Why do companies like Goldman Sachs put academics like the president of Brown University on their boards?

Consider a set of comments about GS in the Washington Post.

Alan Webber, Fast Company magazine, writes:

… The reaction to Goldman today in the press is one of the things that happens when Americans see too clearly their reflection in a mirror.

Are we really that aggressive? Do we really play the game with that degree of cutthroat, win-at-all-costs raw power? Is that really the face of capitalism?

… What kind of capitalism do Americans want?

Casino capitalism? Wild West capitalism? Winner-take-all capitalism? Or are we looking for something that moderates raw, unfettered, ruthless cowboy capitalism with values that include social equity, the public good, the common cause?

It’s not simply a matter of more or less government regulation. It’s a matter of national values, national purpose and social philosophy.

When we look in the mirror after the dust settles over financial regulation, which face of capitalism do we want to see?

Because what we are is what we get.

We are all Goldman Sachs.

No, no, no. We are not all Goldman Sachs.

UD‘s colleague in GW’s business school whose main activity is making money by hastening the disappearance of the professoriate and with it the university — yes, sure, he’s Goldman Sachs. But not all of us are Goldman Sachs. UD, for instance, is not Goldman Sachs.

Nor is it the whole story to say, as Webber does, that we have casino capitalism, etc.

We have casinos masking themselves as social service agencies. We have cowboys masking themselves as Renaissance humanists.

Because it goes both ways. Cowboys want to get themselves on university boards. Cowboy corporations want university people on their boards.

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Why did a cowboy like Bernard Madoff give a shit about getting himself on the board of trustees of Yeshiva University?

University, baby! University! What does the word say to you? What does it make you think of? The wild west? Winner take all? Raw unfettered ruthless? Nah… Placid, peace-loving. Gently blanketed ivy walls. Springtime gatherings of robed figures thinking higher thoughts. The tamed west! Loser take all! Cooked, fettered, ruth!

The university is cover. It’s what you join, or what you invite, to give yourself or your corporation the look of respectability.

Archana Ramesh, a graduate student at Columbia University, contributes this to the Post discussion:

In his book “Leading Change,” James O’Toole argues for values-based leadership and a consistent display of respect for followers. This paradigm of leadership is not one stressed in business schools, which train our future investment bankers and traders. So while we can look at how leaders at a particular institution have behaved as symptoms of a marketplace without values, we have to wonder about the root causes of these behaviors.

What are the gaps in our educational and social curriculum that make it acceptable for some of our most influential business leaders to forget their duty to followers? Where is the business case made for leading based on respect and trust? Have we as a society become so short-term and bottom-line-focused that making values-based decisions becomes a liability?

Of course you can find many interviews and speeches and articles by another Goldman Sachs director, Harvard professor Bill George, in which he gasses on about values.

George is notorious for defending GS executive compensation.

So it’s not that you’ve got on one side evil ruthless capitalists and on the other side good values-based people. You’ve got cowboys, dressed up, for public consumption, in academic gowns. Every business ethics course at universities pumping out Goldman Sachs traders is dress-up.

UD can faintly — very faintly — recall her mother reciting the first lines of the poem Desiderata and then laughing at them. She used a fake British accent and a high-pitched voice.

She can recall her father joining her mother in this laughter.

UD didn’t know, then, that they were laughing at a poem — it was just some language her parents thought funny.

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Desiderata turns out to have been a wildly popular inspirational poem. It still is.

Terre Haute now has a sculpture of Desiderata‘s author, Max Ehrmann, sitting on a city bench.

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Deteriorata was the inevitable parody of Desiderata.

Sitting in my women studies class, an odd tranquility filled the room. [Awkward opening sentence. Makes it sounds as though a tranquillity was sitting in the room. Rewrite along these lines maybe: “An odd tranquillity filled my women’s studies classroom.”] Although the day’s topic revolved around sex-change surgeries, there were no obscene noises made by keyboards, no glare from a computer screen logged on to Twitter, and I was not subjected to watching a random YouTube video playing on a screen in front of me. Perfect tranquility for those of us who were trying to learn.

