a year and your state budget is going up 1 percent per year, those things get out of whack very quickly,” he says.

John Smillie Simon Business ◾ Spring 2012 19 6.1 11.8 1.6 3.3 7.3 13.9 Maine Vermont Rhode Island 23% 13% 29%

2.9 9.3 4.2 8.2 Novy-Marx and Rauh have looked at the possible effect of Alaska 20% New Hampshire 14% policy changes on the pension problem, and have suggested, for example, that in exchange for closing defined-benefit plans to new workers and enrolling them in Social Security, states 25.3 49.0 should be allowed to issue tax-subsidized bonds for pension Connecticut funding. But policy changes and other adjustments will not 22% make the problem go away, he says. “The pain is there,” Novy-Marx says. “There’s $3 trillion 27.0 54.2 65.6 124.0 in off-balance-sheet debt. It’s probably more today. That $3 Massachusetts 15% New Jersey trillion is something retirees and state workers think they’re 46.9 132.9 26% New York getting, taxpayers don’t think they’re paying, and so to sat- 12% 1.8 5.1 Delaware isfy that problem, you have to hurt some group of people. 82.8 166.8 46.3 100.3 24.2 43.5 Ohio Pennsylvania 8% Maryland It’s about how do you divide that $3 trillion pile of toxic 21.3 56.2 35% 33.8 63.6 Wisconsin 18% 15% waste among people. It has to be some combination of higher 23% Michigan taxes, lower services, lower benefit payments, and municipal 24.7 55.1 17% 6.5 11.1 Minnesota W. Va. 27.8 48.2 bond defaults.” 21% 85.3 167.3 18% 1.7 3.6 24.1 42.3 Virginia Novy-Marx says there have been hundreds of pieces of legis- Illinois 17.7 30.2 22.0 43.2 12% North Dakota 27% Kentucky lation that have been passed in state legislatures in the last few 11% Indiana 12% 27% South Carolina 27% 10.9 37.8 years to try to resolve the pension problem, but all aim at put- 8.0 17.0 North Carolina ting as much pain as possible on the workers who haven’t been 18.8 42.9 3.8 7.1 1.7 4.7 Iowa 9% Montana South Dakota 12% hired yet. This essentially has no effect on the problem, he says. Washington 12% 10.3 23.2 13% 20% Tennessee 9% “The easy, low-hanging fruit is to say, ‘The people we hire 2.9 6.1 20.4 42.1 tomorrow don’t get as good a deal,’ but that doesn’t resolve the Nebraska 7% Missouri 18% 20.6 40.4 2.6 5.4 Alabama problem that’s already there,” Novy-Marx says. “There’s got Wyoming 24% 22.7 57.0 Georgia to be some pain suffered by current workers—they’re going 14% 11.1 20.0 15.9 28.7 14% 6.9 15.8 to fight like hell, as they should. The magnitude of this prob- Kansas Mississippi 30% 3.1 7.9 28.5 57.4 16% Arkansas 14.6 37.8 15% lem is so big that if you try to put all of it onto the workers and Idaho Colorado Oregon 15% 23% retirees, there’s a good chance some of them won’t be able to 23% 17.8 30.1 pay their rents when they get old. The problem is so big that Oklahoma the taxpayers are going to have to take the biggest hit. Higher 20% taxes and lower services; there has to be some combination of 7.9 16.5 18.5 36.5 Utah 15% 12.9 23.9 Louisiana those things.” 6.6 17.5 Nevada New Mexico 17% 14% 32% he pension-financing problem is more severe in some states such as New Jersey, New York, Cali- 39.9 89.8 65.2 142.3 fornia, Illinois, and Ohio, Novy-Marx says. If fis- Florida 12% 188.5 370.2 Texas 12% cal problems further deteriorate in enough states, California 20% there is going to be a strong temptation for a fed- 18.8 48.7 eral bailout, says Novy-Marx—which, he thinks, Arizona 19% Twould be ill advised and would only shift the problem from in- dividual state taxpayers to the nation’s taxpayers as a whole. “What that effectively means is that people who are in more fiscally responsible states, their problem gets bigger, but people in more profligate states, their problem gets smaller, so it’s a transfer from the states that have been more fiscally responsible Unfunded liability Unfunded liability to the states that have been more profligate,” Novy-Marx says. using stated basis using Treasury rates “That’s contentious in itself.” In billions of dollars In billions of dollars Transparency is sorely lacking, Novy-Marx believes, and he Unfunded liability supports federal legislation to amend accounting practices to as a percentage of shine more light on states’ pension situations. He also says that 9.4 16.1 Hawaii gross state product public entities that have information about projected payments 24% The height of each of pension plans should be required to disclose that data. state is proportionate to this value “This whole thing for me is a transparency issue,” Novy- Marx says. “I’m not taking a strong stand that [plans] should be Source: Calculations by Robert Novy-Marx and Joshua Rauh, as of June 2009. Gross state product is from the Bureau of Economic Analysis, US Department of Commerce

20 Spring 2012 ◾ Simon Business Steve Boerner 6.1 11.8 1.6 3.3 7.3 13.9 Maine Vermont Rhode Island 23% 13% 29%

2.9 9.3 4.2 8.2 Alaska 20% New Hampshire 14%

25.3 49.0 Connecticut 22%

27.0 54.2 Massachusetts 65.6 124.0 15% New Jersey 46.9 132.9 26% New York 12% 1.8 5.1 Delaware 82.8 166.8 46.3 100.3 24.2 43.5 Ohio Pennsylvania 8% Maryland 21.3 56.2 35% 33.8 63.6 Wisconsin 18% 15% 23% Michigan 24.7 55.1 17% 6.5 11.1 Minnesota W. Va. 27.8 48.2 21% 85.3 167.3 18% 1.7 3.6 24.1 42.3 Virginia Illinois 17.7 30.2 22.0 43.2 12% North Dakota 27% Kentucky 11% Indiana 12% 27% South Carolina 27% 10.9 37.8 8.0 17.0 North Carolina 18.8 42.9 3.8 7.1 1.7 4.7 Iowa 12% 9% Washington Montana South Dakota 12% 10.3 23.2 13% 20% Tennessee 9% 2.9 6.1 20.4 42.1 Nebraska 7% Missouri 18% 20.6 40.4 2.6 5.4 Alabama Wyoming 24% 22.7 57.0 Georgia 14% 11.1 20.0 15.9 28.7 14% 6.9 15.8 Kansas Mississippi 30% 3.1 7.9 28.5 57.4 16% Arkansas 14.6 37.8 15% Idaho Colorado Oregon 15% 23% 23% 17.8 30.1 Oklahoma 20% 7.9 16.5 18.5 36.5 Utah Louisiana 6.6 17.5 15% 12.9 23.9 Nevada New Mexico 17% 14% 32%

