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| Professor Paul W. McCracken lends his insights of the past 50 years. The distinguished professor has served as an advisor to several United States Presidents and has influenced scores of UMBS students. |  |
If you were to ask anyone who has had the honor and pleasure of working with Paul W. McCracken, the Edmund Ezra Day Distinguished University Professor Emeritus of Business Administration, Economics, and Public Policy, you will hear the same words come up over and over again when describing him - generous, kind-hearted, decent and, most of all, modest and unassuming.
As testament to the impact Dr. McCracken has had on their lives, over 140 people crowded into the Phelps Lounge last Thursday to honor him for his 50 years of service to the University. Colleagues, friends, family, and former students came from around the country and around the world to attend the event. In fact, so many accepted the invitation that Dean B. Joseph White felt it necessary to apologize for the tight conditions, explaining that 98 percent of those invited were in attendance many more than can usually be expected for such a gathering.
Introducing him as "a legend and an inspiration," Dean White described Dr. McCracken as "a modest, self-effacing human being... who epitomizes decency, fairness, generosity, and openness of mind." Similar sentiments were echoed by Prof. Joel B. Slemrod, the Paul W. McCracken Professor of Business Economics, who spoke at the event. Those in attendance were also quick to volunteer similarly emotional responses and stories when asked about Dr. McCracken, using words like "steady," "a loyal supporter," and as "always looks out for others' interests."
One former student explained that in Dr. McCracken's classes, he kept the first three pages of his notebook reserved for words that Dr. McCracken would use that he had never heard before. Upon looking them up, he would always discover that not only were they all accurately and properly used, but also pronounced exactly as listed in the dictionary.
While Dr. McCracken surely has touched a lot of lives while serving as a professor at the UMBS, a position he has held since 1948, to get a sense of the impact he has had on the world at large one only need look at the pictures in his office they show him meeting with and advising Presidents Kennedy, Nixon, Reagan, and Bush. Dr. McCracken served as a member of the President's Council of Economic Advisers from 1956-59 and as Chairman of the council from 1969-72. He was also a member of President Reagan's Economic Policy Advisory Board, and up to recently was a regular contributor to The Wall Street Journal's op-ed page.
Dr. McCracken grew up in a small community in South-Eastern Iowa, attending a one-room elementary school, followed by an 85-student high school. He received his B.A. from William Penn College in 1937, and, as he puts it, he "graduated into the ranks of the unemployed." Despite having a degree in mathematics, he was hired by Berea College to teach English. In his third year there he became very nervous on learning that a student teacher would be joining his class ("when one is trying to pretend about knowledge he does not have, it is very annoying to have someone around who knows the subject"), but the story ended happily Ruth, the student teacher, became his wife before too long.
At this point, Dr. McCracken returned to school and completed an M.A. and Ph.D. in Economics from Harvard. After graduating from Harvard, he worked in Washington for the Department of Commerce and in Minneapolis for the Federal Reserve Bank before being invited to teach economics at the University of Michigan Business School in 1948. He accepted the offer and has been here ever since, with the exception of the occasional stint in Washington. Although he "officially" retired in 1986, he still remains active in the University and, if he's not off at a meeting of a national economic council, can be found most mornings in his office in Davidson Hall.
His tenure at UMBS has seen the school go from taking up half of a building on Central Campus (he jokes about how surprised he still is to hear students refer to Davidson Hall as "the old building") and one heavily focused on Accounting, through all the expansion and academic changes leading up to it's current standing among the top tier business schools. To learn more about Dr. McCracken in his own words, please see the accompanying interview.
I recently had the opportunity to meet with Dr. McCracken and discuss his experiences, both in the business school and outside, as well as to learn about some of the changes that have taken place in the school over the course of his time here.
I was wondering if you wouldn't mind taking us back to when you first came to Michigan and telling us what the school in general was like, and what the business school was like physically in size and in student composition.
The enrollment, I think, was probably a little smaller. The program here for a long time had been in essence a 5 year program after 4 years you got your BBA and after one more year you got your MBA. At issue in the early years when I was here was whether we should drop the BBA program. We didn't do that, and I think that was wise. Before I quit teaching, in fact in my last year, I taught a BBA class. They were very sharp, bright kids. I sometimes compared them to a high-horse power engine without a fly wheel they could rev up to high speed instantly and then lose interest. But they were very good.
But now, to respond more directly to your question, the physical plant when I came here was about half of the dark red building wedged between the art museum and the president's home. That was the school of business about half of it. This tan brick building [Davidson] was being built. As a matter of fact, during my first year, I think the classrooms were ready, but the offices weren't available. Then, at the beginning of the second semester of my first year, we occupied the whole building. That made an enormous difference.
