S P R I N G / S U M M E R 2 0 0 8

T h e C o n c o u r s e P r o j e c t ■ I s s u e s i n t h e ' 0 8 C a m p a i g n ■ Wa r n i n g S i g n s o f t h e S u b p r i m e C r i s i s■ A n a l y z i n g t h e C r e d i t C r u n c h ■ G l o b a l T r e n d s i n F i n a n c e ■ I s P r i v a c y P a s s é ?

t h e A l u m n i M a g a z i n e o f N Y U S t e r n

STERNbusinessTHE VALUES PROPOSITION

HOW STERN IS BRIDGING THE DIALOGUE

BETWEEN BUSINESS AND SOCIETY

a l e t t e r f r o m t h e deanNYU Stern has clearly

become one of the top-tiercenters of business educa-tion in the country, attract-ing not only the brighteststudents but the mostaccomplished and respectedfaculty. We have achievedthis stature by dint of our

strong belief that the best learning takes place whereboth knowledge creation – in the form of facultyresearch – and knowledge dissemination have beenoptimized. An urban campus such as ours brings withit a special blend of many advantages, in the form ofgreat intellectual and professional stimulus, and theoccasional challenge, most specifically relating tophysical space. On this latter point, it is with greatexcitement that I can report to you the launch of theConcourse Project, a historic, $35 million building ini-tiative here at Stern that will transform our New Yorkcampus, and our educational environment, in funda-mental and momentous ways (page 16).

The project has already started, with the retro-fitting and expansion of the usable space in theShimkin basement, and it will proceed, with meticu-lously plotted logistics, through the winter of 2009.When it is complete, the formerly cramped, dim lob-bies of Tisch Hall and the Kaufman ManagementCenter will be bright and spacious, with sunlightstreaming in through soaring glass façades.Significantly, these lobbies and the Shimkin Lobbywill finally be directly connected. Natural light will bebrought below-grade to the redesigned LowerConcourse. Renovated, flexible classrooms will providestudents and professors with the latest learning aids,such as high-speed Internet connectivity and flat-screen displays to facilitate the real-time global semi-nars that are a requirement of a meaningful 21st-cen-tury business education.

Providing the best business education has alwaysbeen the goal of all our initiatives at Stern. Changes inthe global political economy have pushed all the topschools to look beyond a narrow focus on trainingbusiness leaders in the art of maximizing shareholder

value and to think about the variety of ways in whichbusinesses influence the world. The business-societydialogue is a subject that greatly interests us at Stern,and Professor Doug Guthrie and I have set out ourviews on it herein (page 12). We see this dialogue play-ing out in the thoughts and actions of our businessleaders, as evident in the interviews with MorganStanley CEO John Mack (page 24) and Campbell SoupCEO Doug Conant (page 22). In a similar vein, NobelLaureate Muhammad Yunus spoke at Stern in the fallabout microfinance as a way to eradicate poverty (page41). And student leader R. J. Panda (MBA ’08) formedthe Stern Campus Greening Initiative as a way to makethe dialogue real here at Washington Square (page 41).

The subprime mortgage crisis of the past 18months is another common theme in this issue. JohnPaulson (BS ’78), whose insight into the subprime cri-sis netted his hedge fund a multibillion-dollar profit,answers questions about his coup (page 11). ProfessorOtto Van Hemert crunches the numbers to reveal earlywarning signs of the subprime crisis (page 28). A panelcomprising Stern faculty and industry professionalsfocused solely on the subprime credit situation, with550 in the audience (page 3), and quant Jim Simonsalso touched on it during Stern’s new Chats withFinanciers series of events (page 4).

In other faculty research, Vasant Dhar identifies arelationship between Internet chatter and online musicsales (page 32), and Zur Shapira explores the psychol-ogy of consumers faced with insurance purchase deci-sions (page 36).

Being a leader means doing what it takes to remainahead of the pack. With the achievement of theConcourse Project, I think you will be proud of whatwe have wrought at your alma mater: the finest busi-ness education available in a state-of-the-art facility inone of the world’s most vital cities. With your contin-ued interest, participation, and support, we will con-tinue to lead.

Thomas F. CooleyDean

contents S P R I N G / S U M M E R 2 0 0 8

2 Public OfferingsNYU Stern, The Economist, and CFR.org talk global issues in the ’08 campaign; scholars and industry chiefs take the pulse of the credit crunch; how managers of hedge funds and quant funds find value; After Market Hoursspeakers reflect two sides of the entertainment industry; Marc Rotenbergsounds off on privacy in the Google era; and former UN Special Envoy Stephen Lewis rails at poverty and disease in Africa

7 Stern in the City7 Developer Joe Sitt’s bold vision for Coney Island, By Jenny Owen9 Ros Stephenson leads at Lehman Brothers Corporate Finance, By Rika Nazem

11 Going Short and Winning Big8 questions for John Paulson

12 Cover Story – The Values PropositionNYU Stern prizes a well-rounded education that teaches about business and its role in society, not just how to maximize shareholder value,By Thomas F. Cooley and Doug Guthrie

16 Special Feature – Building ConnectionsA dramatic facilities renovation brings the campus up to par with its growing reputation, By Marilyn Harris

22 Leading IndicatorsStern’s CEO Series: Doug Conant of Campbell Soup talks about reviving the iconic consumer food giant, and John Mack of Morgan Stanley reports on global trends in the finance industry

26 ProspectusNew faculty appointments, noteworthy papers, awards, and honors

Office Hours – Faculty Research 28 The Subprime Mortgage Crisis

Early signs of a credit crunch were hidden, but discoverable, By Yuliya Demyanyk and Otto Van Hemert

32 Does Chatter Matter?Record industry marketers may want to tune in to the Webto spark album sales, By Vasant Dhar and Elaine Chang

36 Paying a PremiumThe faulty assumptions consumers make that lead them tooverspend on insurance, By Zur Shapira and Itzhak Venezia

40 Peer to PeerStudent Life in Washington Square and Beyond: Doing good in Costa Rica, creating an interactive résumé, going green in Washington Square, and lending “social dollars”

42 Alumni AffairsAlumni News and Events: Community-building initiatives, professional resources for alumni, the first Alumni Business Conference, and alumni in Los Angeles

45 Class Notes

52 Past PerformanceCharles Waldo Haskins, accounting evangelist and Stern founder, By Marilyn Harris

STERNbusinessA publication of New York University

Stern School of Business

President, New York UniversityJohn E. Sexton

Dean, Stern School of BusinessThomas F. Cooley

Vice Dean and Dean of theUndergraduate CollegeSally Blount-Lyon

Chairman, Board of OverseersWilliam R. Berkley

Chairman Emeritus, Board of Overseers Henry Kaufman

Associate Dean, Marketingand External RelationsJoanne Hvala

Editor, STERNbusinessMarilyn Harris

Managing Editors, STERNbusinessRika Nazem and Jenny Owen

Contributing WritersShana Carroll, Randy Cohen,Lisette Coviello, Lauren Furgione,Jessica Neville, Angela Parks,Carolyn Ritter

Contributing PhotographersAnnemarie Poyo Furlong

Phil Gallo

Don Pollard

IllustrationsMichael Caswell

Steve Dininno

Bryan Leister

Robert O’Hair

Gordon Studer

DesignAnne Sliwinski

Letters to the Editor may be sent to:NYU Stern School of BusinessOffice of Public Affairs44 West Fourth Street, Suite 10-160New York, NY 10012www.stern.nyu.edusternbiz@stern.nyu.edu

the pact – into a leadership role in the movement to reduceglobal warming? Tercek stated that since the US is thelargest emitter of greenhouse gases, presidential candidatesshould take a stand. However, although regulation wouldgive industry the guidance to make smarter, long-terminvestments in alternative energy, he admitted it would bepolitical suicide for a candidate to propose caps or taxes oncarbon emissions that impose a significant short-term cost.Vaitheeswaran pointed out that Republican governors inCalifornia, New York, and Massachusetts have alreadyenacted environmental policy, but affirmed that a broadnational policy is needed.

On the topic of energy security and independence,Economy observed that China and the US both subsidizegasoline, though Chinese subsidies are larger. The urban-ization of China will increase demand 350 percent by 2030as 400 million people move from rural areas, she said.China has suggested the US and other developed nationsshare renewable-energy technology with poorer nations forfree, an idea the US is resisting.

With millions of legal and illegal immigrants in thecountry, immigration is a hot-button topic in the currentUS presidential campaign, and it generated a free-wheelingdiscussion at the third panel discussion, which was moder-ated by Dean Cooley, and held, appropriately, on February5 – “Super Tuesday.” “The Immigration Balancing Act:Border Security, Cheap Labor, and US Jobs” was the titleof the event, with panelists Edward Alden of the Councilon Foreign Relations; Adam Roberts, news editor forEconomist.com; and Cristina Rodríguez, associate professorof law at NYU Law School.

Alden posited that the events of September 11, 2001,had raised the issue of border security and naturalizationpolicies to an inflammatory level. Rodríguez, calling theimmigration issue a manufactured crisis, nevertheless

Last November, NYU Stern inaugurated a series of paneldiscussions about major issues in the 2008 US presidentialcampaign. The debut panel, moderated by RobertMcMahon, deputy editor of CFR.org, the outreach arm ofthe Council on Foreign Relations, consisted of Stern DeanThomas F. Cooley; Amity Shlaes, senior fellow for economichistory at the Council; and Matthew Bishop, editor and NewYork bureau chief for The Economist. Global trade was thesubject, with nearly 400 business people, Stern students andalumni, and members of the greater NYU community inattendance.