39.9 89.8 65.2 142.3 Florida 12% 188.5 370.2 Texas 12% California 20% 18.8 48.7 Arizona 19%

Unfunded liability Unfunded liability using stated basis using Treasury rates The Nation’s Pension Financing In billions of dollars In billions of dollars State By State Unfunded liability Legislation adopted by the states so far aims at putting as much as a percentage of 9.4 16.1 pain as possible on the workers who haven’t been hired yet, “but that Hawaii gross state product 24% The height of each doesn’t resolve the problem that’s already there,” says Novy-Marx. state is proportionate to this value

Source: Calculations by Robert Novy-Marx and Joshua Rauh, as of June 2009. Gross state product is from the Bureau of Economic Analysis, US Department of Commerce

Simon Business ◾ Spring 2012 21 “This whole thing for me is a transparency issue. I’m not taking a strong stand that [plans] should be fully funded. I don’t actually have a huge problem with the level of funding. What I do have a problem with is that the way they account for these makes them look like they’re in a much better situation than they are.”

fully funded. I don’t actually have a huge problem with the level in finance, then was on the faculty at the University of Chicago of funding. What I do have a problem with is that the way they Booth School of Business for seven years before moving to account for these makes them look like they’re in a much bet- Rochester and joining the Simon faculty in July 2010. ter situation than they are. I’d like to see more transparency and Novy-Marx and his wife, Milena Novy-Marx, an economist have people see how large the problem is. It’s getting worse, not who works with international programs as an officer for the Chi- better. There is no simple solution, and everyone’s going to suffer cago-based MacArthur Foundation, have three young children, some. The questions now are who, how much, and when?” Harlan, Roman, and Ella. Novy-Marx says there is a painless, albeit unlikely, solution to Novy-Marx and Rauh met when they were on the faculty at the problem: decades of a bullish stock market and uninterrupted, the University of Chicago. In some sense, the two economists magnificent economic growth. Many people in the government were an unlikely pair to team up on projects, Rauh says. pension business are crossing their fingers hoping that happens, “Robert was known for his equilibrium investment models but Novy-Marx believes such thinking is misguided. “I don’t think and their implications for asset prices, whereas I had a decidedly we should be planning on the assumption that’s going to happen,” more empirical orientation and had been studying corporate he says. “That’s basically just kicking the can down the road.” pension plans and corporate finance,” Rauh says. “But we both Eventually, the municipal bond market will likely impose dis- had a strong interest in the policy implications of our lines of in- cipline, he says. When municipalities start defaulting because quiry, and conversations about these topics eventually led to our of their pension obligations, municipal bondholders are going realizing that finance theory had powerful and practical implica- to start paying more attention to pensions and pension debt in tions for government-sponsored pension systems.” determining whether they’re willing to hold debt or what sort of Novy-Marx and Rauh have collaborated on six papers in the interest rates to demand, Novy-Marx says. And when the cost of past several years, including their public pension research. This borrowing skyrockets because of pension obligations, people are clearly indicates that they work well together and enjoy being a going to reevaluate things, he notes. team, according to Rauh. “Robert is one of the sharpest financial “The recurring theme is that everyone likes their services and economists out there, and I learn a tremendous amount from no one likes to pay for them,” Novy-Marx says. “You can’t have working with him,” he says. American taxes and European services forever. At some point Novy-Marx and Rauh’s pension research has received wide- you have to decide if you want to have an American system with spread media attention, including in The New York Times and lower taxes and a smaller government workforce or you have to The Wall Street Journal. A YouTube video (http://www.youtube go the European route and start paying for the services.” .com/watch?v=grFlyVdMSGo) features Novy-Marx’s testimony before a congressional panel. he 42-year-old rising economic star grew up in Novy-Marx enjoys and appreciates the attention his work is Portland, Oregon, the oldest of four children of receiving. Lusijah Marx, a psychologist who runs a nonprofit “It’s much more fun to have people pay attention to what you program servicing low-income people with life- do,” he says. “Everyone who does any work thinks their work is threatening illnesses, and Leo Marx, now a retired important and really interesting, and to have people be inter- heart surgeon. ested in the stuff that you are convinced is interesting is wonder- TNovy-Marx studied physics as an undergraduate at Swarth- fully gratifying. I’ve seen the other side of this. My first several more College, where he ran track and cross-country. After grad- years in the profession, I did very highfalutin’ theory work that uating from Swarthmore in 1991, he became a competitive cyclist I thought, and still think, is very interesting. But working on and then a professional triathlete. He competed in triathlons for other stuff that people care about much more . . . it’s great having seven years, from 1992–99, turning pro after winning a bronze people pay attention.” s medal as an amateur in the 1993 World Triathlon Championships in Manchester, England. Richard Zitrin is a Rochester, New York-area freelance writer. After his life as a professional athlete, Novy-Marx enrolled at the University of California—Berkeley to get his doctorate

22 Spring 2012 ◾ Simon Business Refer a Full-Time MBA or Master’s candidate by March 31, 2012 and receive a Kindle Touch e-reader as a thank you

Many of our incoming students indicate that they first heard about Simon through a family member, friend, or colleague. As such, we would like to offer you an opportunity to continue the Meliora “Ever Better” tradition by providing that same kind of encouragement to friends, family members, co-workers, or acquaintances who you feel would be a great fit for the Simon School. We sincerely appreciate your support for Simon’s recruiting efforts. If you have questions, please contact Rebekah Lewin, executive director of admissions and administration, at [email protected] or (585) 275-3533. For terms and conditions, visit: www.simon.rochester.edu/replaceyourself

Reinventing the Curriculum The Simon School is continuously examining new and innovative ways to ensure students are well prepared for the job market. By Sheila Livadas

he Simon School has embarked on several curricular innovations to prepare students for an increasingly competitive job market. The changes also reflect Simon’s commitment to equip students with the tools and finesse to solve real-world problems. Putting theory into practice fuels the Ex- perience Simon Modules, our three-day in- tensives that show students how the curriculum applies to their Tdesired career. Faculty members lead the modules, which oc- cur over each quarter’s study break and involve Simon alumni and other business leaders from various industries. Students must complete at least two modules, but the sub- ject options are intentionally broad because “one size doesn’t fit all,” says James A. Brickley, Simon’s Gleason Professor of Business Administration and professor of economics and man- agement and of finance. Recent modules have focused on business systems consult- ing, health services management, and even “personal selling,” Students discuss putting theory into or how students should market themselves to recruiters. practice during the first Experience Simon Besides bringing the outside world into the classroom, the Modules held in 2010. modules prepare students for internship opportunities, Brick- ley says. Brandon Sloane ’12 says his first Experience Simon module centered on an actual problem at a Rochester-area market- ing firm. A firm representative began by briefing students on the company’s brand and business plan, and then divided the