Programmatically, of course, it's changed enormously. At that time, the school was very strong in accounting, and a very large percentage of senior management of the accounting firms throughout the country were alumni from here. And, of course, the legendary head of this organization, of the accounting group, was William A. Paton, for which the Paton center is named. Now, of course, there's been an enormous change in the program.
Was this focus on accounting something that was going on nationally or just here?
I think you'll find at any university that the focus will tend to be what the strong people on the faculty are interested in. And Bill Paton well, there were really three or four outstanding people here but Bill Paton was clearly the dominant faculty member. I remember when I came through here in early summer 1948 to look at the school and of course to be looked at. I interviewed him well, I guess more accurately he had to interrogate me. Now, Bill was very positive in his view. He might have been wrong occasionally, but he was never in doubt. I had just acquired a newly minted Ph.D. from Harvard in Economics. Harvard was sort of the citadel of Keynesianism, and he wasn't sure this place ought to be infected with Keynesianism, which he assumed I would be...
So I finally came, and have been here ever since, with of course, some time off for Washington.
What is it about Ann Arbor, the University, or the business school in particular that led you to stay all this time?
Well, I suppose the cynic could say, "You stayed here because you never got a better offer." And, I suppose, in a way, from my point of view, that's right I never got an offer that looked to be a better situation than what I had here. The school of business was moving along, at the outset a little slowly but steadily. The faculty was getting better balanced, and we were becoming much more than just an accounting school. We had Maynard Phelps, for whom the Phelps Lounge is named, who was quite distinguished at marketing and had been a rather high official in the State Department, and so was interested in international trade and so forth.
My interest in economics didn't quite fit a Department of Economics, because I wasn't that interested in highly theoretical issues, and that was quite acceptable here. Not only quite acceptable - I guess the right way to put it is that the school's interest in economics and my interests coincided.
Could you describe this a bit more?
Their interest wasn't as much in highly theoretical work, as opposed to giving students a sense of the economic milieu within which companies conduct business. When I came I found that a professor had been teaching a course for some years called Business Conditions, and I took that over. My initial idea was I would have to rename it "macro theory" or something, but I decided "that's a pretty good name" so we just kept it.
Now you asked me why I stayed here...I found the faculty congenial, my family liked it here, we had a good football team, usually actually, for quite a number of years, that wasn't true here. I could remember when the stadium would be, oh, 60% full.
It's hard to imagine now.
I know, but you have a losing season for three or four seasons, and ....
Do you still go to games?
I still have tickets and usually go. I might add, I played football in high school, not that anyone would believe it. I went to a high school with 85 students, and of course, half were girls, so the pool for talent was very limited.
That's interesting. Where are you from originally?
I'm originally from South-Eastern Iowa. I went to a little small-town high school. The population was seven-or-eight hundred, and decidedly rural. On the other hand, we had very good teaching. And prior to that, I spent eight years in a one-room country school probably had better elementary school than the kids get today, although during the whole eight years I never had a college graduate for a teacher. But they knew their subject and they knew how to teach.
You said you have your Ph.D. from Harvard. Where did you go before that?
I grew up in a Quaker community, and my family were Quakers on both sides, so I went to William Penn College in Oskaloosa, Iowa. Oskaloosa, I found later when I was writing for The Wall Street Journal, was a town they used in place of Timbuktu as "no place."
When you look back over the last 50 years, what are the major trends or major innovations that stand out for you?
Here in the school of business, to go back to that time, the coursework had pretty conventional titles: Accounting, Labor and Industrial Relations, Business Law, Marketing, Production Management, that kind of thing. And by the way, it had very little in the field of economics - there was a course in government, and my course. Well, you know the curriculum today better than I do. The faculty members are much more highly trained, are much more, the emphasis is much more theoretical, and the mathematics requirements are much higher - which didn't happen to trouble me, because I majored in math in college, but that was accidental.
At that time, there was virtually no attendance to international matters. After my first tour of duty in Washington, which was in the 50's, I did put in a great deal more of the international economy and the US economy into a class which today would be called Macroeconomics. But up to then, there was virtually was none. Well, now, we have I think a very good, small, dept. of economics here in the school.... Much broader, much larger a better faculty.
How about the changes in the national stature of the Michigan Business School over time?
At the time I came, I think it would be fair to say that, well, you had one school at the top Harvard. Symptomatic of that was the Harvard professors, who kind of subconsciously, if they were out at a meeting in New York or something, would allude to "the business school" that was Harvard, or course. Now there were a good many business schools scattered around the country, but "the" business school was Harvard.
And then, without trying to rank them on down, there was a coterie of, what would you call them, upper middle scale schools - like Minnesota, Michigan, Illinois, schools like that. They were good, solid schools, and you got a good training you certainly came out of here trained in the problems of Accounting. What we've seen, and particularly in the last 20 years, since the mid 70's, we've seen this school move up the parade, up the queue line, very sharply. And as you know, this school now ranks very high.