The panelists agreed that global trade benefits the USeconomy, while addressing why the general population con-tinues to be pessimistic about globalization and why thecandidates have not made the issue a priority in their cam-paigns. “We are seeing some of the dark side of globalizationand trade in a very real way with regard to poison-taintedChinese toys,” observed Dean Cooley. “Why is it politicallypopular to jump on this issue rather than stand up and talkabout the incredible benefits of free trade? Because it’s veryeasy to concentrate on who loses from trade, such as thosewho have lost jobs because of NAFTA, and it is very difficultto pinpoint who the many beneficiaries are.”

The relative absence of discussion on the trade issue bycandidates and corporate thought leaders alike was noted byboth Shlaes and Dean Cooley. Bishop questioned whether ifHillary Clinton were elected she would adopt the “remark-ably positive” free-trade policy of her husband’s administra-tion. “I think most people believe she understands the eco-nomics of free trade and may find reason to embrace it moreaggressively in office” than she has done in the campaign,he said.

Bishop explained his position that free trade should be amantra for the US. “America is playing globalization betterthan any other country in the world,” he said. “Its compa-nies are the most innovative in the world, leading the profit-making from manufacturing outsourcing in China, as well asthe business process outsourcing in India.”

In December, the second panel in the series discussedenergy and the environment. The panelists were MarkTercek, managing director at Goldman Sachs and adjunctprofessor at Stern; Vijay Vaitheeswaran, a reporter for TheEconomist who teaches at Stern; and Elizabeth Economy ofthe Council on Foreign Relations. Mike Moran, executiveeditor of CFR.org, moderated. Issues included climatechange, the role of business in effecting change, and China’srole in global energy investment and security.

Moran launched the discussion by announcing thatAustralia had received a standing ovation that week at theUN climate change meeting in Bali when it agreed to ratifythe Kyoto Protocol. What can the next president do, heasked, to propel the US – now the sole wealthy nation not in

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G L O B A L I S S U E S I N C A M P A I G N ' 0 8 : NYU STERN, THE ECONOMIST, AND CFR.ORG DISCUSS TRADE, ENERGY, IMMIGRATION, AND AMERICA'S IMAGE

Top: (From left to right) Robert McMahon, DeanThomas Cooley, Amity Shlaes,and Matthew Bishop discussedglobal trade.Bottom: Mike Moran (left) mod-erated the second panel discus-sion on energy and the envi-ronment with (from left to right)Vijay Vaitheeswaran, MarkTercek, and Elizabeth Economy.

acknowledged the economic burden on state and local gov-ernments imposed by illegal immigrants who access educa-tional and healthcare resources.

Roberts described how immigrants from south of theborder used to spend six months in the US and six in theirhome countries but that now, with hardened borders, theyare more inclined to bring their families and remain in theUS. When asked about the value of erecting walls or fencesto prevent illegal immigrants from crossing US borders,Roberts asserted no wall would be effective. Instead, hesuggested, the solution to deterring illegal immigrants is tocrack down on the employers who hire them. Alden addedthat about 40 percent of illegal aliens enter this countrylegally, coming in by air and staying with lapsed visas.

Cooley asked the panelists to depict the different poli-cies the presidential candidates might adopt if elected. Theconsensus was that a McCain administration would likelyaddress the immigration issue, while a Clinton or Obamapresidency would focus more on health care than immigra-tion. The panelists agreed the next president should focuson creating a new immigration system, open the dialoguewith Mexico and the international community, invest inneighboring countries, and separate the issue of immigra-tion from that of security.

The fourth panel discussion in the series, entitled“Brand America: Can the New President Rescue America’sImage?,” was held in March. The panelists were PeterDavid, foreign editor of The Economist; Walter RussellMead, the Henry A. Kissinger Senior Fellow for US ForeignPolicy of the Council on Foreign Relations; and Craig

Calhoun, University Professor of the Social Sciences anddirector of the Institute for Public Knowledge at NYU.CFR.org’s McMahon moderated the discussion.

The entire panel agreed that the Bush administration leav-ing office will no doubt improve America’s brand, but eachpanelist offered different ideas on what steps the next presi-dent should take to undo the damage.

Mead thinks the next president has a very difficult taskahead of him/her because “what is in the interests of the USisn’t always what is in the interests of the rest of the world,and unless there is a dramatic shift in US foreign policy, notmuch will change to improve America’s image.”

Calhoun’s advice to the next president is to not act as arogue superpower, but to use diplomacy all over the world.He stressed that public relations alone will not save the USimage, but action in a variety of areas, from the KyotoProtocol to the International Criminal Courts, is necessary.

What is at stake if America cannot change its image?David believes America’s ability to mobilize other countries tocooperate in US foreign policy interests such as Iraq and therest of the Middle East relies on gaining support from foreigngovernments. While it appears as if pro-American govern-ments are coming back (e.g., Sarkozy in France, Merkel inGermany), they still have to “sell” their policy positions totheir electorates, who are not pro-American. According toDavid, immediate wins for the next US president would be todismantle Guantanamo Bay, extend the ban on torture to theCIA, and sign on to the Kyoto Protocol or develop a compara-ble global warming initiative.

Sternbusiness 3

MARKET PULSE EVENT CENTERS ON THE CREDIT CRUNCH AND SUBPRIME CRISIS

NYU Stern's Office of Alumni Relations& Development, the NYU Stern AlumniCouncil Finance Committee, and the SternSalomon Center for Research in FinancialInstitutions and Markets co-hosted a MarketPulse panel discussion in the fall on thesubprime credit crisis. More than 550 NYUStern alumni, students, and industry leadersgathered to hear from expert researchersand practitioners on the topic, including therole of the Federal Reserve, the impact ofsubprime defaults on the real economy,financial market volatility, and the creditcrunch. The Market Pulse series was devel-oped by NYU Stern to pair scholars andindustry chiefs in leading a timely dialogueon current market issues.

“We consider business the mostimportant driver of social change, and it isour responsibility as educators to be leadingthe dialogue on how business affects socie-ty,” said Dean Thomas F. Cooley. Panelistsincluded: Edward Altman, Max L. HeineProfessor of Finance; Dean Cooley; Robert

Engle, Michael ArmellinoProfessor of Finance and2003 Nobel laureate; MickeyLevy, chief economist, Bankof America Corporation;Mark Patterson (MBA '86),chairman and co-founder ofMatlinPatterson GlobalAdvisers; and Paolo Pellegrini,managing director, Paulson & Co., Inc.The moderator was Matthew Richardson,Charles Simon Professor of AppliedFinancial Economics and Sidney HomerDirector, Salomon Center at NYU Stern.

Over the last few years there havebeen three characteristics of credit mar-kets: an abundance of credit, low spreads,and loans issued under loosening stan-dards. The market for collateralized debtobligations (CDOs) experienced exponen-tial growth, mainly from leveraged loans.At year-end 2005, residential constructionbegan to fall, and around September 2006,there was an increase in subprime delin-

quencies. All of this had, and still has, anaffect on hedge fund trades. Pellegrini’s andPatterson's firms are both players in thecredit markets, and both agreed that theimpact of this situation will be felt for awhile. Pellegrini declared this a genuinecredit crisis, not a liquidity crisis, and saidthere is “froth” in the market.

Engle asserted that while current marketvolatility is high relative to the last severalyears, it is not as high as in the period from2000 to 2002. He explained that while bigbanks like Citi and Merrill Lynch, which bothtook large write-downs because of their sub-prime exposure, are big enough to absorb

the hit, they are clearly notinsulated from fraudulentloans, poor risk manage-ment, and securitizedloans. He also noted thatthere is difficulty in tracingborrowers.

Patterson explainedthat the current situationlikely happened becauseinvestors weren't correlat-ing structured investment

vehicles with housing loan data, forinstance, and, therefore, did not not fullycomprehend the scale of what was happen-ing. Dean Cooley and Levy providedmacroeconomic perspectives, commentingon the Federal Reserve System's decision tocut the federal funds rate and revive the dis-count window to reassure markets that theFed would provide support. Dean Cooley,explaining that the Fed was created to pro-mote the stability of the banking system,said that the Fed's actions create moral haz-ard and are disingenuous. Levy cautionedthat as finances unwind, so, too, will thehousing market.

(From left to right) Panelists Robert Engle, Mark Patterson, Dean Thomas Cooley,Edward Altman, Mickey Levy, Paolo Pelligrini, and Matthew Richardson.

ACTIVIST INVESTOR WILLIAMACKMAN AND QUANTEXTRAORDINAIRE JIM SIMONSKICK OFF CHATS WITHFINANCIERS SERIES

The NYU Stern AlumniCouncil Finance Committee andthe NYU Stern Salomon Centerfor the Study of FinancialInstitutions recently launchedthe Chats with Financiers eventsto pair top Stern faculty mem-bers with luminaries in the finance industry for discus-sions on personal experiences and current trends infinance. The speaker for the first in this series wasactivist investor William Ackman, founder of PershingSquare Capital Management, a $6 billion hedge fund,who spoke to Stern alumni, students, and friends.William Allen, the Jack H. Nusbaum Professor of Lawand Business at NYU Stern and director of the NYUCenter for Law and Business, interviewed Ackman, oneof the most influential and successful investors in theindustry, who spoke frankly about his investing philoso-phy and what it takes to succeed in a business that isreputation-sensitive.

Ackman explained that the hardest thing about hisprofession is locating the idea or the opportunity thatwill create enormous value. He spoke about his recent9.6 percent stake in Target Corporation as well as hisinterests in Sears and Wendy’s, and touched on PershingSquare’s hand-crafted, old-fashioned investment strate-gy. Pershing invests in only a handful of deals a year,which Ackman said allows it to concentrate on creatingvalue.

Ackman cited his father, a real estate investor, andWarren Buffet as two influences on his own career.When asked about the characteristics he looks for in hir-ing, Ackman said that he seeks trust, confidentiality –because of the nature of the business – and admiration.He advised the audience to do something they love andpursue their dreams, noting that there are other reward-ing jobs besides investing.