24 Spring 2012 ◾ Simon Business class into teams for brainstorming. “Over the course of a couple them to draw parallels between their classroom experiences and of days, he worked with the students to build out and solve the leadership challenges in the business world. issue with an interactive learning experience,” says Sloane, an “And that kind of experience you’re not going to get anywhere MBA student with a finance concentration. in a traditional MBA program,” says Edieal Pinker, associate pro- The modules “keep getting better,” and now reflect students’ fessor of computers and information systems and of operations requests for industry-specific options, Sloane says. management. Another curricular innovation has brought second-year MBA First-year students find the workshops both challenging students into the classroom to facilitate small workshops for and valuable. first-years. Simon professors train the facilitators and encourage “The students can’t just sit back and say, ‘Well, tell us the

Simon Business ◾ Spring 2012 25 “All these changes are really a demonstration that the faculty is very committed to doing what they can to help students compete as effectively as they can in the job market. So we’re taking a very active and aggressive role in this.” —Edieal Pinker, associate professor of computers and information systems and of operations management

answer,’ ” Pinker notes. “They have to work it out themselves.” its calendar. Under the change, classes would start in August Sloane says the time he spent in the workshops as a student for first-year MBA and MS students and in mid-September for and a facilitator was “awesome.” second-year students. “Some of the problems are very, very nebulous, to the point Beginning the school year earlier means that students will where there are multiple ways you can solve it and multiple ways have more courses under their belt when they encounter intern- you approach it,” he says. “And so often, what you’ll see is that ship recruiters, says Rajiv M. Dewan ’84S (MS), ’87S (PhD), senior half of the group will want to do it one way, and half the group associate dean for faculty and research and co-chairman of the will want to do it the other.” PhD program. The earlier start date also would bring Simon In those instances, students learn how to cope with divergent more closely in line with the University of Rochester’s calendar viewpoints and ultimately reach consensus. and allow first-year MBA and MS students to experience orien- tation at the same time. Simon also is considering finishing its exam week in May so that students have ample time to prepare for internships in June. “The big motivation is being more in sync with the market,” says Dewan, a Simon professor of computers and information systems. Simon also has resequenced certain courses to prepare students for intern- ships. The new course tracks—one in finance and accounting, the other in general management—provide relevant material to first-year students in a more timely fashion. “Students who are interested in gen- eral management, such as marketing or operations, can take those courses ear- lier and defer, for instance, accounting “It’s exactly how it is when you get out in the real world,” says to another term,” Dewan says. Sloane, a native of Santa Barbara, California. “You have prob- Other recent curricular innovations have sprung from faculty lems where there isn’t a set solution, and you can’t look it up in members turning to teaching techniques beyond traditional the back of a book.” lecturing. Given that legions of companies now use internships as a way “A lot of the efforts, especially in the core classes, have been to evaluate potential employees, Simon also is planning to adjust geared toward getting students to participate more,” Dewan says. Student-response systems, often called “clickers,” have helped Simon professors spark livelier classroom discussions, Brickley Through a carefully crafted combination of hands-on learning, says. Students use the keypad devices to answer questions, and peer-to-peer interaction, and traditional classroom lecturing, students then the technology tabulates the responses in bar graphs on (above) are better prepared for real-world business environments. PowerPoint slides. David Tilson (opposite page), clinical assistant professor of computers “You quickly see that, in many cases, where you thought peo- and information systems, conducted the Business Systems Consulting ple were grasping a point, they’re not,” Brickley says. module during the October 2011 series of modules on the theme Pinker says he now lectures less often so that students can “Putting Theory Into Effective Practice.” learn by doing.

26 Spring 2012 ◾ Simon Business “It’s known that students learn a lot from each other, and you Simon’s rich tradition of fostering cross-disciplinary educa- learn a lot by explaining things to other people,” Pinker says. Stu- tion is slated to take on a new dimension with the recently an- dents tend to retain more when traditional lecturing is not the nounced revival of the University of Rochester’s undergraduate lone teaching method, he adds. business major. Brickley now weaves team assignments into his instruction to Tenure-track faculty at Simon will teach courses related to the promote active learning. In some instances, he will ask students core curriculum of the major, which had been in development to examine spreadsheets and other data on particular industries for two years. so that they can develop supply curves and not rely on theory In total, Simon’s curricular innovations aim to show students alone. “So it’s more application, more case discussion, and more how to apply what they learn to the real world, right away. working a problem,” he says. “All these changes are really a demonstration that the faculty Another curricular innovation called “Think, Pair, Share” en- is very committed to doing what they can to help students com- courages students to state their own thoughts on classroom topics. pete as effectively as they can in the job market,” Pinker says. “So Students buddy up with their neighbors to consider the question we’re taking a very active and aggressive role in this.” at hand and then share with the class what they discussed. Simon’s bold steps with its curriculum have already earned Peer-to-peer interaction is a powerful pedagogical tool, praise. In specialty rankings released by Bloomberg Businessweek Dewan says. “Sometimes, students may have a perspective that’s in late 2010, Simon placed 8th for the most innovative curricu- a little bit different from the one the professor is offering, and lum. Simon was the top private US business school for return on they have actually enhanced the topic being discussed,” he notes. investment and placed 3rd in teamwork in the same rankings. Rising MS Finance enrollments also have triggered curricu- “We know that our education serves them very well in the lar improvements, including increasing the number of sections long run,” Dewan notes. “When we meet alumni, it’s a common of required and elective courses for MS students by eight this refrain when they say, ‘You taught us how to think.’ ” s academic year. In the past 15 months, Simon has added five new finance and accounting faculty members. Sheila Livadas is a Rochester, New York-based freelance writer.