What do you attribute that rise to?
I can explain that in one word Leadership. We got a Dean back there, Gilbert Whitaker. He was seemingly very quiet, low-key, but right from the start I sensed that the pot was going to start to boil. For example, I met him at the airport I thought he was coming for us to look him over. He wasn't garrulous - in fact, we almost had trouble keeping the conversation going from the airport. And in the meeting that morning with the faculty, halfway through, I thought "we're not interviewing him, he's interviewing us," which I thought was a good sign. Well, he came, and he hadn't been here very long, when he announced a $16 million campaign to bring the plant up to speed. At that time, the plant consisted of this tan brick building and the Hale auditorium and so forth. Now, when I heard that, I thought, "Michigan's economy is flat, isn't doing very well, and everyone know you can't raise $16 million in this state."
After quite an interlude here, he became a provost of the University. But Gil had much more lofty ideas about where the school really ought to be - instead of just the comfortable middle range, as it were, he wanted it to be right up there, and he raised a lot of money, even though he didn't impress you as the salesman type at all. He also had a lot of ideas about what the program should be. One of his final smart moves was his choice of Associate Dean namely Joe White. And when Gil left, we got a dean who also had strong ambitions, was capable of raising money, and so forth. So, it does show, as I say, leadership is important the faculty can't do it. They're preoccupied with their specific fields, and it takes someone at the top who is going to get the resources, either from the legislature, the University, or private money, and then knows how to develop a program that is going to be a blue-ribbon program. And now the school ranks pretty high.
I see a lot of pictures here with various Presidents and other important people, and was wondering if you could talk a little about the different appointments you've had in Washington and on different boards.
As far as Washington goes, I guess my earliest call to duty, as it were, was in 1950-51. There was, in Washington, a major, well, exploration of economic policy, and the typical procedure for that sort of thing, they will develop a list of questions which they want pertinent people in the administration to respond to and respond to at great length. So, out of the blue, I got a call from the Secretary of the Treasury saying that the treasury needed some help responding to these questions. This wasn't the case where you went down the list saying "yes, no..." most of them required an essay so you ended up submitting a manuscript to the committee.
The next one was in 1956, I recall participating at a conference in Dartmouth, and a secretary came in breathlessly "the white house is calling you." I'm sure she thought there was only one phone in the White House! It wasn't the president, obviously....
To make a long story short, I went to Washington. The council of economic advisors, which was a bit more important than it was now, consists of 3 presidential appointees and a staff of 50 or so. They advise the President on economic policy matters and I spent, well, let's see, I came back in early 1959. Then, ten years later, I got another call. This would have been in 1968.
Once again, this was the President-elect calling, except it was one of his functionaries. So I went down, and the President-elect had offices in the Pierre hotel in New York. And so I saw Mr. Nixon, and he said he would like to have me for chairman of the council, and would I be interested. I still remember, I said, "gee, I'm interested. I suppose I ought to call my wife, and if she violently objects, and so forth." So we chatted for a while, and he said "I've got a news conference in 10 minutes, and I don't have anything to tell them. Why don't we just announce it." So we went down and it was announced. You find at that point that life changes. You don't make any off-the-cuff comments. Of course, when you're a professor, what difference does it make, but it can get you in trouble. And so I went down, and was there for 3 years.
But earlier, I might add, there was a man who was to be the under-secretary of the treasury Bob Rosen, Ph.D. from University of Michigan, by the way and he had spent a year at Harvard at the time I was there, too, so I knew him. And he suggested that Allan Sproul, who had just retired as President of the New York Fed, and Roy Blough, who had been an economic advisor to Truman, be a trio to develop a manuscript, or a report, to the President well, at that time the President-elect. There was a sticky problem there. It was the dis-equilibrium when you're international economic situation requires one thing and your domestic economy requires something else. For example, our balance of payments was running against us. What did it call for? Well, of course, tightening up monetary policy, increase the inflow of money and so forth. But the trouble was our domestic economy was weak that called for easing monetary policy. How do you get out of that? So we holed up at the NY Federal Reserve Bank for 3 weeks, then met with Kennedy this would have been a month or so after he became President.
Now there was one part of that colloquy with Kennedy that I've always remembered and often used with my academic colleagues. At that time, because the external payment situation was in dis-equilibrium, we were losing gold. There was a law still on the books requiring that the Federal Reserve keep a gold reserve equal to 25% of the notes and currency outstanding. That reserve was still comfortably above 25%, but declining. In our report we recommended that maybe he ought to propose legislation, before people start reading headlines that we're about to go broke, that the gold requirement be reduced.
And I've never forgotten, he said "Yes, I understand the problem, but that legislation would have to go before the senate banking committee. Oh my god! If I propose that, old Harry Byrd (who was chairman, and I still remember his gesture) would go right through the capital dome!" I think he was right. Not infrequently I hear my professorial colleagues say "well those dumb blokes in Washington can't they see they have to get that reserve requirement down." They don't understand the political context within which our political leaders must work. So we did our job to call his attention that there was a potential problem, and I think he made the right decision in not pursuing it.
