… B-School Boys.

The trajectory from faculty to fatcat is often impressive and inspiring. To come up with original ideas that make you and other people rich can be very cool. Here a Nobel Prize recipient, William Sharpe, thanks Barr Rosenberg, once a Berkeley professor, now a financial titan, for his pioneering work in computer-based trading. Berkeley’s business school boasts of its graduates’ internships with the outfit that bears his name.

Barr has now been barred from the securities business.

[I]n late June 2009 a [Barr Rosenberg] employee discovered an error in the code of a complex automated optimization model that caused $217 million in losses in about 600 client portfolios. After the employee discussed his finding with Rosenberg and other employees, the SEC claims Rosenberg directed them to keep quiet about the error and not to inform anyone else about it.

Rosenberg also directed that the error not be corrected at the time.

… It is a hard fall for Rosenberg, a supremely wealthy man and widely respected academic, who pioneered the use of quantitative techniques to implement investment strategies for decades.

His clients lost hundreds of millions of dollars. Barr will pay a $2.5 million fine.

… law school graduates!

As long as there’s a Goldman Sachs, all is not lost.

First up and then out of the Anglican Church, Jonathan Kirkpatrick turned to one of New Zealand’s universities, where, as head of this outfit, he got away with $666,000 until he got caught.

Court documents showed the large scale of the fraud, which stretched back to 2002 soon after Kirkpatrick got the job…

He resigned from his role as chief executive of AUT’s business innovation centre after large sums of money were discovered missing from research and development funds last week.

… Kirkpatrick was a Reverend and Priest in Charge at St Alban’s Church in Balmoral, in central Auckland, where his assistant priest was Reverend Philip Sallis, who is also the Pro Vice Chancellor of AUT.

In the midst of Preet Bharara’s crackdown on insider trading, the future denizens of Wall Street have one burning question for the hard-driving federal prosecutor: What can we still get away with?

During his tenure as U.S. attorney for New York’s Southern District, Bharara has made the rounds at the country’s best business schools, lecturing on ethics and compliance in what he calls his version of Scared Straight.

His audiences, though, are far from frightened. Instead, students invariably ask him how close they can get to the line without crossing it.

… (pronounced embolize), is UD‘s term for the tendency of some MBA programs to lie about their job placement numbers.

An ethics complaint made to [the University of Florida] alleged that Warrington College of Business Administration officials manipulated data on the [2009] job placement of program graduates.

A higher percentage of graduates were reported as being employed in order to maintain the program’s ranking in U.S. News’ annual guide to graduate schools…

The school admits the numbers were madly inflated, but denies lying. It was just “inexperience” or something.

Fudging is very much the way at UF. Take this statement from the Distance Learning page on the business school’s website:

Studies have shown that there is no significant difference in the learning outcomes experienced by students in a traditional classroom versus those in a distance learning situation.

Footnote? Wanna source that? Why not?

In an article titled The Default Major: Skating Through B-School, the New York Times describes the shoddiness of most business majors, and then quotes Henry Mintzberg of McGill University.

[A] dogged critic of traditional business programs, [Mintzberg] … says it is a “travesty” to offer vocational fields like finance or marketing to 18-year-olds.

The story goes on to note that “Most Ivy League universities and elite liberal arts colleges, in fact, don’t even offer undergraduate business majors.”

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Yet, as Louis Menand points out, “The No. 1 major in America is, in fact, business.”

… [S]tudents majoring in liberal-arts fields — sciences, social sciences, and arts and humanities — do better on [a college learning assessment exam], and show greater improvement, than students majoring in non-liberal-arts fields such as business, education and social work, communications, engineering and computer science, and health. There are a number of explanations. Liberal-arts students are more likely to take courses with substantial amounts of reading and writing; they are more likely to attend selective colleges, and institutional selectivity correlates positively with learning; and they are better prepared academically for college, which makes them more likely to improve. The students who score the lowest and improve the least are the business majors.

Sixty per cent of American college students are not liberal-arts majors, though… Twenty-two per cent of bachelor’s degrees are awarded in [business]. Ten per cent are awarded in education, seven per cent in the health professions. More than twice as many degrees are given out every year in parks, recreation, leisure, and fitness studies as in philosophy and religion. Since 1970, the more higher education has expanded, the more the liberal-arts sector has shrunk in proportion to the whole.

Already back in ’09, Jon Stewart was seriously discouraged about the nation’s anti-MBA-grad defense capability. The MBA brigade, equipped by Harvard, Columbia, Wharton, Stanford, and Northwestern with the latest weaponry, launches wave after wave of attacks, year after year, against American suckers like you and me who haven’t learned high-level market-craft. There’s really nothing we can do.

It’s gotten so bad lately, with all the MBA insider traders, that some of their degree-granting institutions have begun to issue public statements.

“These are serious allegations, which if proved true are of great concern to me as a teacher, as a dean, and as someone who is dedicated to restoring people’s trust in business leaders,” said [the dean of the Harvard business school] “We try to do all we can at HBS to convey the importance of integrity and accountability to our students and will keep striving to do more.”

Yadda yadda. He’s talking about yet another insider trader his school trained.