Simon Business ◾ Spring 2012 27 Research Highlights

Just How Big Is Wal-Mart’s Impact? The retailer’s When a Wal-Mart supercenter comes to town, what repeatedly make the same trip to purchase grocer- effect on local happens to the grocery stores that are already there? ies, the authors write. Paul Ellickson, assistant professor of econom- Even within the three-mile radius in which hardware and ics and of marketing, who studies the econom- Wal-Mart does have an impact, not all of its gro- home and ics of retail competition, researched the question cery competitors are adversely affected. Growing garden centers with Paul Grieco of Pennsylvania State University, companies that are entering or expanding in the businesses is in “Density versus Differentiation: The Impact of same market are essentially untouched. These can Wal-Mart on the Grocery Industry.” include retailers that target more affluent consum- well known. But Wal-Mart has had a well-documented effect on ers, such as Wegmans Food Markets, and discount, how effective are the discount general merchandise industry in the private-label food retailers, such as Aldi and Save- its supercenters United States. The addition of a Wal-Mart store to a-Lot, as well as dollar stores. when it comes to a community draws customers away from locally “There’s a segment of consumers that actually owned hardware stores, home and garden centers, finds Wal-Mart expensive,” Ellickson says. competing with and convenience stores. On the other hand, outlets of large, similar chains grocery stores? Ellickson and Grieco took the research to the next and stores that are already on the decline are dam- By Sally Parker level. They wanted to explore the retailer’s impact aged by Wal-Mart’s entry. An exception is franchise specifically on competing grocery stores. What effect operations, whose local owners can tailor merchan- do its supercenters, which contain full grocery de- dise selection to local demographics, Ellickson says. partments, have on food retail chains, franchises, and “Wal-Mart appears to intensify declines in sales mom-and-pop shops that operate in the same area? due to contraction and exit,” the paper states. “Its The authors used a detailed panel data set span- effect falls mostly on large chains, which target the ning 1994 to 2006 to estimate Wal-Mart’s im- same consumer types as Wal-Mart supercenters.” pact on the revenues, employment numbers, and Though Wal-Mart has not reshaped the eco- square footage of competing grocery stores. They nomic geography of grocery retailing as it has for “Wal-Mart appears to intensify declines in sales due to contraction and exit. Its effect falls mostly on large chains, which target the same consumer types as Wal-Mart supercenters.” found that the retail giant’s presence is felt mostly dry goods, it has other reasons besides density mo- within a tight, three-mile radius of its location. tives to be part of the grocery segment, Ellickson “Wal-Mart’s entry does not negatively affect says. For one, the presence of a grocery section in revenue or employment at grocery stores more the store can bring in more customers—or entice than three miles away from the Wal-Mart site,” regular customers to visit more often—increasing they write. “This seems to indicate that Wal-Mart’s the chance that they will purchase high-margin of- strategy of exploiting density economics by con- ferings in other parts of the store. vincing consumers to travel farther for goods has In addition, the authors write, “even though not translated from dry goods to groceries.” Wal-Mart may not draw customers from far afield, Consumer tastes are more individualized when it it may still be profitable when operating grocery comes to the wide array of choices available in food outlets within a smaller catchment area.” shopping. This works against Wal-Mart’s traditional Wal-Mart has started opening small stores, business model, which emphasizes standardization. which it calls neighborhood markets, that special- “In particular, if consumer preferences are more ize in groceries. The retailer’s interest in smaller discerning for grocery products than dry goods, it grocery stores, the authors write, indicates that may be difficult to gather a sufficient mass of gro- “the company which built itself on a density strat- cery shoppers under a single roof to generate the egy believes smaller grocery stores remain profit- requisite scale,” Ellickson says. able despite the scale of supercenters.” s In addition, consumers who are willing to travel 20 miles to buy a television may be unwilling to On the Web: http://ssrn.com/abstract=1819268

28 Spring 2012 ◾ Simon Business Research Highlights

Banks and Short-Term Borrowing What banks In 2010, The Wall Street Journal published a se- are doing ries of articles focusing on discretionary actions that 18 big banks take to mask risk. At the end of to appear less each quarter, when they were required to report risky is more debt levels, the banks were window dressing their commonly known leverage to appear less risky in their borrowing as “window throughout the quarter as a whole, the Journal reported. dressing.” Simon professors Joanna Wu and Edward By Sally Parker Owens set out to investigate whether a large sample of bank-holding companies were indeed window dressing leverage numbers to mask fluc- tuations during the quarter. They also wanted to see if the market knew—and if it cared. In their paper, “Window Dressing of Short- Term Borrowings,” the authors studied the use of short-term loans, the tool banks are most likely to use. They found evidence that a large percentage of the companies do pay off short-term loans at the Professors Joanna Wu and Edward Owens studied the end of the quarter. These loans were repurchase practices of banks when it comes to short-term borrow- agreements, or repos. ing and found that many engage in the same behavior Banks are required to report quarter-end num- toward the end of the quarter. bers and quarterly averages in Y-9C regulatory filings with the Federal Reserve, but only quarter- authors write. Short-term borrowing is of particu- end numbers appear in financial statements filed lar concern to the SEC for at least two reasons. For with the Securities and Exchange Commission one, firms that rely heavily on it are more suscep- (SEC). Owens and Wu showed that during the tible to fluctuations in market conditions. Second, quarter debt levels fluctuate, but they tend to be because the levels of short-term borrowing can lower at the quarter’s end. This means the quarter’s vary greatly during a reporting period, end-of- overall risk is often higher than implied by quarter- quarter balances are less likely to accurately repre- end numbers in SEC filings. sent activities during the period. They also found that the stock market is paying The SEC wants greater transparency. Reports attention: It responds when banks’ quarterly aver- released to the investing public should have more age leverage figures are published in the Y-9C. “It complete information that makes transactions is an economically significant effect,” Owens says. more obvious, regulators say. And they want more “You see a stock market reaction when the Y-9C is published. It would have been surprising if we found no stock market reaction.”

“You see a stock market reaction when the Y-9C than just banks to cooperate, calling for the regula- is published. It would have been surprising if we tions to apply to all companies. found no stock market reaction.” “Banks already have to file disclosures,” Owens In September 2010, the SEC unanimously voted says. “The stock market responds. The impli- to propose rules requiring both financial and non- cation is that the market values the in-quarter, financial public companies to provide enhanced short-term borrowing information. And the SEC disclosure of short-term borrowings. recognizes that it would be useful if all firms filed The reason is rooted in the recent financial disclosures.” s crisis, which has brought the risk-taking behav- ior of financial institutions into sharper focus, the On the Web: http://ssrn.com/abstract=1811110

John Smillie Simon Business ◾ Spring 2012 29 Alumni Leaders

Martin Mucci ’91S (MBA) President and CEO, Paychex Inc.

By JOY UNDERHILL While many Simon grads choose to build ca- He especially values his ability to look at an issue reers elsewhere, Martin Mucci proves that there from many angles—and to consider alternatives are exciting opportunities right here in Rochester, in his analysis and decision-making—skills he first New York. learned and practiced at Simon. Mucci assumed the role of president and chief “Simon provided a unique and challenging executive officer of Paychex in 2010, becoming the environment. I particularly liked the study-team third CEO in the company’s history. Paychex is a approach with diverse business leaders in the leading provider of payroll, human resource, and greater Rochester area,” he notes. “Professor Cliff benefit solutions for small- to medium-sized busi- Smith had a great way of presenting his material nesses, with more than 12,000 employees and 2011 that was effective, interesting, and thought-pro- revenues totaling $2.1 billion. voking. I also appreciated Ron Schmidt’s straight- “I started with Paychex as senior vice president forward, no-holds-barred comments, which kept of operations in 2002,” Mucci says, “where I was me listening and on my game!” responsible for all operations and customer service Mucci is a member of the board of directors of as well as the company’s product management and Cbeyond Inc., a leading provider of communications information technology functions.” packages and IT services to small businesses. He Before joining Paychex, Mucci served as CEO also serves as chairman of the Catholic Family Cen- Martin Mucci credits of Frontier Telephone of Rochester and president ter board of governors, and is immediate past chair- Simon’s Executive MBA of telephone operations for Frontier Communica- man of the St. John Fisher College board of trustees. Program for providing tions. In that capacity, he was responsible for sales, “I would recommend the book Power Listening the unique and chal- operations, customer service, and financial perfor- by Bernard Ferrari, who is also a University grad,” lenging environment mance for Frontier’s 34 local telephone companies. says Mucci. “He makes some excellent points that that helped him develop Mucci credits his education with helping him I have always subscribed to—particularly that you critical thinking and develop the critical thinking and business analytics can never listen enough to clients, colleagues, business analytics. he has needed as he took on more responsibilities. or investors.” s

30 Spring 2012 ◾ Simon Business John Smillie P. Peter Nguyen ’03S (MBA) Supply Chain and 3PL Finance Manager, Cardinal Health Inc.