Then, Reagan wanted to form an advisory board on economic policy entirely of outside economists. I think that was very wise I would recommend that for any president, because the insiders want to keep themselves as sort of the sole advisor to the president.... And so he formed a small group... people with whom Reagan would feel comfortable.
One clear difference between Reagan and Nixon was that Nixon's major interest was foreign affairs, and he was very good at it. Reagan, and by the way, this was true of Gerald Ford, who I knew as an alumnus here both of them found economic policy questions sort of interesting intellectually. That was not true of Nixon you had to sort of stick his nose in it.
It was very important for him to get outside points of view, and not just be limited to people within the administration. We'd meet about every month or two, and for about an hour during the day, Reagan would come in and meet with us, and he had very definite ideas about the economy. He was unfailingly courteous and genial. But if he disagreed with you, he wouldn't budge a millimeter. And, of course, that was a bunch of people who weren't adverse to giving their opinions.
You've certainly earned the right to retire, I'm curious as to why you haven't done so?
The worst thing is to decide that at age 65, or whenever, the thing to do is to get a rocking chair and sit on the front porch. Life is more fun if you feel that you're still in the hunt; that's certainly been my philosophy, and I think it's a good one.
Do you have any plans to retire in the foreseeable future?
Coupled with what I just said, it's very important for an older person not to have any illusions that he's as good as ever. Your energy is not up to level that it used to be, and the older we get, the less certain we can be that we're up to speed with our subject. But stay active keep your brain working, it's very important. And as I said, life is more fun that way.
Are there any projects in particular that you are working on right now?
Not particularly, at this stage of the game, but I still have a certain amount of outside activities. For example, over this weekend I was at a meeting of the Directors of the National Bureau of Economic Research, which is the preeminent economic research organization in the country. I still keep up to date with what's going on there. Once in a while I still give a talk on some aspects of economics. Once in a while write something - for quite a period, I used to write an op-ed piece for The Wall Street Journal about once a month, but have given that up. You have to find that narrow passage between doing things where people are not saying "why doesn't that old fogey recognize he's too old" and, as I said, just vegetating.
Do you have any thoughts or comments on being honored for your service to the school?
Well, now, I suppose the only real requirement for reaching the 50th anniversary is to live a long life, and I guess I did. I appreciate it enormously, and it was very nice of Dean White thinking about it. I've thoroughly enjoyed this association with the University, and would recommend to anyone they live out their 50 years if they can.
Here's an update on companies hiring non-U.S. citizens without a green card for domestic positions. They are scheduled to interview on campus October 19th - October 23th. Look out for this column next week!
American Airlines
McKinsey & Company, Inc.
TRW, Inc.
Donaldson, Lufkin & Jenrette Securities Corp.
Goldman, Sachs & Co.
Towers Perrin Management Consultants
A.T. Kearney, Inc.
Ernst & Young, LLP
Pricewaterhousecoopers, LLP
Wasserstein Perella & Co.
Good luck with your job search!
International Business Club
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Kim Woo-Choong, Chairman and Founder of Daewoo Corporation, addressed a capacity audience in Hale Auditorium on "The Changing Global Economy and Daewoo's Alternative: New Challenges and New Partnerships." He started by describing how Daewoo had always sought to differentiate itself from others. From the ashes of the Korean War, Kim rose to became one of the first Korean entrepreneurs to seek international markets to drive company growth. "Cultivating overseas markets through export was the right choice and the only breakthrough for Korea," explained Kim. Looking abroad for opportunities greatly broadened Korea's views of potential markets and allowed the company to become internationally competitive. "It was a process that geared at globalizing all aspects of management...Furthermore, it was an aggressive overseas investment with goals to create future business opportunities and environments."
In pursuing these international opportunities, Daewoo launched the Global Management Plan, a strategy to localize business activities and to become major players within economic blocs. "Since establishment, Daewoo has focused on localization of management activities and globalization of its management strategy by harmonizing overall management factors," expressed Kim. He proudly described Daewoo's ventures into the former Eastern bloc, where the company assisted in guiding these countries toward national prosperity. "They recognized Daweoo as a perfect partner who is interested in contributing to their national economic development through liberalization." For example, Daewoo invested into an automobile manufacturing facility in former Soviet republic of Uzbekistan. Started in 1997, the plant annually produces 200,000 small passenger cars and serves as the strategic base in central Asia for Daewoo.