From day one, our professor was very adamant about her non-computer policy — simply, no computers allowed. “The following activities disrupt an educational environment and will not be tolerated: talking, texting, phone calling, giggling, playing Texas HoldEm or other games, im-ing, emailing and surfing (on the web). Should you engage in any of these, you will be asked to leave,” states the class’ syllabus. [Giggling?]

The student paints a scenario:

“I’m only going to take notes,” you might be telling yourself, but let’s paint a scenario. You’re in your chemistry class and your professor is rambling on about something you learned two quarters ago. You are, at the moment, taking notes on your laptop. What to do? Option A: Google something random. Option B: continue to take notes, despite the fact [that] you are falling asleep. Most if not all would choose option A. Although I myself take pride in my note taking abilities, I have been known to wander the path of YouTube occasionally during class. It seems as though human nature takes part in this attempted compensation for boredom. Even with insane multi-tasking abilities, students will more than likely miss a vital part of lecture and end up suffering come grade time.

… was on the Compensation Committee.

… Shareholders suing Goldman Sachs over executive pay packages are seizing on investigations of the Wall Street bank by the Senate and Securities and Exchange Commission.

A shareholder pay complaint filed earlier this year in Delaware was amended this week to take into account the Senate’s findings and the SEC’s civil fraud case alleging that Goldman misled investors about securities tied to home loans.

In addition to claiming that Goldman directors breached their fiduciary duties by allowing excessive pay for employees, the shareholders now say Goldman officials failed in their fiduciary duty to properly oversee the company…

… giggle.

Wild at heart.

It was a very bad bet. Their brand new basketball coach, Tim Welsh, was just found asleep at the wheel at a local traffic light, plastered.

He forgot to tell the university about this event. Hofstra read about the arrest in the paper. The school’s not happy. It looks real dumb, hiring this guy at hundreds of thousands of dollars a year. Hofstra has suspended Welsh.

“One month into the job and already setting a good example for your players,” comments one sports site.

Will he be fired?

Are you insane? Have you been reading this blog even for five minutes?

Of course he won’t be fired.

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Update: Welsh has resigned.

The civil case was brought against the firm and a single named banker — Fabrice Tourre. Who might the [Department of Justice] choose to prosecute [in a criminal case]? According to Chicago Law School Professor and securities law expert M. Todd Henderson, the sky is the limit.

The Atlantic

Chandru Rajam is a business school professor here at George Washington University.

He manages a business — a grading outsourcing business.

Rajam stands ready to take all of my students’ papers and exams and send them to India for grading, thus relieving me of the burden of reading my students’ work. Which in turn removes the burden of my worrying about whether they’re learning anything.

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When I think of Chandru Rajam, I think of a spa. A spa where I lie down on one of those narrow firm beds and get a nice long hot rock treatment. The rocks feel funny when they first set them down on your back, but gradually — with the help of softly piped in music — you feel an all-enveloping warmth… Your muscles begin to relax… And somehow — it’s hard to put this into words … plus maybe it’s not the prettiest thought … But somehow your total relaxation is intimately related to your knowledge that while you are lying on this quiet table, breathing in smoke from gently guttering lavender candles, a harried Indian housewife is sweating through thousands of papers and exams — among them yours — that have been emailed to her from America.

And you think, “I deserve this. I deserve the guest lecturers who teach my classes for me, the ghostwriters who write my papers for me, the PowerPoint slides written by someone else that I read to my students, and all the other “edupreneur” innovations that allow me, as an American university professor, to be treated in the way I should have been treated all along. I’m a citizen of a wealthy, successful, first-world country. Since when should someone like me dirty her hands with grading? … I know my students understand this, because while I sit back and read the PowerPoint slides to them they sit back and watch films on their laptops… Bottom line: I really don’t need to teach; they really don’t need to learn. We have servants for that. At some point the students will check the slides, just as I’ll … you know… maybe scan the grading the Indians have done for me… Make sure they’re doing a good job. Meanwhile… ah. Another rock….”

Next up, France and Denmark.

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“We’re the first country to spring the locks that have made a good number of women slaves, and we hope to be followed by France, Switzerland, Italy, and the Netherlands; countries that think,” said Denis Ducarme, a liberal deputy.