By JOY UNDERHILL For P. Peter Nguyen, graduation day meant more than acknowl- edgement for years of hard work. It was also the day he married his wife, Grace. “Grace and I met at the Univer- sity of Rochester,” says Nguyen. “We were in the same class, so I can credit Simon with leading me to both my future career and my future wife.” Nguyen is currently the supply chain manager at Cardinal Health, No. 19 on the Fortune 500 list, that supplies pharmaceutical and medi- cal products to more than 60,000 locations daily, plus manufactures The connections gloves, surgical clothing, and fluid between theoretical management products. In his time modeling and real-world at Cardinal, Nguyen has acted in applications explained several critical supply chain posi- by Simon professors tions, helping to manage $400 mil- were important lion in expenses and $120 million in to Peter Nguyen’s revenues. He recently earned Car- career success. dinal’s Worldwide Finance Leader- ship Award for his work in securing a key contract worth $25 million in annual profits. As part of his job, Nguyen man- ages finance teams in two states and assists senior leadership with budgeting and forecasting. “I credit my Simon education with helping me develop a strong set of finan- cial analysis and critical-thinking skills, which have been indispensible in my work,” events in the Chicago area. The success sto- he notes. “I’ve also been able to take on leader- ries from his fellow grads have continued to fuel ship roles with holistic views of challenges and Nguyen’s desire to be the best in his profession solutions.” and to give back to the Simon School through the Phillip Joos was a favorite professor. “He was George Eastman Circle and the hiring of a recent humble, dedicated, and very passionate on the graduate. subject of financial accounting and stock perfor- Much of Nguyen’s free time is spent raising a mance in the biotech/pharmaceutical industry, in growing family; his fourth child arrived just days which I have a strong interest. He was approach- before Christmas 2011. able and always made time with students to en- “We are dedicated to education, so we spend a sure that we understood the connection between lot of our time teaching our children math, read- theoretical modeling and real-world applications,” ing, writing, and science,” Nguyen says. He highly continues Nguyen. recommends The 17 Indisputable Laws of Team- Nguyen stays in touch with about a dozen work and The 21 Irrefutable Laws of Leadership, Simon grads and has regularly attended Simon both by John C. Maxwell. s

Brian MacDonald Simon Business ◾ Spring 2012 31 Alumni Leaders

Marlene K. Puffer ’86S (MS), ’93S (PhD) Managing Editor, Global Fixed Income Strategy, BCA Research

By JOY UNDERHILL For Marlene Puffer, getting her PhD from Simon work, research, and pension fund management. was only the beginning. She found herself first Then another opportunity came up that was drawn to the academic world, then to the buy and even more appealing. “BCA Research provides sell sides of the financial markets, and finally to investment strategy to a global clientele of insti- BCA Research, where she combines her dual inter- tutional investors. I’m an ‘idea geek’ but I under- ests in theory and practice. stand the markets and the client perspective, so at “I was on faculty at the University of Toronto for BCA, I have just the right balance.” five years,” Puffer notes. “But over time, I decided Puffer credits her Simon education with es- I wanted to experience the inside of capital mar- tablishing the analytical skills to fully evaluate kets rather than watch them from the outside.” She empirical research and to remain skeptical of con- spent the next five years heading the fixed income clusions. She especially values what she learned analytics group at RBC Capital Markets, then about agency theory, incentives, and arbitrage Her PhD from the Simon moved on to another dealer, followed by portfolio from Simon professors. “I have especially fond School was only the management and business development roles at memories of the late Michael Barclay and Jay beginning for Marlene Legg Mason Canada and PIMCO Canada. Shanken, who were my thesis advisors.” Puffer, who credits “After several years in the capital markets, I Puffer spends what little free time she has her Simon education had developed a unique skill set,” says Puffer. “I with her three children and one fluffy dog. She with establishing the had gained deep quantitative skills from aca- skis, practices meditation and yoga, and sits on analytical skills to fully demia and varied experience in capital markets, the board of the large Healthcare of Ontario evaluate empirical so I decided to form my own consulting company, Pension Plan. research and to Twist Financial.” Puffer’s clients came to value her “I don’t miss those Rochester snowstorms,” she remain skeptical of combination of strong research ability and mar- adds, “but I’ll always credit Simon as being a piv- conclusions. ket knowledge. Projects included expert witness otal springboard to my professional success.” s

32 Spring 2012 ◾ Simon Business Ria Tafani 2012 Simon New York City Conference

May 3, 2012 | 8:30 a.m.–5:00 p.m. | Grand Hyatt | New York City Economic Action and the Management of Risk: Critical Decisions Hanging in the Balance

Join us for the Simon School’s third annual conference in New York City focusing on key issues facing corporations today. Hear from preeminent faculty, CEOs, and senior executives of major multinational corporations on changes in financial regulation and opportunities and challenges of current economic policies.

Key Participants

Jeffrey R. Immelt Bernard T. Ferrari ’70, ’74M (MD) Chairman and CEO Chairman and Founder General Electric Ferrari Consultancy LLC; author of Power Listening: Mastering the Most Critical Business Skill of All

Douglas B. Petno ’89S (MBA) Executive of the Year Award Chief Executive Officer, Commercial Banking Jamie Dimon JP Morgan Chase & Co. Chairman and Chief Executive Officer JPMorgan Chase & Co.