The emphasis on mutual economic benefit has proven to be a successful strategy in numerous countries, including Poland, Romania, Czech Republic, Vietnam, India, and China. "The fact that these nations chose Daewoo as their partner for economic development is proof of Daewoo's dedication to mutual prosperity," claimed Kim. "By entering a new market, Daewoo creates employment opportunities and helps develop its [the host country's] infrastructure. Daewoo benefits from becoming pioneers to the new market and from achieving economy of scale by expanding its global network."
| Kim Woo-Choong is the Chairman and Founder of Daewoo Corporation of Korea. His presentation was provided by the Mitsui Life Distinguished Lecture Series. |  |
E Han Kim, Woo-Choong Kim, Kyung Hoon Lee, and Gunter Dufey (not pictured) spoke in Hale Auditorium last week on Daewoo's strategic views. |
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The results of Daewoo's Global Management Plan have been impressive. As of June 1998, there were over 600 business sites around the world serving a variety of industries, ranging from automobile and heavy equipment manufacturing to hotels and financial services. Most of the growth has occurred in recent years. Approximately 400 of the locations are less than six years old. Daewoo currently employs 260,000 people in 90 countries, and the company ranked 18th among Fortune magazine's list of the top 500 largest global corporations.
Kim addressed issues concerning Korea and the Asian financial crisis. "I believe Korea's current difficulties resulted form failure to effectively prepare itself against a changing trade system and the harsh international reality, which shifted from a national economic order to a global economic order," stated Kim. "From the mid-1980's, the overgrowth of the financial sector ended up controlling the real economy and led to a situation where rapid flows of speculative capital threatened the independent economic policies of sovereign governments...These speculative funds caused chaos in financial markets, especially in nations with relatively frail economic structure."
He voiced both concern and optimism concerning Korea's handling of the crisis. The country has been experiencing rising unemployment and high interest rates, which has caused considerable hardship on the Korean people. However, the country has demonstrated considerable resolve to pull out of the crisis, as demonstrated by its restoration of foreign currency reserves in a short period of time. Kim expressed his pride in the Korean people, who have formed a national consensus to overcome their difficulties and to find opportunities in times of hardship.
Kim illustrated one of these opportunities with Daewoo's entry into the U.S. automobile market. The product launch consists of three models: the Leganza mid-sized sedan, the Nubira sub-compact, and the Lanos compact. The company has already experienced considerable success in introducing these three cars in Europe, South America, Asia, and Africa.
Daewoo is utilizing a unique approach in marketing its vehicles. The company targeted university and college students for its marketing campaign. It hired thousands of college students as Daewoo Campus Advisors to promote its vehicles. Kim explained the strategy, "These students will show American consumers of our progressive corporate culture and our reliable and durable product image during and after their stay in university and college campuses."
Kim concluded by giving his views of the American market, which provided him the opportunity to start his business 31 years ago by selling dress shirts for only $1. Now he returns with automobiles. "It is the place where quality products receive fair judgment and where those who work hard are given deserving opportunities. It is a place where new ideas are always welcomed and where entrepreneurship is still alive."
On September 24, 1998, in Hale Auditorium, moderator Katherine Schipper of the University of Chicago led a distinguished group of five panelists in discussing accounting reporting requirements. At first glance, you may wonder if this topic is relevant to your future careers. Unless your future career plans include becoming a hermit, isolated from society on some desert island, accounting standards are quite relevant. The impact of accounting standards actually pervades all industries, from investment banking to brand management. Read on to find out how these standards may affect you and what challenges exist for those responsible for implementing new accounting standards.
The panelists were Michael W. Brown: Chairman of the Board, The NASDAQ Stock Market, Edmund L. Jenkins: Chairman, Financial Accounting Standards Board (FASB), G. Michael Crooch: Executive Committee, International Accounting Standards Committee, Warren McGregor: Executive Director, Australian Accounting Research Foundation, and Mary B. Tokar: Associate Chief Accountant Securities and Exchange Commission. Obviously, the panel consisted of some highly influential individuals.
Currently, all U.S. public companies must comply with U.S. generally accepted accounting principles (GAAP), which are generally considered to be the most complex and sophisticated reporting requirements in the world. Foreign companies wishing to list their shares on U.S. stock exchanges are required to effectively comply with U.S. GAAP by filing a form (20-F) which reconciles their domestic GAAP to U.S. GAAP. Some argue that requiring foreign companies to follow U.S. GAAP unnecessarily inhibits the free flow of capital, while others believe that lower quality accounting standards may cause a greater loss in capital; for example, resulting in poor investment choices. The topic of the panel discussion was based on the controversy of whether or not the SEC should accept some internationally acceptable set of accounting standards in lieu of U.S. GAAP.
Benefits of aWorldwide Standard
Mr. Crouch cited several benefits to having one worldwide accounting standard. The world of business is becoming increasingly international and investors are looking to diversify into other markets. To do so effectively, investors need to be able to make educated decisions. A common accounting system would help investors better understand the health of the firm before they commit to investing. Mr. Jenkins added that international investments are being used to diversify risk. In addition, international companies may be looking for funding of a scope beyond which is supported by their own countries. Having a standard accounting system would help those companies to more easily obtain interested investors from other countries.