… it says at the top of this page (click on Negotiated Procedure for EU Charter of Fundamental Rights in Poems to get to it).

(Update: Link’s not working. Here’s the home page.)

We’re at the website of the European Union Agency for Fundamental Rights, whose function is to

provide the relevant institutions and authorities of the Community and its Member States when implementing Community law with assistance and expertise relating to fundamental rights in order to support them when they take measures or formulate courses of action within their respective spheres of competence to fully respect fundamental rights.

The guy who runs FRA also thought it would be a good idea to have a poetry contest.

The FRA is looking to contract a poet or other experienced individual (or group of individuals), or organisation, to devise a poetic composition based on the articles of the EU Charter of Fundamental Rights, along with the organisation of an accompanying performance.

This “Charter in Poems” (working title) should be composed in English (literary language). The piece will then be performed at the Fundamental Rights Conference 2010, to take place in Brussels on 7 December. This performance should be approximately 80 minutes in length, and should be supported by multimedia elements and/or other artistic performances (dance, music, etc.). It should be a group performance that reflects the diversity of the EU.

EIGHTY MINUTES OF POETRY ABOUT HUMAN RIGHTS. That’s almost an hour and a half of people singing and dancing to the tune of balanced and sustainable development and [the] free movement of persons, services, goods and capital, and the freedom of establishment.

The Justice Commissioner is pissed. That’s why FRA has had to close the negotiated procedure.

Justice commissioner Viviane Reding has killed off plans to recast the EU Charter of Fundamental Rights as an 80-minute-long epic poem.

Concerned about what she viewed as a frivolous waste of time and money, Ms Reding, who is also responsible for fundamental rights and citizenship, has written a tersely worded letter seen by EUobserver to the director of the Fundamental Rights Agency, Morten Kjoerum, lambasting the plans.

“The language of the charter is already clear and direct,” she wrote. “I do not therefore see what is to be gained by running the initiative you have in mind in order to promote its accessibility to citizens. I rather see the counterproductive risk that the dignity of the charter is undermined.”

“This initiative does not provide the added value that is expected from the agency and is not in line with its mandate,” she continued, demanding to know how much time and money had been spent on the poetry plans.

… It is understood that the commissioner was surprised when she read about the agency’s poem project. “It just came out of leftfield. She thought: ‘Is this really how they should be spending their time?” said one EU official.

Ms Reding however said the idea was beyond the mandate of the agency and that it should stick to its main job of analysing the human and civil rights situation in the EU…

… for Ruth Simmons to start thinking about her decade-long directorship of Goldman Sachs.

At one point during the hearings, Sen. Carl Levin played the Jimmy Stewart good-banker role from “It’s a Wonderful Life” by describing capitalism as it’s supposed to be. Levin noted that Wall Street “has been seen as an engine of growth, betting on America’s successes and not its failures.”

Well, that’s what Wall Street proclaims in its advertisements for itself. But when defending themselves against legal charges, Wall Streeters retreat to honesty by saying that everybody knows they are really there to make money and that it’s naive to hold them accountable for the social impact of what they do.

Does she think that her firm should be held accountable for the social impact of what it does?

… both sit on the board of directors of a company probably about to face criminal charges.

Federal prosecutors are conducting a criminal investigation into whether Goldman Sachs Group Inc. or its employees committed securities fraud in connection with its mortgage trading, people familiar with the probe say.

… [I]n the more than two-century history of the U.S. financial markets, no major financial firm has survived criminal charges. Securities firms E.F. Hutton & Co. and Drexel Burnham Lambert Inc. crumbled after being indicted in the 1980s. In 2002 Arthur Andersen LLP went bankrupt after it was convicted of obstruction of justice for its role in covering up an investigation into Enron Corp…

From the Yeshiva College student newspaper.

Across numerous departments, this year witnessed many disappointing faculty losses. Some of YC’s most famously beloved professors, for reasons largely unclear to students and, in many cases, even faculty, were fired or denied tenure. Why? Students find themselves frustrated and re-frustrated, in each instance unaware why professors whose courses they immensely enjoy, professors renowned for their knowledge, dedication, and skills, are consistently pushed to leave.