Clifford W. Smith Jr. Jerold L. Zimmerman Louise and Henry Epstein Professor of Ronald L. Bittner Professor of Business Business Administration and Professor of Administration and Professor of Finance and Economics, Simon Graduate Accounting, Simon Graduate School School of Business, University of Rochester of Business, University of Rochester

www.simon.rochester.edu/nyc Class Notes

1989 his strong background BoSton ■■Daniel Ng was ap­ in corporate finance Alumni gathered for a pointed head of merg­ from Simon as a factor summer happy hour on ers and acquisitions in in this achievement. June 8, 2011. (Pictured, addition to his current Joel is a senior analyst from left): R. Todd Barber role as head of corpo­ with C. K. Cooper & ’92S (MBA) and Michael rate finance for Bank Company in Irvine, CA. Dailey ’93S (MBA). of China International. Daniel is based in Hong 1999 Kong. ■■Quilvio Cabral was pro­ moted to vice president 1990 of credit risk at Banco ■■Noor Menai was pro­ BHD S.A. He and his filed in theFinancial wife, Johanna Fernan­ WashingtoN, D.C. Times, discussing the dez, have two children, DC Simonites gathered for a evolution of IT in bank­ Amelia and Leticia. summer happy hour on July ing operations. Noor is They live in Santo 12, 2011. (Pictured, from executive vice presi­ Domingo, Dominican left): Carlos Barrionuevo dent, North America Republic. ’95S (MBA) and Rhonda region head, at China­ Holmes ’85S (MBA). trust Commercial Bank 2000 in Taiwan. ■■Emily Yee Chang ac­ cepted a position as 1995 marketing director at ■■Hakan Akbas has Apple (Greater China). founded a new bou­ She is based in Shang­ tique advisory firm, hai, China. Global Dealings LLC, ■■Ender Markal published Chicago focusing on growth and his first math book, Chicagoland Simonites new business devel­ GMAT Math Work- gathered on August 17, opment with strategic book, through Bar- 2011, for the relaunch of emphasis on emerging ron’s in February 2011. the Simon School Alumni global markets. Global The book is available Network of Chicago. Dealings LLC is based through Amazon.com. (Pictured, from left): Geoff in Bethesda, MD. Ender is the founder Laughlin ’98S (MBA) and ■■Frank Monachelli, of SFTutors in San Ron Carlson ’01S (MBA). formerly the finance Francisco, CA. director for the whole­ ■■othon A. Paez (MS) has sale banking unit of been appointed chief BBVA Compass Bank in financial officer at Pa­ Houston, TX, was pro­ trimonio Hipotecaria RoChester moted to executive vice in Monterrey, Nuevo The Sands Leadership president of finance and Leon, Mexico. Lecture brought Matt Ridley, chief financial officer of ■■Masaki Sasamoto is author of The Rational commercial banking. now executive vice Optimist, to speak to president at Consoli­ students and local alumni 1998 dated Systems Inc. on November 14, 2011. ■■Joel P. Musante won (CSi) in Columbia, SC. (Pictured, from left): Dean the number one spot ■■Bruce N. Stewart is Mark Zupan, Ridley, and for the Best on the currently the vice Richard Sands. Street Wall Street Jour- president of busi­ nal Analyst Survey for ness development for the Oil and Gas Pro­ Ameritherm Inc. He ducer sector. He credits has spent the past nine

34 Spring 2012 ◾ Simon Business Sydney, Australia years headquartered in Alumni down under joined Rochester, but the past Delores Conway, associate three years living in Eu­ dean for masters programs rope (mostly France), and professor of statistics managing two subsid­ and real estate economics, iaries and five distribu­ for lunch on June 20, 2011. tors. He may also be the (Pictured, from left): first full-time alumnus David Gee ’92S (MBA), of the Class of 2000 to Patrick McCawe ’82S be a grandfather. (MBA), Conway, and Nicholas Assef 2002 ’98S (MBA). ■■Grace E. Liljemark has relocated to the United Kingdom to start a new position as global brand marketing manager for Atlanta Dettol/Lysol at Reckitt “An Evening of Jazz” Benckiser. under the stars was enjoyed by Atlanta alumni on July 29, 2004 2011, at Callanwolde Fine ■■Takwon Lee is now em­ Arts Center. Pictured are ployed at BMW Group Kevin Nicholas ’93S (MBA) Financial Services Ko­ and his guest, Denise; rea in Seoul, Korea. Kevin okoeguale ■■Karen Sweet relocated ’05S (MS), Katy Purwin to Toronto, Canada, ’06S (MBA), and where she is now direc­ Ray Maung ’06S (MBA). tor of real estate man­ agement with Oxford Properties. Oxford, which is wholly owned by OMERS Worldwide, is active in Canada, the United States, and New YoRK City Europe. Alumni and summer interns ■■Roberto Vazquez and gathered on a rooftop bar his family relocated in for a summer happy hour on August 8, 2011.

2010 to Uruguay, where he is currently a senior consultant in the pro­ curement department for OCA—Itau Corpo­ ration in Montevideo, Uruguay.

Simon Business ◾ Spring 2012 35 Class Notes

■■Kirsten Werner (Execu­ LoS Angeles Share tive MBA) is pleased Area alumni gathered to announce that her for an evening on Your News February 16, 2011, company, Diamond To submit a class note, Packaging, won its to launch the Simon send an e-mail to the Simon first ever Benny Award School Alumni Network Advancement office in care of Kelly Rains at kelly.rains@simon of Southern California. in the 62nd annual .rochester.edu, or to your Class Premier Print Awards Correspondent below. competition, the Class of 1982 graphic arts indus­ Sameer Shah try’s largest and most [email protected] prestigious worldwide Class of 1983 Ellen Stevens printing competition. [email protected] Kirsten is president of RoChester Class of 1988 Diamond Packaging in Jeff Durbin Local alumni met Rochester, NY. [email protected] on March 1, 2011, Class of 1992 at the University of Eric Suitos 2005 Rochester Alumni and [email protected] ■■Sangheon Koo is now Advancement Center to Class of 1994 senior director in Rosanne Tierney Schwartz celebrate the relaunch charge of LCD prod­ [email protected] of the Simon School uct marketing in North Class of 1995 Alumni Network of Hakan Akbas and South America at Greater Rochester. [email protected] Samsung Electronics, Philipos Minaidis America Headquarters [email protected] (Device Solutions) in Nikolaos Veraros [email protected] San Jose, CA. RoChester Class of 1996 ■■Mario Luna and his The Simon Aditya Kapoor wife have relocated to Advancement office [email protected] Canada, where he is hosted “A Toast to Our Class of 1998 a project manager for Grads” on May 6, 2011, Geoff Laughlin [email protected] Nordion in Ottawa, ON. to welcome the Class Class of 2000 ■■Sarah L. Schwartz is of 2011 to the alumni Jennifer Henion now a senior imple­ community. Toasts were [email protected] mentation consultant at given by Alan Rosen Class of 2001 Cortera in Boston, MA. ’88S (MBA) and Kevin Bob Tracy [email protected] ■■Goncalo Souto has ac­ Sheldon ’04S (MBA). Class of 2004 cepted a position as vice Alan is the father of Karen Sweet president at NuWave In­ Class of ’11 graduate [email protected] vestment Management Max Rosen ’11S (MBA). Class of 2005 in Parsippany, NJ. Rameet Kohli RoChester [email protected] Simon alumni and Seiichiro Takahashi 2010 students participated in [email protected] ■■Siddharth Ladsariya the 23rd Annual Simon Class of 2006 was featured in the Chris Johnston Golf Classic on May 20, Economic Times article, [email protected] 2011, at Ravenwood Golf “The Generational Shift Class of 2008 Club in Victor, NY. Chris Adams in Investing,” about [email protected] the exploration of new Christine Stoelting avenues by the latest [email protected] generation of investors. Don’t see your class represented Siddharth is a manager here? Interested in becoming a Class Correspondent? Contact at Everest Flavours Ltd. Kelly Rains (kelly.rains@simon in Mumbai, India. .rochester.edu) to learn more.