If a standard accounting system is so attractive, why don't we have one? There are two main players in the arena of international accounting standards: the U.S. Financial Accounting Standards Board (FASB) and the International Accounting Standards Commission (IASC). The FASB sets the standards in the U.S. while the IASC is working towards unifying the accounting standards across countries by developing a single set of standards that will be acceptable to securities market regulators in all countries. Many people, especially in the U.S., believe that the FASB standards are the highest quality accounting standards in the world and that those standards should be the model for IASC worldwide standards. However, not everyone in the world shares that view. Mr. Crouch mentioned that some feel the U.S. GAAP to be too prescriptive, causing rules designed for one industry to be forced upon other industries.
Cultural and Political Issues
There are also cultural and political issues. Some cultures are not fond of the idea of using an American standard. Also, many countries want the opportunity to influence the development of new standards, which they feel would be difficult if the single accounting system was controlled by the FASB. So, if the world is not ready to adopt U.S. GAAP, should the U.S. adopt the International Accounting Standards (IAS)? There are 255 identified differences between the U.S. GAAP and the IAS. However, it is not known which ones are really important to investors. It is clear that fraudulent accounting is bad, but determining between good and better accounting practices is difficult. Herein lies the challenge what must a standard accounting system include in order to be internationally accepted? It appears that obtaining the answer will require considerable effort and must start by reconciling the differences between the two systems.
Mr. Brown repeatedly mentioned that a key problem with accounting today is the lack of a solid, scientific base on which future accounting questions can stand. He believes that until the world can agree on some of the basics in accounting, more complex issues will only lead to frustration. He recommends having scientific work done, not just by accountants, but by physicists, mathematicians and other strong minds, to develop the solid footing on which future accounting standards can be built.
The panel discussion turned to how the work would be accomplished, at which point it became clear that there is much work to do, but few assigned to the task. For example, the IASC, with all its responsibility, consists of only a few part-time leaders and about eight staff members. They meet four times a year for a few days at a time. The primary work is to be done in steering committees, but those are mainly run on a volunteer basis. This organization, despite its small size and infrequent sessions, is responsible for the International Accounting Standards. In contrast, the FASB, responsible for U.S. GAAP, consists of seven full-time board members and a staff of about forty. It appears that while change can occur, it will not happen quickly. There are too many people to please, too many countries to change, and too small a driving force for a set of international standards to be universally accepted anytime soon.
Impact of Accounting Standards
To make this applicable to us, it is important to see how accounting standards affect how we do business. Suppose you are an investor considering Daimler-Benz and you see their earnings post a gain of $800M. The company is looking fairly interesting and perhaps worthy of your investment. However, once they convert their accounting system to meet U.S. GAAP they now show losses of $300M. Is the $1.1 billion reduction important to you? Absolutely! Having the correct accounting standard may save you millions by avoiding a bad investment. Consider the general manager of a division in Japan. If your Japanese accounting system is providing misleading information, you are unable to make good financial decisions. The old adage holds: garbage in, garbage out. While a standard accounting system will not turn a bad manager into a superstar, it is critical for good managers to have accurate information on which to base their decisions. One could conclude that better accounting might produce better management, and that is certainly important to all of us.
Michael W. BrownChairman of the Board,The NASDAQ Stock Market |
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Did the Leadership Development Program whet your appetite to learn more about social responsibility? Students for Responsible Business (SRB) is sponsoring a series of events on October 8-9 to continue where LDP left off. The main event is a panel discussion on "Defining Social Responsibility," which will be held on Thursday, October 8th at 7:00 p.m. in Hale Auditorium. This event is also sponsored by the Corporate Environmental Management Program (CEMP) and the Office of the Dean.
The featured panelists are:
o Dr. Mark Albion, a former Harvard as school marketing professor, co-founder of the national SRB organization, and founder of You&Company, a "head-hunting" company which matches MBAs with jobs they can love. Dr. Albion was the first person to deliver a keynote address to the United Nations on the topic of corporate social responsibility.
o Jon Entine, an investigative reporter and television producer who has written about corporate responsibility for The Sunday Times of London, Utne Reader, and Business Ethics. He received a National Press Club Award for Consumer Journalism for his article "Shattered Image: Is The Body Shop Too Good to Be True?"
Three corporate representatives will round out the panel:
o Lisa Caldwell is a Partner with Deloitte & Touche Consulting.
o Fritz Grutzman is Director of Marketing for Johnson & Johnson's Baby Products
o Doug Bauer is Executive Director of the SmithKline Beecham Foundation and manages the company's $27M philanthropy program.