[D]uring his first year at Harvard, [Samir] Barai would have taken the required course ”Decision Making and Ethical Values,” that had been put into HBS’ curriculum eight years earlier. The module offered students an ethical framework to use as a guide for making decisions and using sound judgment… The lessons from that class, including several case studies on ethics, must have eluded him.

One indignant B-school professor, reflecting on all the criminal cases, complains,”People assume that you’re somehow flawed if you go to business school.”

One thing Harvard’s new ethics-oriented dean might do is ask himself what his own professors are modeling for their students. Harvard’s business school, after all, spawned the notorious Monitor Group.

Born in Sri Lanka’s capital, Colombo, Rajaratnam was educated there at St. Thomas’ Preparatory School before leaving for England, where he studied engineering at the University of Sussex. He came to the U.S. to get his master’s of business administration, graduating from the University of Pennsylvania’s Wharton School in 1983.

Two of his Wharton classmates — Anil Kumar, who became a partner at McKinsey & Co., and Rajiv Goel, who was a managing director at Intel — testified against him at the trial, telling jurors how their relationships began at the school and how they turned to crime. Both pleaded guilty and testified for prosecutors.

Found guilty on all counts today.

… so at business schools.

[B]usiness ethics lacks a core body of knowledge and an agreed methodology. With calls for business schools to “teach ethics”, this confusion is damaging. Courses can be added, but it is impossible to assess how well they fulfil their purpose without a sense of what that is.

Martin Sandbu, in the Financial Times, calls for serious moral philosophy to be taught in business schools. He contrasts traditional analytical thought to “faux-analytical concepts of strategy management and corporate responsibility,” and insists that rather than try to make business students into good people (he points out what UD has pointed out since this blog was a baby, that universities can’t make people good; they can only train them in strong forms of self-consciousness about goodness), b-schools should sharpen students’ moral self-awareness in general by teaching them how to argue intelligently about morality, and how to distinguish bad arguments about morality from good.

His idea will never fly because it lacks glamor. It’s not new, whereas “business ethics” is new (even if, as Sandbu points out, it doesn’t mean anything). It’s not based on specific workplace examples so it lacks that whole Group Project / Psychodynamics thing that people seem to like so much. It’s not based on charts (it has instead to do with unpredictable collective reflection), so it doesn’t work with the PowerPoint bullets many business school professors like to read.

Finally, moral philosophy is hard.

… named in honor of erstwhile Yeshiva trustee Ira Rennert, intends to be, says its webpage, ‘a gateway to the “real world” of entrepreneurial business.’

It doesn’t get any realer than Rennert’s latest venture: A private museum on his Sagaponack estate (already the largest residence in the country).

Rennert has run into a problem, however:

[Rennert] has been instructed by [town] officials to cease construction of a museum on the 63-acre property. A village building instructor discovered Rennert’s plan to build when he noticed a concrete pumper truck on the property. “There has been no attempt to file a permit for any… type of structure,” the village official told the Post.

The student newspaper responds to one notorious defense of lax conflict of interest rules at universities.

Concerns have been raised that stricter policy stipulations and implementations would make Columbia less appealing to high profile faculty — but what sort of professor would reject an offer from Columbia due to high ethical standards? Any professor or researcher who finds strong disclosure policies a shortcoming is not an individual we want at our University.

UD would only add that Columbia should have an open door policy when it comes to inviting low ethical standards money people to the university after they’ve been put in prison. Already there’s a bustling trade in financial criminals giving cautionary lectures at business schools all over America.

One senior accounting major at Radford, who asked not to be named so as not to damage his job prospects, says he goes to class only to take tests or give presentations. “A lot of classes I’ve been exposed to, you just go to class and they do the PowerPoint from the book,” he says. “It just seems kind of pointless to go when (a) you’re probably not going to be paying much attention anyway and (b) it would probably be worth more of your time just to sit with your book and read it.”

We all know the drill, the way students can get through four years of college without doing or learning much of anything. There’s good old PowerPoint in the classroom, of course, keeping them absent forever. Lots of things to say in favor of technology (laptops in class) in this regard.

But there are also certain majors — the ones the big-time athletes get directed toward — that create perfect non-learning conditions. Business, as this New York Times piece suggests, is among the best. Moronic group projects galore, almost no writing required… And, above all, no body of knowledge. What is business? I mean, as an academic subject? What is journalism? If there’s no body of knowledge, there’s nothing to teach. What you teach is a way of doing stuff, a way of being with other people doing that stuff. These are vocational majors, not academic majors.

Henry Mintzberg, a professor at McGill University in Montreal, … is a dogged critic of traditional business programs. He says it is a “travesty” to offer vocational fields like finance or marketing to 18-year-olds.

But they’re getting prepared for the job market!

And what about employers? What do they want?

According to national surveys, they want to hire 22-year-olds who can write coherently, think creatively and analyze quantitative data, and they’re perfectly happy to hire English or biology majors. Most Ivy League universities and elite liberal arts colleges, in fact, don’t even offer undergraduate business majors.

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UD thanks Dirk for the link.

A commenter in the Cornell University newspaper welcomes another name to the pantheon.