36 Spring 2012 ◾ Simon Business New YoRK City Herbert Allison, former assistant Secretary of the Treasury for financial stability, presented “The Megabanks Mess” on September 29, 2011. (Pictured, from left): Dean Mark Zupan, Joe Willett ’75S (MBA), Herbert Allison, and Janice Willett ’78S (MBA).

RoChester The Meliora Weekend Reunion Celebration and Awards Dinner was held on October 22, 2011. The Alumni Service Award was presented to Marty Stern ’80S (MBA), the John N. Wilder Award was presented to John Anderson ’80S (MBA), and the Distinguished Alumnus Award was presented to John Davidson ’88S (Executive MBA). (Pictured, from left): Stern, Anderson, Dean Zupan, and Davidson.

Simsbury A group of Simon alumni gathered in central Connecticut on September 17, 2011. The outing started out with a hike to Heublein Tower in Talcott Mountain State Park, Simsbury, CT, followed by a group lunch. (Pictured, from left): Suzanne Ley ’04S (MBA), John Allen ’04S (MBA), Aarthi Chandrasekaran ’08S (MBA), Puja Lakdawala, Sherli Looi ’04S (MBA), Anjan Rao ’04S (MBA), Weihsun Yen ’04S (MBA), and Apurv Baraya ’09S (MBA).

Simon Business ◾ Spring 2012 37 Mergers & Acquisitions

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38 Spring 2012 ◾ Simon Business 1995 fellow Class of 2000 on July 19, 2011, at Glen the owner of BlueSpike live in Penfield, NY. ■■Mark D. Unferth and his Simon alumni Curt Iris Inn at Letchworth Beverages. They live in ■■Sarah E. Heximer mar­ wife, Jenna, welcomed Carstensen, Bob Genter, State Park. Monica is Montreal, Quebec. ried John Klompstra on the arrival of their son, and Chris Bajak, as well principal at Infante ⓫⓫ Pedro Grau and his September 17, 2010, in Aiden Max Unferth, as Mike McCauley (’99) Marketing. Peter is wife, Nuria Hernandez Lockport, NY. Sarah born October 23, 2011. and Brian Ayash (’99). president of Butler/Till ’05 (MS), welcomed is a category director Mark is a portfolio Sean is a global account Media Services. They the arrival of their at Winn Dixie Stores manager at CQS (US) representative at Gen­ live in Brighton, NY. daughter, Mar Grau, Inc. John is an air traffic LLC. They live in Short eral Electric Company ❼❼ Kevin Sheldon and born in September 2011. controller. They live in Hills, NJ. in Santa Clara, CA. his wife, Angie, wel­ Mar joins older brother, Jacksonville, FL. Megan is a marketing comed the arrival of Pep, 3. Pedro is vice 1996 consultant with Visa. their son, Christopher president and credit 2008 ■■Peter W. Alpern and They live in San Fran­ John (CJ), born June risk manager at Citi. ⓮⓮ Bridget J. Heinsler his wife, Elizabeth, cisco, CA. 30, 2011. Kevin was Nuria is a forecast ana­ married Pete Nowak on welcomed the arrival ❹❹ Bart Schockaert mar­ recently promoted to lyst at Coty UK. They June 10, 2011, at Colgate of their son, Harlan ried Maiyelis Carrillo senior director of dis­ live in London, UK. Rochester Crozer Di­ Alpern, born in May Perez on November 14, tribution strategy at ■■Timothy P. Santo and vinity School. Bridget 2011. Harlan joins older 2008, in Aalst, Bel­ AOL Inc. They live in his wife, Traci, wel­ works in internal audit sisters, Laurel and Lia. gium. Bart is controller, Leesburg, VA. comed the arrival at Monro Muffler Brake Peter is director of global R&D, at Merck/ of their son, Nathan Inc. They live in Roch­ prime services sales at MSD Animal Health in 2005 Santo, born February ester, NY. Deutsche Bank Securi­ Boxmeer, Netherlands. ❽❽ Christopher A. Antola 7, 2011. Nathan joins ■■Marko Semiz and his ties. They live in Berke­ Maiyelis is a logistics and his wife, Anne- older sisters, Grace, 5 wife, Mika, welcomed ley Heights, NJ. operator at Copaco. Sophie, welcomed the and Emma, 3. Timo­ the arrival of their twin They live in Nijmegen, arrival of their son, thy is global controller, daughters, Maria and 1998 Netherlands. Arthur Arnold An­ corporate accounting Petra, born July 2, 2011. ❶❶ Richard Scigaj and tola, born March 2, operational COE at Marko is a banker at his wife, Melissa, wel­ 2003 2011. Christopher is General Electric Com­ JPMorgan Chase. They comed the arrival of ❺❺ Bobby Zhuang Ma vice president of sports pany. They live in New­ live in Seattle, WA. their twins, Garrett and and his wife, Zhu Hua, rights/corporate fi­ town, CT. ⓯⓯ Silvia Torres married Natalie, born Septem­ welcomed the arrival nance at Fox Sports ⓬⓬ Patrick Tehan and his Stephen Weinberger ber 15, 2010. The twins of their first daugh­ Media Group. wife, Meghan, wel­ on September 17, 2011, join older brother, ter, Sici Ma, born in ❾❾ Naomi S. Cohen mar­ comed the arrival of in Harvard, MA. Silvia Evan. Richard is finance July 2011. Bobby is the ried Bill Cody on July their first child, Adam is an assistant brand director at ITT Cor­ founder of Linwo Fi­ 17, 2011, at the Liberty Christopher Tehan, on manager at Procter & poration. They live in nancial Ltd. They live in House in Jersey City, March 16, 2011. Patrick Gamble in Boston, MA. Alexandria, VA. Shanghai, China. NJ. Naomi has been is a senior reporting Stephen is a physician promoted to senior analyst at Global Cross­ at University of Massa­ 2000 2004 brand manager for the ing. They live in Roch­ chusetts Hospital. They ❷❷ Nicholas L. Kerr and ■■Philip M. Mastil mar­ Breyers brand at Uni­ ester, NY. live in Boston, MA. his wife, Jennifer, wel­ ried Danielle Morse­ lever in Englewood comed the arrival of man on August 5, 2011, Cliffs, NJ. Bill is a brand 2006 2010 their first child, Penel­ at the New York Botani­ manager at Moulding & ⓭⓭ Jennifer M. Garsin and ■■William B. Reynolds ope Jane Kerr, born Jan­ cal Gardens in Bronx, Millwork. They live in her husband, Michael, and his wife, Cassan­ uary 25, 2010. Nicholas NY. Philip is vice presi­ Jersey City, NJ. welcomed the arrival dra, welcomed the is a product marketing dent at Valuation Re­ ❿❿ Kathryn Ann Dudek of their son, Ryan Mat­ arrival of their daugh­ manager at Microsoft search Corporation in married Mathieu thew Garsin, born July ter, Gabrielle Eliza­ Corporation. They live New York City. Danielle Gagnon-Oosterwaal on 7, 2011. Ryan joins older beth, born February in Seattle, WA. is a financial services/ October 30, 2010, in sister, Lauren Eliza­ 16, 2011. Gabrielle joins ➌➌ Sean M. Noonan mar­ hedge fund profes­ Buffalo, NY. Kathryn is beth Garsin, 3. Jennifer older brother, Mala­ ried Megan Reilly on sional. They live in New a financial analyst sup­ is manager of financial chi. William is a senior May 28, 2011, at a vine­ York City. porting new product planning and analysis consultant at Deloitte yard in Healdsburg, ❻❻ Monica Ryszytiwskyj launches at Xerox Cor­ at Constellation Brands Consulting LLC. They CA. In attendance were married Peter Infante poration. Mathieu is Inc. She and her family live in Rockville, MD.