The panel will be moderated by Professor Thomas Gladwin, who is the CEMP Faculty Director and the Max McGraw Professor of Sustainable Enterprise at the University of Michigan Business School and School of Natural Resources and Environment.
Corporate social responsibility covers a broad range of issues, from
workplace diversity to community economic develop 
ment to environmental protection. The panelists will discuss how companies
define their role in corporate social responsibility and what challenges
and opportunities they face in that role. They will also describe their
personal definition of social responsibility and how they have worked as
individuals to initiate change.
During LDP, Michigan Business School students are challenged to commit themselves to take responsibility for the well-being of their communities. It is difficult to maintain that commitment when you don't have a clear conception of what social responsibility means to you.
According to Jeanine Fukuda, Co-President of SRB, "Part of SRB's mission is to create a forum in which people can explore and develop their personal definition of social responsibility. We're bringing in two 'experts in the field' who can speak to these issues intelligently. Jon and Mark will bring years of research and experience to our discussion while our corporate panelists will ground the discussion with personal and industry-specific challenges they face in the corporate world. This will be a candid discussion. And because Jon and Mark have two very different teachable points of view, you can expect an engaging, lively discussion."
Dr. Mark Albion will also be featured in two other events during his visit:
o "Cause Related Marketing"
October 8th, 3:00PM in D1270
Dr. Albion will discuss the benefits and challenges businesses face when
they integrate social causes into their marketing efforts such as advertising
and promotional campaigns.
o "Making a Life, Making a Living"
October 9th, 10:30 a.m. in D1276
Dr. Albion will lead a discussion on work-life balance and the importance
of finding a work setting that matches your personality and values as well
as your financial and professional goals. This event is perfect for all
those MBA2s and BBA2s currently trying to choose their first job out of
school.
Is it just me, or do MBAs really get all the attention and fun in the B-School? I've struggled with this issue for about 3 years now, since my early days as a BBA-hopeful in my first year at the University. I've always wondered why the highly value-added "real-world" academic programs, such as the William Davidson Institute (WDI), the Executive Skills Program, and the Multidisciplinary Action Program (MAP) are only offered to MBAs, while BBAs are left soaking up text books and lecture notes.
I've always wondered why the fun and exciting social events, such as the MBA Games, B-School Follies and Spring Swing, are in place for MBAs (and 21-and-over BBAs for Spring Swing), while BBAs have essentially only one week for such activities (BBA week in April), albeit in the last month of the year. Most significantly, I've always wondered why BBA issues are nowhere to be found in the MSJ and why when we, the BBAs do get the gall to voice our issues to the MSJ, MBAs and B-School administration, (our voices seem to fall on deaf ears.)
Over the past 3 years, I've developed some theories behind why the above realities exist in our school. Are BBAs too young and inexperienced to be involved in WDI and have programs similar to Executive Skills and MAP? Are BBAs too busy wrestling with coursework, job interviews and other University organizations to participate in periodic B-School social events? Most significantly, are issues related to BBAs and the BBA program too insignificant to be covered by the MSJ? Or, to play the devil's advocate, are we BBAs just too busy to submit our own articles to the MSJ expressing our views and issues to the B-School community, or is it that we just don't care?
The overall purpose of this column in the MSJ is to provide a place for BBAs to express their opinions, voice their concerns and share their experiences in the B-School, and to explore the issues discussed above. Mike Dunlap (dunlapm@umich.edu ), Lei Vishnu (lvishnu@umich.edu) and I will be writing this column each week, so please send us your ideas and any concerns or issues you would like to see discussed in the column. We strongly encourage BBAs to use this column to their advantage as a communication vehicle to the B-School community. We look forward to covering your stories and ideas throughout the year. We would also like to applaud the MSJ for its desire to cover more BBA issues in the paper.
BBA Question of the Week:
"What do you ultimately want to accomplish upon graduating from the B-School?"
"WORLD DOMINATION!"
-Greg Samson, BBA1
I want to get a job that pays over one hundred thousand dollars. Now on a serious note, I think the business school needs to incorporate ecological and social cost issues into the curriculum.
-Brad Feuer, BBA2
I want to make the world a better place, in some way. It sounds cliched, but that really is my ultimate goal.
-Ed Pauls, BBA2
Upon graduation I want to be satisfied with what I have accomplished and the path I have ahead of me.
-Matt Michalski, BBA1
Ever feel like you spend all of your time shuttling among four buildings on the corner of Hill and Tappan? Does your conversation revolve around Porter's five forces, supply and demand curves and the four P's (first years) or recruiting dinners, presentations and interviews (second years)? Maybe you should take a break and come check out the new UMBS Supports Habitat for Humanity house!