With such a high rate of faculty attrition, it seems YC has something against the good ones. What is it about professionalism and dynamism that seems incompatible with a job at YC? With abounding complaints about many professors who’ve been here for a long time, it’s particularly aggravating when YC finds a gem, then lets him or her go.

… Dr. Hrnjez’s molecular drawings are famous for the clarity they lend to organic chemistry. Dr. Pimpare’s commitment to advisement has allayed many students’ frustrations, and attracted many students to the political science major. Dr. Hogan, with his vast knowledge and devotion to his students, seemed to be the legitimating presence of the Art History Department. Why them? …

A comment in response to the article, from Hogan:

What creates an environment where good and dedicated teachers cannot succeed at Yeshiva is the management style of the Dean’s Office and a number of the administrative officers of the school. While it seems as if I was asked to leave, or perhaps the Commentator article wishes to convey that impression, I decided not to return in early February after my very carefully documented problems with the Payroll department (I was overpaid by about 300% per month for two months) were not fixed.

I appealed to the Dean’s Office, which …failed to solve the problem for six weeks, then to Payroll, which responded by writing one check for $0.00 and another that Chase Bank would not cash, and then finally to the head of HR Yvonne Ramirez, who said on 7 January she would look into the four months of payroll errors and get back to me. She never did. On about 9 April she apologized (in writing) but then never followed through.

The administration of Yeshiva College in particular is, in Ms. Ramirez’s words, not capable of addressing complicated administrative matters. So people like me, who work hard and try to do a good job, just give up.

… is the headline in the Seton Hall University newspaper.

Subhead:

STUDENTS LOSE PRIVACY IN CLASS

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If UD had written the article, the subhead would be:

PROFESSORS LOSE DIGNITY AND TRAIN OF THOUGHT IN CLASS

All a matter of perspective, I guess. But UD, a professor, sees mainly the pathos of academics reduced to spies… Instead of lecturing and leading discussions, the Seton Hall classroom monitors are as distracted as their laptop-using students.

These professors must constantly run their eyes over their surveillance screens and — while trying to think and talk about civil engineering or geology or absurdist plays — interpret the images they see in order to determine whether or not they are relevant to the class. And then I guess they must decide how to punish wrongdoers…

Some Seton Hall professors have begun using surveillance software to monitor student activity on their laptops during class.

DyKnow software allows professors to monitor student’s laptop activity during class. The professor downloads the DyKnow software, which allows the professor’s laptop monitor to become a surveillance screen.

… Professor James Kimble of the communication department is one professor who uses this software.

“I’ve grown increasingly concerned that internet access is a distraction for my students, so much so that I feel confident in my growing belief that it is affecting student learning and, ultimately, student grades,” Kimble said…

The students are pissed; they defend their right to show contemptuous disregard for the person addressing them from the front of the room.

So this does not seem to UD a good solution. She feels sure, what with American ingenuity and all, that students will evolve DyKnow-blocking software (it probably already exists), in response to which the professor will install DyKnow II, etc.

Laptop wars. A bit unseemly. Time to get on the ban-wagon.

MinnPost.com discusses a recent study of American universities which concludes, among other things, that

Universities [don’t] tap their endowments for more cash in tough times, even though their rules [allow] bigger withdrawals.

“One reason to have an endowment is to smooth over the shocks,” [one of the authors] said. “It’s a rainy-day fund so that when things go bad, they can dip into those reserves. What we found is they deviate from their own policy.”

Among the reasons for this behavior: Endowment managers who are more concerned about the “prestige” of building the endowment’s value and “implicit contracts” with donors to maintain the size of the endowment.

“What our paper shows is that universities are behaving in a way to grow the endowment rather than using it to support the activities of the university,” [he] said. “The point is that if you think endowments exist to smooth over the shocks in bad times, they’re not doing that. … They’re maintaining the value of the endowment for its own sake.”

UD wrote about endowment hoarding here. She featured this Peter Conti-Brown paper and wrote:

UD is particularly intrigued by Conti-Brown’s suggestion that the awesome, anally hoarded university endowment [of some universities] has finally transmogrified and hardened into a physical object, like a fantastic yacht, or Ezra Merkin’s Rothko room….