He then responded to various questions from theaudience including those on stock multiples, the hedgefund he started after business school, and his non-retailinvestment interests. He advised the audience that when

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investing, tell the truth, do the homework, and be eco-nomically rational.

The second Chats with Financiers event welcomedJim Simons, founder of Renaissance Technologies LLC,who spoke to an audience of Stern students and alumni.Renaissance Technologies uses quantitative models totrade and currently has more than $30 billion undermanagement, making it one of the world’s largest quantfunds. Simons was interviewed by Robert Engle, MichaelArmellino Professor of Finance at NYU Stern, director ofthe Center for Financial Econometrics, and 2003Nobel laureate.

Simons uses computer models, scientific evidence,and quantitative trading methods to trade. He recountedhow he entered the investment field without a notionthat trading could be mathematical and gradually cameto realize he had no idea how to build a sizeable businessbased on fundamental trading. He believes that what hedoes is more like science than math, likening economicsto astronomy, in that one collects data and makesinformed deductions. Simons then touched on the sub-prime mortgage crisis, which had what he described as adomino effect of liquidation on financial markets, thoughhe believes the fallout will be finite. He then discussedwhat his firm looks for in potential employees: ideally, afamiliarity with statistics and optimization methods.

Simons is also the founder and chairman of Math forAmerica, a nonprofit organization with a mission to sig-nificantly improve math education in the nation’s publicschools. He answered audience questions about his firm’sintellectual property; the role of hedge funds in the mar-ket; the lack of human intervention in his firm’s tradingstrategy; and characteristics of success, which he saidinclude good luck.

Jim Simons (left) and William Ackman discussed founding and managing a quant fund and hedge fund, respectively.

Sternbusiness 5

SIX DEGREES OF SEPARATION: AFTER MARKET HOURSSERIES FEATURES ENTERTAINMENT MAGNATESLORENZO FERTITTA AND JIM KOHLBERG

NYU Stern alumni Lorenzo Fertitta (MBA ’93) and JimKohlberg (MBA ’89) discussed their careers in the enter-tainment industry with intimate groups of alumni and stu-dents during the latest After Market Hours events, whichare part of a series hosted by the NYU Stern Dean’sExecutive Board that showcase successful alumni and theirdiverse and creative careers. In November, the third AfterMarket Hours event featured Fertitta on: “From SlotMachines to Ultimate Fighting.” In the Commons of Stern’sKaufman Management Center, which was transformed intoa sports arena complete with black-curtained walls, flat-screen televisions, strobelights, a stage, and a fullbar, Fertitta spoke candidlyabout his ultimate fight tobuild Station Casinos, ofwhich he is president andvice chairman, and tolaunch the US’s premiermixed martial arts associa-tion, Ultimate FightingChampionship (UFC).

Fertitta explained howStation Casinos, founded byhis father in 1976 withPalace Station Hotel andCasino, has become thefifth-largest gaming compa-ny in the US, with 16 casi-nos and a market value of approximately $4.8 billion. Thecompany provides Las Vegas with not only gaming but alsorestaurants, nightclubs, movie theatres, and bowling alleys.He described how he has positioned the company to takeadvantage of the area’s explosive growth. Las Vegas is nowthe largest retirement community in the country, thanks toits mild climate, entertainment opportunities, and, notleast, lack of city and state income tax.

He also described how, after acquiring the strugglingmartial arts association, he led the UFC to become the top-rated cable sports program, staging the largest pay-per-viewevent in North America. His strategy included improvingthe sport’s reputation by lobbying for additional regulation,spearheading promotional efforts such as “The UltimateFighter” Spike TV reality show, and expanding merchan-dising. Fertitta said that the greatest opportunity for growthis overseas, because, unlike many other sports, fighting isunderstood by all cultures. He also detailed how new mediasuch as the Internet, cell phones, and iTunes downloadswould complement his growth strategy.

Two nights after his presentation, Stern alumni and stu-

dents joined him at the East Coast Ultimate Fight at thenew Prudential Center in Newark, NJ.

From another corner of the entertainment industry, theAfter Market Hours series next welcomed Kohlberg, who’sfound the nexus between finance and film that works forhim. Kohlberg spoke to a small group of Stern and NYUTisch alumni, faculty, students, and former classmatesfrom his EMBA 1989 class about both the private equityfirm he founded with his father nearly 20 years ago andhis newest venture as head of the film production andfinancing firm Essential Entertainment. The audience wasalso treated to a sneak peek at Essential Entertainment’sfilm, “Trumbo,” a 2007 Toronto International FilmFestival Real to Reel selection.

Introduced by Steve Zelin (MBA ’91), senior managingdirector of the Blackstone Group LP and chairman of the

Dean’s Executive Board,Kohlberg spoke aboutfounding and leading hisprivate equity firm,Kohlberg & Co., a middle-market buyout firm. Duringthe 15 years that he wasmanaging partner, he wasable to explore his interestsoutside finance, particularlyfilm, and was determined tocreate an environment forpursuing them. In early2007, he launched EssentialEntertainment. Kohlbergretains his affinity for mediaand technology companiesand noted his recent

appointment as an alternate nominee to the board of TheNew York Times.

Before showing clips of “Trumbo,” Kohlberg discussedthe movie’s subject, Dalton Trumbo, a screenwriter whowas one of a group of movie industry professionals ques-tioned by the government during the McCarthy hearingson the influence of Communism in Hollywood. Eventuallyblacklisted by the industry, Trumbo fought to receive cred-it for his work. Kohlberg is credited as a producer on thefilm, which features actors Joan Allen, Michael Douglas,and Nathan Lane. The film will be distributed theatricallythis spring by Samuel Goldwyn Films.

Kohlberg answered audience questions on topics includ-ing the impact of the Internet on movie distribution andviewing, which Kohlberg said was still evolving; the rela-tive ease of securing an all-star cast for his movie becauseof its subject matter; and Wall Street’s investment in films,which has historically been a mixed bag, but withHollywood capital constrained, could now become morecommonplace, according to Kohlberg.

Lorenzo Fertitta (left) discussed his career in gaming and mixed martial arts; Jim Kohlbergtalked about his career in private equity and film production and financing.

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STEPHEN LEWIS, FORMER UN ENVOY, DISCUSSESPLIGHT OF AFRICA IN LUBIN LECTURE

It was a bad-news, (perhaps eventually)good-news story. When Stephen Lewis, for-mer UN Special Envoy for HIV/AIDS inAfrica, addressed a packed audience of NYUstudents and alumni last September duringthe annual Lubin Lecture, he painted a direpicture of the effects of globalization onAfrica and the developed world's failure tohelp. Despite the gravity of the subject,Lewis prefaced his discussion with aglimpse of hope, saying, “Over time, Africawill emerge as a series of nation-states tooccupy its place in the world.”

Lewis then launched into a discussionof the eight UN Millennium DevelopmentGoals, crafted by the UN General Assemblyin 2000, which he used as the framework totell the story of the millions of Africansgripped by the devastating AIDS pandemic.Despite the progress wrought by globaliza-tion, it hasn't rescued the world from dis-ease, poverty, and conflict, so the UNdevised the goals as a backup plan. Byestablishing long-term objectives, the UNintended to “achieve the social justice andequality that seemed otherwise so elusive,"Lewis asserted. The stated goals range fromeradicating extreme poverty and hunger to

promoting gender equality and empoweringwomen. Yet, the goals remain simply that.Africa's failure so far to make significantprogress toward achieving them is a harshreality.

Lewis explained that, despite the goalto eradicate extreme poverty and hunger,the World Food Program was forced toreduce its contributions to Darfur, a geno-cide-ridden region in western Sudan,because it was receiving neither the grainnor the funding promised by the West.

Further, child and maternal mortalityrates are still staggering, and the transmis-sion of HIV/AIDS across Africa remainsrampant. Lack of access to the preventionmethods and treatments that are readilyavailable to US citizens has contributed tothe continent's failure to meet the goals ofreducing child mortality, improving maternalhealth, and combating HIV/AIDS, malaria,and other diseases. Lewis urged the audi-ence to consider this poignant question:“Why is the life of a New York City childworth so much more than the life of anAfrican child?”

Sharing an account of his travels toRwanda from 1998 to 2000, following thegenocide there, Lewis described his power-ful emotions when three women recountedto him the acts of rape and violence theyexperienced. The world swore this tragedywould never happen again, he declared, butit is happening now in Darfur and the east-ern Congo.

Lewis implored the developed countriesto reexamine their priorities and honor theirpromises. “This is a world which I some-times think is off its rocker. We are nowspending between $10 billion and $15 bil-lion a month to fight wars in Afghanistanand Iraq – and we cannot summon thatamount of money in any given year to fight a

pandemic that has taken 25 million livesand has 42 million people in its grip.”

In closing, Lewis said he remainshopeful for Africa's future, what with the UNconsidering a proposal to establish aninternational agency to empower women,and an increased emphasis on disease pre-vention and treatment. He called on thepublic and private sectors and celebritiesand NGOs to join forces to help, and chal-lenged audience members to assist in therelief process by visiting a developingcountry or raising awareness at home. “Whyelse are we on this planet – for the mereaccumulation of wealth? I invite you toengage in the response to this pandemicbecause there are millions of lives at stake.”His remarks drew a standing ovation, afterwhich he took audience questions and latermet with students individually.

The Joseph I. Lubin Memorial Lectureswere established and funded in perpetuitythrough the generosity of the late Joseph I.Lubin, a distinguished business, civic, andphilanthropic leader and a Trustee of NewYork University. The lectures have attractedworld-class leaders to NYU Stern and haveserved as a public forum to discuss eco-nomic, financial, and management princi-ples and theories.