Simon Business ◾ Spring 2012 39 Executive Advisory Committee

J. Peter Simon ’08S (LLD), Chairman

Sami Abbasi ’88S (MBA) Carol A. (John) Davidson ’88S (MBA)* John M. Kelly Robert E. Rich Jr. ’69S (MBA)* Joseph W. Abrams ’74S (MBA) John L. (Jack) Davies ’72, ’73S (MBA) Dennis Kessler Efrain Rivera ’89S (MBA) Edward J. Ackley ’53, ’64S (MS) Harindra de Silva ’84S (MBA), ’85S (MS) David M. Khani ’93S (MBA) John B. Robbins ’74S (MBA) Mark S. Ain ’67S (MBA) Joseph G. Doody ’75S (MBA) David H. Klein Stephen E. Rogers ’90S (MBA) Gerald A. Altilio Jr. ’92S (MBA) Robert B. Dorr ’97S (MBA) Ronald B. Knight ’61 Michael P. Ryan ’81, ’84S (MBA) Stephen G. Down ’88, ’95S (MBA) Robert B. Koegel John W. Anderson ’80S (MBA) Albert I. Salama ’73, ’74S (MBA) Brian S. Archibald ’94S (MS) Christopher T. Dunstan ’77, ’81S (MBA) Salvatore A. LaBella ’78S (MBA)* Richard Sands Ajay Asija ’96S (MBA) Ronald H. Fielding ’73 (MA), ’76S (MBA) Evans Y. Lam ’83, ’84S (MBA) Leonard Schutzman ’69S (MBA) Neil A. Augustine ’88, ’89S (MBA) Barry W. Florescue ’66 Daniel G. Lazarek ’91S (MBA) Joel Seligman (ex officio) Michael J. Behrman ’92S (MBA) William G. Forman ’82, ’83S (MBA) John C. MacDonald ’86S (MBA) Joseph M. Bell Philip G. Fraher ’93S (MBA) Rohtash Mal Muriel Siebert ’04S (LLD) Jay S. Benet ’76S (MBA) Roger B. Friedlander ’56 Jeff E. Margolis ’77, ’78S (MBA) William E. Simon Jr., Esq. Russell P. Beyer ’82S (MBA) W. Barry Gilbert ’82S (MBA) Donna L. Matheson ’78, ’79S (MBA) Arthur P. Soter ’72S (MBA) Taj S. Bindra ’86S (MBA) James S. Gleason ’68S (MBA)* Louise McDonald ’99S (MBA)* Gregg M. Steinberg Paul A. Brands ’66S (MBA) Robert B. Goergen ’60 Charles W. Miersch ’70S (MBA) Martin L. Stern ’79, ’80S (MBA) Michael A. Braun ’71, ’72S (MBA) Scott J. Gordon ’84, ’85S (MBA) Richard T. Miller ’91S (MBA) Michael C. Stone ’95S (MBA)* Steven P. Brigham ’99S (MBA)* Gwen Meltzer Greene ’65 Carlos P. Naudon ’74S (MBA) Amy Leenhouts Tait ’85S (MBA)* Hollis S. Budd Bruce M. Greenwald ’68, ’69S (MBA) Jeffrey R. Olsen ’91S (MBA) Andrew J. Thomas ’91S (MBA) David J. Burns ’78S (MBA) Mark B. Grier ’80S (MBA) Robert M. Osieski ’77, ’78S (MBA) Jon D. Van Duyne ’85S (MBA) Terence L. Griswold ’83S (MBA) Sandeep Pahwa ’95S (MBA) Andrew M. Carter Sanjay Vatsa ’89S (MBA) Eduardo Centola ’93S (MBA) Jeff Hanson Steffen W. Parratt, ’85, ’87 (MS) Kapil Wadhawan Kevin P. Collins ’82S (MBA) Robert O. Hudson ’80S (MBA)* Warren (Barry) Phelps III ’73S (MBA) Kathy N. Waller ’80, ’83S (MBA) Donald L. (Skip) Conover ’79S (MBA)* Charles R. Hughes ’70S (MBA) Kevin M. Pickhardt ’90S (MBA)* Ralph R. Whitney Jr. ’57, ’73S (MBA)* José J. Coronas ’75S (MBA)* Harvey H. Jacobson ’82S (MBA) Dennis M. Pidherny ’86, ’87S (MBA) Janice M. Willett ’78S (MBA) Clifford J. Corrall ’86, ’87S (MBA) Rene F. Jones ’92S (MBA) James Piereson Frank G. Creamer Jr. ’70S (MBA) Rufus M. Judson ’06S (MBA)* Adm. Stuart F. Platt ’55, ’70S (MBA) Joseph T. Willett ’75S (MBA) Vineet Kapur ’99S (MBA) Mark D. Quinlan ’82, ’85S (MBA) Timothy W. Williams ’86S (MBA)* * Executive MBA graduate Robert J. Keegan ’72S (MBA) David Reh ’67S (MBA) Alan S. Zekelman ’87S (MS)

Meliora. It means “Ever Better” and at the Simon School, it’s our goal to help every student live such a philosophy. Whether it’s by giving you the ability to understand root causes, develop lasting solutions, or work effectively with others, what matters is not just what you learn—but the ethics and ideals you develop that guide your leadership and help you make an impact forever. Ever Better. Forever. URG_MaraisSimon8.5x11_Layout 1 2/15/12 11:15 AM Page 1

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