UMBS Supports Habitat for Humanity works in partnership with Habitat for Humanity Huron Valley (HHHV) to build affordable homes for local families. By becoming a sponsor, we are committed to donating the cost of materials (currently $50,000) and providing 2,000 volunteer labor hours to complete the project. Homeowners are selected from applicants with an income of 35-50% of the local median income, and purchase the homes at an affordable price through nointerest loans financed by HHHV.
"Sweat Equity"
Families are also required to put in hundreds of hours of labor (called "sweat equity", not to be confused with "sweet equity" of gingerbread origin) in order to purchase the home. The goal of Habitat is two-fold: to provide affordable housing to local families, and to improve communities by increasing the sense of ownership and involvement by the homeowners. This is your chance to make a difference.
UMBS began work on our third house in mid-August. In the space of a few weeks, the lot has been transformed from a pile of rubble to the beginning of a new home. Working on the house is not only a chance to play with power tools, it's also a great chance to meet new people and get involved in the community outside of the business school. No experience is necessary -- just bring your enthusiasm! Here are some words from this year's volunteers:
"There's more to b-school than being pummeled by a cocky Frenchman (Corp. Strat) Anonymous
"I found putting up a wall a lot more rewarding than studying..." John Walker
"This is by far the best community service UMBS is involved in." Al Reba (The quick on your feet guy)
"What's a cat's claw?" Jim
"Don't wear your bicycle shorts to the site ... Everyone will laugh at you." Chris Sherman
Besides working on the house, we're working hard to raise the remaining $40,000 for purchase of materials. The golf tournament last weekend was a great success, netting about $5,000 for the project. We'll be planning more events like this, so don't be shy get involved! We're also pouring our efforts into external fundraising, volunteer coordination, and publicity, and could use more volunteers. For additional information about UMBS Supports Habitat for Humanity visit our website (which is a candidate for a Grammy, Emmy, and some other prestigious awards) at: http://webuser.bus.umich.edu/Organizations/Habitat.
Come out to the Habitat site and see what all the excitement is about!!!
Current workdays/times are Saturday 9am-3pm, Thursday 4:30-7:30pm and Friday (TBD). Contact Brock Hastie (bhastie@umich.edu) if you'd like to volunteer.
(some restrictions will apply )
If your club wisheS to accept our challenge, contact Ellen Hodo for more details (ehodo@umich.edu)
This is a little bit late, but hey, it is still before mid-term. So for all the newly entering evening students, WELCOME to the crazy ride! Kidding aside, you'll here a fast-paced, dynamic and challenging place to spend a substantial part of the next two few years. You'll find your fellow classmates competitive, talented, and motivated. Go make an effort to get to know them. Do not confine yourself to the classrooms. As many of you might already know, a big part of the MBA experience is outside the classrooms. You may sometimes find it difficult to balance work, life (if you think you can have one) and school, and that indeed is one of the many challenges. But listen to this: some of my classmates live in Midland, Kalamazoo, and, where else, Chicago. So, just remember you're not alone.
This year, I'm glad that three more staff writers will join me on this column. I, will try to concentrate on my interviews with fellow classmates and alums to bring you more success stories with tears (and beers?) behind. I hope you enjoyed my first interview last week with Sean Gelston. Stay tuned. More is coming. As always, please feel free to drop me a line if you have a wonderful story to tell, and we can bring it to the world.
Matt is one of the three "Top Guns" Tad and I found in helping to expand the evening column. He started his evening MBA at the beginning of this year, and is a very talented, young person (well, I'm not all that old). I'll let him introduce himself. Until next time, Ciao.
I read an interesting story this morning about Russia's failed attempt to
loft a dozen American business satellites into orbit using a converted, Cold-War-era ballistic missile. Apparently, an incorrect communication was sent to the rocket, forcing it to cut its engines mid-flight. Obviously upset at having been deprived of power so far above ground, the 'Zenit' booster saw fit to return to earth and unload its cargo... the Hard Way.
Besides offering an interesting commentary on Western interaction with theemerging markets of Eastern Europe, this news snippet provides a great piece of advice for incoming students: Don't put all of your eggs in one basket.
As a highly-evolved EMBA student, you have the mixed blessing of "dual citizenship," living simultaneously in both the business and academicworlds. When push comes to shove, however, the vast majority of us will "sacrifice the class for the job." This is understandable you still have to eat, for Pete's sake but don't let yourself lose perspective. It may take a while to realize this, but UMBS is one of the greatest resources any of us will ever find. So use it! Broaden your existence. Really learn about another nation. Change your point of view:
I've always told my friends, I'm an engineer who takes classes at night; what I should be telling them is that I'm a student who sidelines as an engineer during the day. Try it. Like Julian said, keep things in balance. Enjoy being a student! Join a club. Write for the Monroe Street Journal. Spend a morning in the library reading a magazine about Ghana. If you're really daring, have a conversation with a day MBA student (but don't feed it!) Above all, spread your time and effort over both work and school. In the end, you'll enjoy both that much more. Good luck.
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