GOOGLE, PRIVACY, AND SOCIAL RESPONSIBILITY: THE THIRD ANNUAL HAITKIN LECTURE

Privacy? A slide featuring just this wordin the font and primary colors of the ubiqui-tous Google brand served as the opening ofMarc Rotenberg's social responsibility talk, inwhich he argued that Google's proposedmerger with Internet advertising companyDoubleClick gravely threatens consumer pri-vacy. NYU Stern's Markets, Ethics, and Lawprogram welcomed Rotenberg, executivedirector and co-founder of the public interestresearch group Electronic Privacy InformationCenter (EPIC), to campus last November toaddress students and alumni for the thirdannual Haitkin Lecture. The Haitkin Lecture ismade possible through the generosity ofalumnus Jeffrey Haitkin (BS '68), whose com-mitment to ethics has fostered this forum toanalyze and debate issues of integrity in thepractice of business.

As a leading advocate for privacy rightswho uses both Congressional testimony andmedia platforms to get out his message,Rotenberg has won the respect of regulators,

the business community, and consumers.His mission to cover the issue from “sound-bite to footnote” has safeguardedRotenberg’s and EPIC's authority as credibleprivacy experts. In turn, EPIC was a trail-blazer in using the Internet to mobilize thepublic, having attained 50,000 signaturesfor a petition lobbying for freedom to usecryptography well before blogging hadmoved into the mainstream. He argued thatthe protection of privacy is the greatestsocial and political issue of our time.

Rotenberg called Google “the greatestprivacy challenge” in light of the volume ofprivate information it is able to collect basedon people's Internet search histories. InApril 2007, EPIC filed a complaint with theFederal Trade Commission (FTC) regardingGoogle's plans to acquire DoubleClick.With its use of digital tags called “cookies,”DoubleClick has privileged access to users'preferences, such as their net-surfing pat-terns. Together, both firms are collecting an

immense amount of data, but neither is beingheld accountable for how they will use it.The DoubleClick merger would give Googleaccess to more information on the Internetactivities of consumers than anyone else inthe world. To hold Google accountable,Rotenberg, through EPIC, petitioned the FTCeither to block the merger or to condition thedeal on the establishment of meaningful pri-vacy safeguards. (Editor's note: In December,the FTC approved the merger without condi-tions and has upheld that approval despite

challenges from privacy groups, includ-ing EPIC.)

Through his public relations andadvocacy work, Rotenberg has securedthe support and action of the New YorkState Consumer Protection Board andEuropean counterparts, and he has gen-erated editorial coverage in majornational and international papers thatfeature his and EPIC's point of view as abalance to Google's. Rotenberg pointedout the challenges of confronting amedia company whose value trumpsthat of Time Warner, Disney, and NewsCorporation combined. The fact that

Google both owns and uses its media reachto shape consumer perception adds to thecomplexity. His onsite demonstration search-ing the term “privacy” on Google-ownedYouTube yielded results that placed a videoproduced by Google in top position, 10pages ahead of a video attacking Google thathad thousands more views, a measure thattypically drives page positioning. The resultsleft the audience with much to ponder.

In his Haitkin Lecture, Marc Rotenberg argued thatGoogle's merger with DoubleClick is a consider-able threat to consumer privacy.

Stephen Lewis discussed the negativeeffects of globalization on Africa and thedeveloped world's failure to help.

by Jenny Owen

Coney Island devel-oper Joseph Sitt (BS’86) sees a future forthe Brooklyn board-walk and amusementpark that is strikinglydifferent from its storied and,often, seedy, past and present.But then again, where others seedecay, Sitt sees opportunity. Andthat’s exactly how he’s built hisreal estate development compa-ny, Thor Equities, into a success-ful $2 billion-plus operation.

Sitt founded Thor Equities in1986 while still a student at NYUStern. His interest in real estate was piqued by a Sternfinance class and galvanized by the entrepreneurial zealamong his classmates and the real estate environment inand around New York City, which, at the time, wasflush with foreclosures as the mayor’s administrationworked to stamp out urban blight.

Sitt started by purchasing a small property on EastTremont Avenue in the Bronx, financing it privatelythrough family, friends, and parents of fellow Stern stu-dents, many of whom he found through Stern EmeritusProfessor of Finance Frank Angell (BS ’41). “He was aone-man NYU alumni networking service,” said Sitt ofProfessor Angell. “If you needed financing, he hookedyou up with a wealthy NYU grad. If you needed creditor banking, he would set you up with an NYU alumnuswho went into banking. He was hugely popular with thestudents and was a guiding light to me in my earlycareer.”

After purchasing the Bronx property, Sitt went insearch of retail tenants. He reached out to nationalretailers, but didn’t get any takers, at least in the begin-ning. Instead, he worked with local immigrant retailers,before finally succeeding in bringing companies such asRite Aid Corporation and Payless Shoes to the borough.

Sitt, a Brooklyn native, attributed his early interest inurban retail to a video game and an exotic bird. At age12, he searched his neighborhood in vain for the Atarisystem and parrot that he wanted for his birthday, and inthe end, was forced to travel an hour by bus and subwayto Manhattan to find them. The experience gave Sitt first-hand knowledge of the frustrations facing inner-cityshoppers, instilled in him a passion to turn the tide, andopened his eyes to the business opportunities available inthese otherwise neglected markets.

Then, in the early 1990s, Sitt recognized how under-served the marketplace was for retailers and their prod-ucts. “The greater void was not in real estate, but inretailers serving the customer, particularly urban careerwomen,” he said. With a focus on upscale physical space,high-quality but affordable apparel, and top-notch cus-tomer service, in 1991 Sitt founded Ashley Stewart, aclothing chain for plus-size urban women, after a shortstint owning and managing the Children’s Place kidsclothing chain, as well as Marianne Stores, a retail outletfor Latina women.

The idea was one of the first of its kind. Sitt sensedthe vast untapped purchasing power of urban consumersthen being ignored by national retailers. “I wasn’t bigoted

continued on page 8

sternInTheCity

Coney Island developer Joseph Sitt has a bold vision for the Brooklyn boardwalk and amusement park.

An Eye for Opportunity

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against the consumer,” explained Sitt.“Other retailers thought, ‘These people livein the city. They’re used to a little bit ugliersurroundings, potholes in the street, andwhatnot.’ Our earliest approach was that wewanted to have the same quality standardsthat you would see in any other suburbanmarket in America. We invested moneyupfront, in either building a nice property orimproving a property. A lot of the old own-ers back then had the philosophy that apenny saved is a penny earned, as opposedto ourselves, who had the policy of asking,‘Where can we spend a penny and make adollar for it?’” Sitt’s approach paid off, andAshley Stewart quickly grew into a $400million business.

Also part of Sitt’s strategy was to inte-grate the stores into their communities.Instead of launching large advertising campaigns tobuild the company’s brand, he held fundraisers, such asfashion shows, for community charities. He hired peoplefrom the neighborhood, and placed a lot of emphasis ontraining and motivating them. “I invested in good peo-ple,” he said. “We offered profit incentive programs forthe employees.”

Offering “gainful employment” and career opportuni-ties to low-income minorities is Sitt’s proudest accom-plishment. He treasures the letter he received from for-mer President Bill Clinton, who praised Sitt for havingone of the largest placements of people through theWelfare-to-Work program.

Then, in 2000, as urban markets grew, the pendu-lum shifted and demand swung back to real estateownership. That year, Sitt divested his stake in AshleyStewart and devoted himself to growing Thor Equities.Focusing on urban markets, Sitt expanded ThorEquities beyond the Bronx and into greater New YorkCity, as well as to Atlanta, Chicago, Detroit, NewOrleans, Norfolk, and Philadelphia. The company alsoexpanded its portfolio beyond retail to hotel, office,warehouse, and residential space and currently ownsmore than 10 million square feet.

Sitt’s most recent endeavor is also his most public –and nostalgic. Over the past few years, Thor Equities hasspent north of $130 million buying up approximately 12

continued from page 7

acres of land in the Coney Island amusement district.The company plans to build a resort complex – completewith hotels, restaurants, and year-round entertainmentand amusement attractions – right next to the board-walk. Sitt envisions a Coney Island reminiscent of itsheyday in the early 20th century, when Sigmund Freudand Charles Lindbergh delighted in the thrills of theDreamland amusement park.

The plans are under review with the mayor’s office,and the negotiations have been making a lot of noise inthe local media. Despite the challenges, Sitt remainscommitted to the project. He sees it as more than a busi-ness opportunity; it’s also personal. Sitt grew up nearConey Island and spent his childhood summers there.“This is more of an opportunity for me to bring some-thing home and do something good in my own back-yard,” he explained. “I’d love to see Coney Islandbecome what it once was when I was a kid.”

In addition to Coney Island, Sitt is focused on pre-serving another piece of history. His firm is currentlyspending $150 million on restoring the prominentPalmer House Hotel in Chicago, whose guests haveincluded many US presidents, Buffalo Bill, AmeliaEarheart, and Ernest Hemingway. Plans are also under-way to expand Thor Equities into Dallas, Houston, LosAngeles, and other locations throughout the country.

Near and far, Sitt is in search of a turnaround oppor-tunity. For this real estate magnate, betting against theodds has won him a windfall. ■

The new lobby of Chicago's famous Palmer House Hotel, which is being restored by Sitt’s Thor Equities.

Ros Stephenson’s view of lifeas “a marathon, not a sprint” hasled her to a hugely successfulcareer on Wall Street. She is cur-rently one of the leaders of theInvestment Banking Division ofLehman Brothers, which was a$3.7 billion business for the firmin 2007.

Stephenson began at LehmanBrothers in 1987, the same yearshe received her MBA from NYUStern. She had previously workedas an analyst at CBS televisionand already earned an undergraduate busi-ness degree from her native England. AtLehman, she was soon staffed in the mediaand communications area, one of the high-growth businesses at the time. “My back-ground had afforded me an in-depth under-standing of the business, which was rapidlydeveloping in many aspects – entertainment,broadcasting, cable, broadband – and so, the1987 crash not withstanding, we executed asignificant amount of high-profile business,such as the merger of Time Inc. with WarnerCommunications.”

In 1995, Stephenson was elevated to man-aging director, which coincided with herrecognition of the growing importance of the

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In It for the Long Run by Rika Nazem

sternInTheCity

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private equity business. “I was already interacting witha number of the key players,” she said, and so alongwith another managing director, she moved to launchthe Financial Sponsors Group. The early focus paid offand the firm rose to a leadership position on a globalscale, advising the likes of Kohlberg Kravis Roberts &Co. (KKR), Texas Pacific Group, Blackstone, WarburgPincus, and Welsh Carson on multi-billion dollarfinancings and mergers and acquisitions. Some of herhigh-profile deals include KKR’s buyout of TXUCorporation, advisory work for Warburg Pincus’ invest-ment in MBIA, and the buyout of directory publisherDex Media for Welsh Carson.

Fast forward to today: Stephenson now co-headsCorporate Finance for the Investment Banking Division,a position she has held for a year and a half. In thisrole, she oversees all corporate and private equity clientcoverage for the division, which is organized into spe-cialized industry verticals ranging from naturalresources to health care to technology. “The bankingindustry is continually evolving,” she said, “and it is ahighly stimulating environment. The one constant isthat clients need trusted advisors. It’s a client servicebusiness where we are selling the intellectual capital ofthe firm.”

In addition to her responsibilities running the busi-ness, Stephenson is one of 10 people, and the onlywoman, on the Investment Banking ExecutiveCommittee, setting strategy for the Investment BankingDivision. What is it like being a woman in a male dom-inated business and the only senior woman banker onthe committee? “It has never been an issue for me,” sheexplained. “New opportunities have come my way and Ihave accepted the challenges. I have never felt over-looked and, frankly, when 95 percent of the time youare the only woman in the room, you often have anadvantage, assuming you have proven that you knowwhat you are doing.”

You also need to exude competence when the mar-kets get rough. “This is a very difficult time in theindustry – we have encountered challenging periodsbefore, but this one will take some time to work

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through. In the interim, we are focused on the businessand being nimble by moving resources to where the rev-enue opportunity is, whether in the financial institutionsarena or in international markets.” Stephenson recentlyattended the World Economic Forum in Davos,Switzerland, with her colleague and fellow Stern alumnaMadelyn Antoncic (MPhil ’81, PhD ’83), managingdirector, global head of financial market policy relations,and member of the management committee at Lehman:“The concern for the health of the global markets wasthe key topic, but business leaders were focused on solu-tions and the pockets of liquidity that do exist, such assovereign wealth funds. It was a cooperative atmos-phere,” said Stephenson.

Outside of Lehman’s boardroom, Stephenson main-tains severable charitable interests and serves on theboards of the Southampton Fresh Air home, the BoysClub of New York, and Lincoln Center for thePerforming Arts. She resides in Manhattan with herhusband and four children.

When Stephenson talks about her job, the enthusiasmshines through. “If you don’t have passion for what youare doing, it is time to move on. Everyday my horizonsare expanding, and that is the way it should be.”

Now heading into her 21st year at Lehman,Stephenson savors her thriving career. “I am happywhere I am sitting now. Lehman has enjoyed tremendoussuccess and the trajectory will continue. The firm hascome a long way and it is gratifying to have been a partof it since the early days,” she said. ■

"If you don’t have passionfor what you are doing,it is time to move on.Everyday my horizons

are expanding, and that is the way it should be."

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Paulson & Co., Inc., founded in 1994, is one of the largest and mostsuccessful hedge fund management companies focusing on event-driv-en strategies. In mid-2006, based on a strong belief that the subprimemortgage market would fall apart, John Paulson started two newfunds concentrated solely on expecting such a collapse. In 2007, hisCredit Opportunities I fund grew 590 percent, and three of his otherfunds more than doubled their money that year. Paulson & Co. nowmanages an estimated $30 billion in assets.

1. You scored the coup of the year, perhaps the decade, with yourbet against the subprime mortgage market. What persuaded youthat this was the bet to make, and why do you think other sophisti-cated investors missed those signs?

The credit market moves in cycles, alternating between extreme pes-simism and extreme optimism. We thought in the 2006 cycle ofextreme optimism that there wasn’t enough premium paid for risk,and with spreads at all-time lows, the best opportunities were on theshort side. After researching the market, we found that the most over-valued securities were the lower tranches of subprime mortgage secu-rities. The securities represented the first loss tranches underlying thelowest-quality mortgages ever underwritten and yet traded at a yieldcomparable to US Treasuries.

2. Your funds’ great successes up until the past 18 to 24 monthswere in merger and event arbitrage and bankruptcies. What caughtyour attention about the subprime mortgage area?

Event arbitrage includes distressed investing, and I’ve been very activein distressed investing since the mid-’80s. What makes us unique is thatwe also look at distressed credit from a short perspective, shortinginvestment-grade bonds that we believe will become distressed. So whenspreads tightened to all-time lows, we sold our long positions andlooked for short opportunities. We did a lot of research across varioussectors and thought the subprime bonds were the most overvalued.

3. Some experts have observed that hedge funds and institutionalinvestors helped precipitate the collapse of the subprime mortgagemarket by seeking ever more high-yield investments and drivinglenders to relax their standards. To what extent are they right? There certainly was excess liquidity in the world, which caused yieldspreads to tighten to historic lows across almost all credit classes.There was the perception that, after Treasury bonds, the safest securi-ties were US mortgage-backed securities. The mortgage marketbecame the recipient of much of this excess liquidity.

4. The presidential candidates of both parties have ideas on how tohandle the collapse of the subprime market and the painful fallout.

What do you believe government, and, for that matter, private insti-tutions, can or should do? The most important thing is for government regulators and privateparticipants to tighten underwriting standards. When the credit workis done on a mortgage, they should verify borrowers’ income andensure that the borrower has enough income to service the mortgage.

5. Speaking of government, what is your opinion on whether or towhat extent hedge funds should be regulated?I think it’s a good idea, and we have voluntarily registered with theUS Securities and Exchange Commission. The primary purpose ofregulation is to protect investors. We support any regulations thatprotect investors and provide confidence in the market.

6. What kinds of experience and qualities would you say were mostimportant for someone to become a successful hedge fund manager?First, you have to have expertise in an area that will give you an edgein a particular trading strategy, such as macro, credit, distressed,emerging markets, or event. You also need the same qualities as anysuccessful entrepreneur: persistence, good management skills, and theability to deliver a superior product. Ultimately, one’s success is basedon performance, both in managing a fund and managing a business.

7. You have said that a course in investment banking that you tookwhile an undergraduate at NYU Stern influenced you to enter thefield. How did it inspire you?Gus Levy (BS ’32), the legendary Goldman Sachs partner, was anNYU Stern graduate and taught the Distinguished Adjunct ProfessorSeminar in Investment Banking with Professor Ernest Block. When hedied, John Whitehead, the then-chairman of Goldman Sachs, tookover the course. Mr. Whitehead also invited other Goldman depart-ment heads to teach particular classes, including Steve Friedman, whosubsequently became chairman of Goldman Sachs and taught the seg-ment on mergers and acquisitions (M&A); Bob Rubin, who alsobecame chairman of Goldman and subsequently US TreasurySecretary, taught risk arbitrage; and John Jamison, another Goldmanpartner, taught corporate finance. This course influenced my career inboth M&A and risk arbitrage. I think M&A is the most exciting part ofinvestment banking, and risk arbitrage is the most exciting part ofmoney management. Traditionally, these two areas have been thehighest-return areas in an investment bank and require the highestlevel of skills.

8. Where do the greatest challenges and opportunities lie for yourbusiness in the next couple of years? In the short to intermediate term, the challenge is to continue to main-tain the high level of performance that we’ve experienced and that ourinvestors expect. Longer-term, the challenge is to create a companythat can continue without me and continue to prosper.

8QuestionsJOHN PAULSON (BS '78), founder and president, Paulson & Co., Inc.

T H E VA L U E SPROPOSITION

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HOW STERN IS BRIDGING THE DIALOGUEB E T W E E N B U S I N E S S A N D S O C I E T Y

Enron and corruption. Royal/Dutch Shell and the sinking of

the Bret Spar and Nigeria's execution of Ken Saro-Wiwa. Nike,

The Gap, Global Fashions, and low-wage labor. How does Big

Business get past these egregious associations of recent

memory? More important: How do we as educators of tomor-

row's global business leaders embed the lessons from the

past into a values-driven blueprint for the future?

Despite these scandals, the past two decades have seen

an ever-more compelling affirmation of the power of free

markets and modern business to transform people's lives.

The surge in economic well-being across the planet under-

scores the conclusion that business is perhaps the most pow-

erful institution in society. This by itself elevates the way we

must think about the role of business.

Market economies and business are, and will continue

to be, forces for good in the world. Rising prosperity leads

to improvements in health and education, an increase in the

empowerment of women, and, when politics doesn't intrude,

the gradual eradication of poverty. It is important to under-

stand this, and equally important to understand the forces that

By Thomas F. Cooley and Doug Guthrie

Beyond Shareholder ValueNearly three decades ago in The New York Times

Magazine, Milton Friedman published his now famousstatement of his view on the social responsibility of busi-ness and the true purpose of the corporation1. Accordingto Friedman, the issue was simple: corporations have oneresponsibility and one responsibility alone – to makemoney. A corporate executive’s only responsibility,Friedman wrote, “is to conduct the business in accor-dance with [the owners’] desires, which generally will beto make as much money as possible while conforming tothe basic rules of the society.” Throughout the 1980s and1990s, this was the dominant perspective. There werevoices pushing back against this view, to be sure. Most

famously, Edward Freeman’s “stakeholder” view of thefirm argued for a more holistic and socially embeddedview of the corporation, one in which corporations aresubject to the interests of the many different constituentsthat hold a “stake” in their operation. Yet, in an era inwhich finance and economics departments had becomedominant forces in many business schools, the sharehold-er view of the corporation dominated, while the stake-holder view of the corporation was generally ignored.

Sternbusiness 13

can interfere with it. In a moral society, the logical next step is

to accept the social responsibility that comes with progress.

Business schools traditionally kept a narrow focus on max-

imizing shareholder value. But changes in the global political

economy have demanded something more: an obligation to

think about the ways in which businesses influence the world.

As a school, Stern has always placed the highest priority on

rigorous academic research and on the training of the busi-

ness community's future leaders. Whatever our research tells

us about the design of optimal contracts, the incentives in

organizations, or the protection of intellectual property, it can

never inform us about our values or how to think about our

place in the world. Because of this, we have a responsibility to

foster a discourse about the role of business in society.

Business education can't “teach” values, but a discussion

of values and the social importance of business is an essen-

tial and ongoing part of our conversation. How else would the

next generation of business leaders grasp the full scope of

their action in the business arena and its consequence in the

rest of the world?

1 “The Social Responsibility of Business is to Increase its Profits,” byMilton Friedman, The New York Times Magazine, September 13, 1970.

(From left to right) Dean Thomas F. Cooley discussed the credit crunchand subprime crisis at a Market Pulse event; Cristina Rodríguez, a NYULaw professor, talked about immigration at a Global Issues in Campaign’08 event; and NYU Stern Finance Professor Robert Engle, Stern alum-nus Mark Patterson (MBA ’86), and Stern Finance Professor EdwardAltman participated in a Market Pulse panel discussion on the currentsubprime mortgage situation.

In the last decade, three major shifts occurred thathave influenced the public perception of the role of busi-ness in society. First, beginning in the mid-1990s, thehigh-profile corporate scandals relating to low wageworkers and poor factory conditions raised significant –and persistent – questions about the relationship betweencorporations and the broader society. Corporations, inmany cases, continued to insist that they were shelteredfrom culpability on social issues as long as they met theirobligations to shareholders. But the shareholders them-selves proved less than convinced, and they began toinfluence the capitalization of global giants by sellingstock and creating discomfort with corporate policies.

orporate scandals hit closer to home in2001 with the accounting frauds ofWorldCom and Arthur Andersen, as well asEnron and other economic giants at theheart of the US economy. With the decliningvalue of so many US corporate icons, the

role of the corporation in society became impossible toignore. It was clear that the argument for shareholderaccountability did not hold water and that corporate lead-ers, in a rush to short-term profitability, had lost track ofthe very values that made a company seem like a goodinvestment. Further, as the blogosphere took shape overthe past five years, shareholders became armed with moreinformation than ever. Shareholder demands for corpo-rate accountability led, among other things, to strictergovernment regulation – an indication that corporationsdid not exist in a vacuum but had to perceive themselvesas actors in a broader social landscape.

The third issue that has emerged is a sea change in the

public consensus on environmental issues. Scientists’warnings about global warming forced investors andcompanies to realize that their activities – whether burn-ing fossil fuels or clear-cutting rain forests – had a directimpact on the social good, a social good that implicatednot just corporate leaders but their shareholders just asmuch as anyone else. The values proposition suddenlybegan to have very direct relevance to corporations.

How can business educators respond to this changinglandscape? Business schools have a unique responsibility.We are entrusted by society with the culture of anextremely influential profession, and we have a responsi-bility to reinvigorate it through the education of each newgeneration. We especially have a fiduciary duty to thetruth, not to the bottom line, and we are the last stopwhere individuals will wrestle with these issues beforetheir professional lives begin. How, then, does this changeor broaden the discussion in our schools?

For one thing, as researchers, our professors are someof the very individuals who are pointing to the larger costsof an insular corporate culture. We are, therefore, in avery good position to argue that the values debate is, andwill continue to be, at the center of business education.We can, and do, also provide ample opportunities for ourstudents to make up their own minds about how prof-itability should be assessed and about how their individ-ual careers will mesh with the broader social good.

Yet we are also at the very center of a much larger con-versation about business and society. Carrying out busi-ness in an effective and responsible way is about maxi-mizing shareholder value in ways that are ethically,morally, and legally defensible, and business schools arein a unique position to grapple with and influence theconception of these issues.

How do we tackle such big issues at the Stern School?

Business-Society Initiatives at SternAt Stern we promote the dialogue about business and

society both through the curriculum and as a place wherethe issues can be joined in public. From the earliest stagesof their business education, students are asked to consid-er how business operates in the broader society. At the

"At Stern, we embed theissues into the classroom, cre-ate top-flight research centersthat produce state-of-the-artknowledge about importanttopics, and then become thevenue in which the expertiseis translated for the public."

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undergraduate level, our course on Business and ItsPublics is a required offering unique to the Stern School.Prominent speakers address a plenary session, and thenthe class is broken down into small discussion groups. Acourse like this is transformative. Students who want anundergraduate business degree because it is the path-way to a good job come to realize that their role asfuture business leaders will require them to think morebroadly about their goals and accomplishments in thebusiness world.

At the graduate level, Stern pioneered the MBA coursein professional responsibility that is a requirement for allMBA students. Long before the need for such courses wasobvious to the business world, the Stern School under-stood how necessary it was for future business leaders tograpple with some of the broader ethical dilemmas thatthey would face throughout their career.

ur concern with business ethics has led tothe Paduano Faculty Symposium onBusiness Ethics (page 27). Funded by agenerous grant from Daniel P. Paduano(MBA ’69), the symposium bringstogether faculty, the public, and leading

figures in the area of business ethics to think about therole of ethics in business, the role of the corporation insociety, and the responsibilities business institutionshave to the public at large.

Business and public policy go hand in hand, andStern has joined with The Economist and CFR.org, theoutreach arm of the Council on Foreign Relations, tocreate a forum for discussion of current public policyissues. Each institution brings something unique to thispartnership: The Economist brings a well-known andwell-honed perspective on economic policy, as well as avery large readership; the Council on Foreign Relationsbrings a global political perspective and a team ofprominent scholars and policy makers. Stern brings anacademic and research-driven perspective as well asimportant connections to the business community.Hundreds of individuals from the general public havealready participated in four such forums (page 2), host-ed by Stern, about issues that are central to social roles

of business in the current electoral cycle: globalizationand trade, energy and the environment, immigration,and America’s “brand” in the world.

Finally, our Market Pulse Series of panel discussionsbrings together academic experts and important figuresfrom the world of business and finance to discussimportant unfolding events in the global economy.Discussions about the subprime credit crisis, the tur-moil in global credit markets (page 3), and stagflationhave been featured this year. Here Stern is able toshowcase the knowledge of some of our most successfulalumni, who not only comment on events and issues,but are themselves, in many cases, key players in out-comes that will affect the global market.

Creating the Platform for Business-SocietyDialogue

Business education, like the market itself, tends tooperate in cycles. Business educators are pulled betweenthe need for academic rigor and the expectation ofimmediately applicable vocational training. In hisrecent book, From Higher Aims to Hired Hands,Rakesh Khurana of Harvard Business School arguesthat a balance can be struck here – business schoolscan foster rigorous academic research while, at thesame time, fostering a type of knowledge productionthat is more tangible for the business world. Our modelof business-society dialogue rejects this as a false oppo-sition. At Stern, we embed the issues into the class-room, create top-flight research centers that producestate-of-the-art knowledge about important topics, andthen become the venue in which the expertise is trans-lated for the public. We cannot be remote from the dis-cussions of what it means to be responsible businessparticipants. We must be – and indeed, we are – shap-ing the debate itself. ■

T H O M A S F. C O O L E Y is Richard R. West Dean andPaganelli-Bull Professor of Economics at NYU Stern, andD O U G G U T H R I E is Professor of Management, Daniel P.Paduano Faculty Fellow, Faculty Director of Custom and Non-degree Executive Programs, and Academic Director of theTRIUM Global Executive MBA Program at NYU Stern.

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By Marilyn Harris

BuildingConnections:

$35 Million

Concourse

Project

Interlinks

NYU Stern

Campus

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Dean Thomas F. Cooley. “The design and the solution tothe constraints of the existing architecture are brilliant.We attract incredibly talented students and faculty, andwe want to serve them with an educational facility thatgives them the scope to collaborate and broaden theirhorizons, in the middle of a great, vibrant city. With thisproject we achieve that vision.”

The vision is one of connection: the connection of threebuildings and lobbies, of a student/faculty populationwhere collaboration is fundamental, and to the city andworld outside the School. Dean of the UndergraduateCollege Sally Blount-Lyon, who is overseeing the project,said, “The idea of connection on a symbolic level for theSchool is astounding.” Stern’s $35 million renovation ini-tiative will employ state-of-the-art design, technology, andnatural light to modernize its classrooms and study spaces“The Concourse Project is innovative, cutting-edge, and

dynamic – all adjectives to describe the caliber of Sternstudents. And I imagine when prospective students feelthe energy of the new spaces, they'll be excited to join thecommunity. The impact will be boundless.”

Dianna Seltz (BS '10)

“Our School's infrastructure is a source of pride for students.It is more than just a place for class; some of us spend somuch time in the building that we almost live here! TheConcourse Project will positively affect the way we interactwith each other and will give us a 'home base' where we'llfeel comfortable during all hours of the day.”

Sandeep Satish (BS '09)

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n 1992, when NYU Stern’s graduate program relo-cated from Trinity Place to join the UndergraduateCollege at Washington Square, the move united thetwo distinct institutions and prompted a change in

the School’s image and culture. Now, with the “culture ofone” established and a rising reputation for NYU Stern,more change is afoot. In 1992, the relocation drove thechange in culture; in 2008, a spectacular renovation hasbeen launched to catch up to a reputation that’s movedlight years ahead.

Beginning this spring, the Concourse Project, as it’sbeen named, will rise from within the current Stern cam-pus to embody the 21st-century model of educatingfuture business leaders, epitomized by the open accessand interconnectedness of the present era. “TheConcourse Project completes the integration of the Schoolas an entity, and in a particularly compelling way,” said

IT h e c e n t e r p i e c e o f t h e U p p e r C o n c o u r s e l o b b y ( p a g e s 1 6 - 1 7 ) i s a l i g h t - f i l l e d , m u l t i - s t o r y a t r i u m A b o v e l e f t a n d r i g h t : O p p o r t u n i t i e s a b o u n d t o c r e a t e a n d n u r t u r e p e r s o n a l c o n n e c t i o n s w h i l e

Extending the NYU Stern Brand

The new NYU Stern space will be unified with the School'sunique brand. According to Joan Blumenfeld, design principalfor the Concourse Project, architect Perkins + Will’s BrandedEnvironments group will seek to add another layer of meaning tohow the space will be experienced. The result, she said, “will bea more vibrant environment that will relay the message theSchool wants to portray in this space: urban, technologicallysophisticated, but still subtle enough so as not to interfere” withthe functionality and purpose of the space. Compelling two- andthree-dimensional contact points, such as a dynamic technologywall, will be created to communicate the School's brand and toenhance its culture. “We research how people 'read' an environ-ment,” said Blumenfeld. “We take the bones of good architectureand bring another whole level of thought and visual interest to itthrough the use of materials and technology.”

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“ As a parent of a Stern sophomore, I am excited to see how theConcourse Project will enrich the experience of students. Facilitiesplay an important role for students – they need and deserve anenvironment that is beautiful and functional with cutting-edgetechnology where they can learn, socialize, and network. As analumnus and Stern Overseer, I am supporting this renovationbecause I see it as the final push in the School's continuedprogress. If we want to continue to compete at a top level, we musthave the kind of facilities that support our brilliant initiatives.”

Stewart Satter (MBA '82)Member, Stern Board of Overseers

and create a physical environment that reflects and facilitatesthe networked nature of today’s learning community.

With more than half of this goal already contributed bydonors who felt strongly the need to put the School’s physicalpresence on a par with its academic standing, the completionof the Concourse Project will depend on the generous supportof Stern’s alumni, corporate partners, and friends. One earlycontributor was Leonard N. Stern (BS ’57, MBA ’59), mem-ber emeritus of the Stern Board of Overseers, whose naminggift unified the campus at the Square. Said Stern: “As thecaliber of the student body continues to reach new heightsand the alumni community becomes evermore accomplished,

w h e r e s t u d e n t s , f a c u l t y , a l u m n i , a n d c i v i c a n d b u s i n e s s l e a d e r s c o n n e c t a n d s h a r e i d e a s .w a l k i n g t h r o u g h S t e r n ’ s c a m p u s .

“ The Concourse Project is the latest development at Sternthat reflects our culture of innovation and solidarity. Itcaptures the enterprising spirit that enables Stern toimprove from year to year, and it will continue to inspirethe next generation of students.”

Minkyung Kim (MBA '08)

“ Seeing the plans for the Concourse Project is thrilling.The classrooms are more suitable to the working worldbecause you don’t sit in a lecture hall; you sit aroundthe table and throw out ideas with your peers. This newenvironment will be conducive to interacting andbuilding stronger relationships with fellow students.”

Corinna Lau (BS ’08)

20 Sternbusiness

it is evident just how valuable a Stern degree has become.It is also clear that the leadership of those who havebenefited so deeply from a Stern education will be vitalto the School’s efforts to transform its physical environ-ment for the next generation of students.”

Stern is transforming its space from a New York pointof view, creating a more sophisticated, urban, contempo-rary look within the boundaries of the existing buildings’footprint. Externally, the changes will be subtle. To thoseinside, however, the School’s character and functionalitywill be dramatically transfigured. Now separate environ-ments, honeycombed with labyrinth tunnels, the con-course levels of Shimkin Hall, Tisch Hall, and theKaufman Management Center will be renovated with sky-lights set in Gould Plaza and a glass façade on TischHall’s exterior. The centerpiece will be a light-filled,multi-story atrium where students, faculty, alumni, andcivic and business leaders connect and share ideas.Natural light will pour into lobbies, hallways, and reachbelow-ground meeting areas, in most cases for the firsttime. Traffic to and from the School’s various venues willbe far easier, and, at the same time, the new environmentwill include multiple open study lounges and conversation

A b o v e : T h e T i s c h l o b b y f e a t u r e s f l o o r- t o - c e i l i n g w i n d o w s t h a t o p e n t h e S c h o o l t o t h e C i t y, a n d t h e C i t y t o t h e S c h o o l .

areas that will foster a greater sense of community. On both upper and lower concourses, more classrooms

will be created, in the smaller, more versatile sizes thatsuit present-day teaching methods yet still allow morespace per student. The buildings and classrooms will bewired for high-speed digital communications, enablingprofessors to create an environment that brings the worldinto the classroom and vice versa. “We’re truly integratingglobal experiences into the educational models,” pointedout Dean Blount-Lyon. “To educate future global leaders,you need to give them a vibrant learning experience andan environment that contributes to effective networkbuilding and encourages ties to other strong individuals.”

The architectural firm Perkins + Will has been chosento design the Concourse Project. The firm has worked onsome 2,000 projects for more than 150 colleges and uni-versities, including business schools, student life centers,and technology-driven classrooms. Beyond the innovativearchitectural solutions proposed for Stern, Perkins + Willwill seek to express Stern’s unique brand throughout thenew spaces (see sidebar on page 19).

It is only appropriate, Dean Blount-Lyon said, that theSchool’s physical presence track its academic profile as atop business school with a curriculum that emphasizes theplace of a business education in the global marketplace.“Space matters,” she said. “This project enables Stern tobe not just in and of the City, but in and of the world.”With the completion of the Concourse Project, accessibilitywill now be a hallmark of the School physically as well asintellectually.

Declared Dean Cooley, “The Concourse Project signalsthat NYU Stern has arrived at a level of excellence andconfidence in our identity as one unified school, whereboth knowledge creation and knowledge disseminationtake place – and that, in our view, is the richest possiblelearning environment.” ■

Further information and updates on the Concourse Project areavailable at www.stern.nyu.edu/concourse.

“I am proud that my firm, Ernst & Young, is taking part in my alma mater’ssuccesses by supporting the creation of a learning center at Stern [see side-bar on right]. My fellow partners and I have also committed to raise addition-al funds for this space. The learning center aligns perfectly with what E&Y isall about. This center is an ideal vehicle for providing the training and knowl-edge that will nurture the personal and professional growthof NYU Stern students who will one day make a difference forE&Y, our profession, and our wider business community.

Stephen R. Howe, Jr. (MBA '89) Area Managing Partner, Americas, Ernst & Young

”

Sternbusiness 21

Making It Real:The Ernst & Young Learning Center

It's not surprising that the first company to contribute to theConcourse Project is Ernst & Young, a global leader in assur-ance, tax, transaction, and advisory services. Stern and E&Y havea long and close relationship, with Stern alumni currentlyaccounting for the largest representation of any alumni groupwithin E&Y's partner level.

A little over a year ago, this group of alumni banded togetherand initiated a campaign to reinvigorate its alumni activities,enhance the firm's recruitment efforts, and increase participationin the Stern Fund. The Ernst & Young Foundation has recognizedthis dedication by committing major funding for a new learningcenter within the Concourse Project, with Stern alumni working atE&Y pledging to match a portion of this gift. The gift will trans-form space in Tisch Hall into a state-of-the-art learning facilityspecifically designed to create dedicated tutoring space for under-graduate students. To be located on the Lower Concourse, theErnst & Young Learning Center will enable students to expandtheir studies outside of the classroom.

A b o v e : S t a t e - o f - t h e - a r t c l a s s r o o m s c r e a t e l e a r n i n g e n v i r o n m e n t s w h e r e i d e a s m o v e e f f o r t l e s s l y .

22 Sternbusiness

Adrienne Carter: You joinedCampbell at a point of weakness, fardifferent from where it is today. Whatwas your initial assessment?Doug Conant: When I arrived, thecompany had the worst performanceprofile in the food industry. We werestill marketing the same condensed

soup that we had been marketing for 70years, and, arguably, with the same people.The company had great brands, such asCampbell's and Pepperidge Farm, and goodcategories that had the potential to beexpandable. It had a great financial profile,great margins, and good cash flow. We justhad no growth. Our first goal was to get theorganization to a pointwhere it was competitiveon a good day, becausewe were uncompetitive ineverything.

AC: How do you go aboutchanging a culture that'sarrived at that point?DC: The situation had been deteriorating for along time. I believe you can't talk your wayout of something you behaved your way into.We became very explicit about expectationsand accountability, and institutionalized thatin the “Campbell leadership model.” Over athree-year period, we evaluated the leadersagainst that model. If they met the standards,they stayed; if not, they left. In culture build-ing, you have to be tough on standards, buttender with people. Of our top 350 leaders, weturned over 300 in the first three years. Ofthose, 150 were promoted from within.

AC: You spent a lot of time making sure yourwork force was interested and engaged. Howdo you measure something like that?DC: Employee engagement is the strongestproposition I've found when it comes to cul-

ture building. With help from the GallupOrganization, we measure each of our 525work groups via a short list of questions,and then compare the results to othercompanies' results. We also look at ouremployee engagement ratio. To reachworld-class levels of productivity, youneed 12 engaged people for every oneactively disengaged. Our scores on bothcounts have gone way up.

AC: You've been very successful in innova-tion, relative to your peers. How did youaccomplish this?DC: If you have people who are engaged,they give you the answers. Based on our

sales force's observations, we did a timestudy and found that consumers don't wantto spend more than 20 seconds looking fora particular soup. But finding ours took 70seconds. So we developed a shelving sys-tem that makes it easier both to stock ourproducts and to find them. R&D upgradedproduct quality. Our IT people spearheadedan enterprise-wide planning system. Theinternational division suggested we shouldbe in Russia and China. We also innovatedin key trend areas such as wellness, conven-ience, and quality. With the marketingdepartment's input, we started introducingmicrowaveable, healthier soups in 2003. It'snow a $300 million business and makes usmore relevant to a different generation ofconsumers.

AC: Strategically, you're now moving awayfrom the “indulgence” area with the sale ofyour Godiva unit. How do you reassess aninnovation strategy as time progresses?DC: The more focused we can be, the better.We've decided to home in on three things:simple meals, where we're anchored insoup; baked snacks, where we have biscuits,Pepperidge Farm, and others; and healthybeverages, with V-8 tomato juice. Assessingour fourth category, Godiva, I thought ourresources could be better deployed againstthe other three.

AC: China and Russia consume billions ofbowls of soup each year. How do you adapt

what you do and bring thatto consumers who have adifferent eating pattern?DC: China and Russia arethe two largest soup con-sumption markets in theworld, and the soup is allhomemade. For our com-pany, going there is the

equivalent of JFK talking about sending thefirst man to the moon – it puts a spring ineverybody's step. China and Russia areunique cultures, where soup, unlike soda orcookies, is sacred ground. We had to find away to leverage our expertise in a way thatrespected that. In both countries, homemak-ers make soup twice a week by first makinga basic broth. We've crafted an entry planwhere we can introduce a consistent, higher-quality broth that saves them two to sixhours.

AC: How did you research it? Did you putpeople into homes?DC: We had people living in the homes offamilies in both countries. China is a large,complex grid with different populations. Wehad special ethnography sessions to help

In 2001, Doug Conant joinedCampbell Soup Company aspresident and chief executiveofficer, bringing 25 years ofexperience at General Mills,Kraft, and Nabisco. Under hisleadership, Campbell hasreversed a decline in marketvalue and employee engage-ment. The nearly 140-year-oldcompany, a global manufacturerand marketer of consumer foodproducts, has a portfolio ofmore than 20 brands, includingits flagship soups, Prego pastasauces, and Pepperidge Farmbreads and snacks. A Chicagonative, Conant earned a BA fromNorthwestern University and anMBA from the J.L. KelloggSchool of Management atNorthwestern. On December 20,2007, Campbell announced thesale of its Godiva Chocolatierunit to Yildiz Holding AS, ofTurkey, for $850 million, nearly15 times EBITDA.

Doug Conant was interviewed by Adrienne Carter, deputy editor in the finance department atBusinessWeek, where she coversthe food and finance industries.

LeadingIndicators

Doug Conantpresident and chief executive officer

Campbell Soup Co.

“Very few people are fired because they can't do an ROI analysis or use the tools you

learn here at NYU Stern. Where people inevitably run into trouble is their ability to manage expectations and relationships and

effectively communicate.”

Sternbusiness 23

stuff. Very few people arefired because they can't doan ROI analysis or use thetools you learn here at NYUStern. Where peopleinevitably run into troubleis their ability to manageexpectations and relation-ships and effectively com-municate.

AUDIENCE QUESTIONSQ: You took a group ofpeople who weren't per-forming. What did you do

to convince them that you were somebodythat they could make a commitment to, andthat you were going to be able to do whatneeded to be done? DC: The first hour of the first day that some-body works for me, I take him through“here's who I am, and here's what I believe.”You declare yourself. Then, you act withintegrity and do what you say you're going todo. We made what became known as the“Campbell Promise:” We're going to demon-strate we value you, and then, over time,we're going to trust that you will value ouragenda because you believe in us. Then yougive people time to make their own judg-ments.

Q: You mentioned that when you joinedCampbell, you wanted to bring in peoplewho wanted to be part of a transition. Today,what would you tell someone applying toCampbell?DC: We screen on three key characteristics:people with character and competence whocan thrive in a team-based environment. Wealso have a leadership model, with expecta-tions of such qualities as a demonstrableability to inspire trust, motivate people, andexecute against a plan. ■

us understand the deeper cultural valuesassociated with soup.

AC: Campbell's stock is up, and so aresales. What's the challenge now?DC: Our goal is to be the world's mostextraordinary food company. We have a 10-year plan that we divide into stages. The firstthree years we went from being uncompeti-tive to being competitive on a good day. Next,we established that we would aim for qualitygrowth and to be above average every day.That's where we are today. By 2011, we wantto be delivering the best total shareownerreturns in the food group, to be what we calla “sustainably good company.” We want todo this in a way that we can envision repeat-ing year after year.

AC: What advice would you give your com-petitors, who seem to be going through a lotof what you went through five years ago,struggling to innovate and turn around theirsluggish sales?DC: Stick to your knitting, and do what youdo well. Also, it's all about your people andhow you get them engaged. All other com-petitive advantages ultimately prove to beillusory. You may have a technology edge

today, but somebody else will have thesame thing tomorrow. The real competitiveadvantage is your workforce and its abilityto be agile and deal with dynamic marketsand situations.

AC: Why is it so important to study leader-ship instead of just experiencing it?DC: The saying that leaders are born, notmade, is a bunch of hooey. If you want to bereally good at something, you have to studyit and work at it. If you're going to invest inyour education and aspire to be a leader inindustry, I think you have to treat it as yourcraft, not as your job, and you have to learnand absorb all you can. This will differentiateyou. You have to prepare yourself to lead.

AC: You describe yourself as an introvert,which does not seem like the right personal-ity for a CEO. How do you make that workfor you?DC: In my opinion, more than half of allCEOs are introverts. They're internally driv-en, and they have a paradigm that they'reanchored to so they can deal with roughseas. The most effective CEOs are not theones trying to please everybody. They'redriving the agenda. You have to communi-cate with people, but you also have to give

yourself time to regroup and go do the samething the next day.

AC: Early in your career, you got fired. Howdid you overcome an obstacle like that?DC: After 10 years with General Mills, I wasworking in a subsidiary that was spun off,and my job was eliminated. I went home tomy wife, my two small children, my cats, mydog, and my one very large mortgage notknowing what to do and totally unprepared. Itwas probably the most challenging time inmy professional career. I was out of work fora year, and for an introvert to have to go outand interview for jobs is scary. And I hadmouths to feed. Twenty-two years later, I cansay it was a blessing because I realized Ineeded to own my own development, tobecome a student of my craft, and to beengaged in the work in a bigger way. It alsosensitized me. Once you've been throughthat, you can't help but want to give backand help others. I learned a lot. But oncewas enough.

AC: What advice do you offer to MBA stu-dents starting out?DC: There are 10 two-letter words that arecritical for anyone's career: "If it is to be, it isup to me." Also, the soft stuff is the hard

Adrienne Carter interviews Doug Conant at a CEO Series event held at NYU Stern in October.

24 Sternbusiness

Maria Bartiromo: Today the Dow JonesIndustrial Average hit an all-time recordhigh, up nearly 200 points, just about amonth and a half after we had so muchvolatility and worry about the weakness inthe subprime housing market. How wouldyou characterize the environment right now?John Mack: I think we will have some realissues in the next 12 months, given whathappened in the subprime market. On theplus side, US corporations are sitting on alot of cash on their balance sheet, unem-ployment is relatively low, and the dollar isweak, which is great for manufacturing andexports. I believe the rest of the world hasdecoupled from the US – the global econo-my is still growing real-ly well. If the US goesinto a recession, there'sno question it will haveimpact, but the funda-mental change that hastaken place in the glob-al economy is perma-nent. People are verybullish long-term onthe economy. But in theshort run, six to 12 months, I still thinkwe're on dangerous ground.

MB: If the rest of the world is growing, whatdoes that mean to those of us living andworking in the US?JM: First, if I were just graduating from NYUStern, I would be going overseas to China,India, Turkey, Russia, Brazil. I think theopportunities of not only being involved inan emerging economy, but to grow and tocreate real, intrinsic value in yourself,increase dramatically. Number two, I thinkthe US clearly has to figure out a way to bemuch more fiscally responsible. We cannothave the situation we have now, with over $1trillion debt being held by one country.Sooner or later, there's got to be a way that

we can get some of that money back intothis country. So what it means to us, and Ithink you'll see this clearly in the next elec-tion, is that we have to be far more disci-plined in creating our savings and balanc-ing our budget. I think the next 10 to 15years are going to be much more difficultfor the US and how it interfaces with therest of the world.

MB: We hear so much talk about the USlosing its competitiveness, deals going toLondon and Shanghai and not the NewYork Stock Exchange and NASDAQ. Areyou worried about that?JM: With markets around the world being

open, and with liquidity being able to movearound the world, New York, I believe, hasa real issue just on financial service. Butwhat bothers me the most is that our politi-cians have become very US-centric. Thereis a tremendous movement toward xeno-phobia. I think the US has to become muchmore proactive in global politics. It isimperative that we keep feeding this coun-try with bright and talented people fromaround the world. Our politicians have tounderstand that it's a global economy, andthat we cannot give in to isolationism.

MB: To what do you attribute your suc-cess?JM: I think a lot of it is luck. But I workhard; I think I have the right values. I grew

up in a family where you had to work, and Iwent to school on a scholarship. I have theability to read people pretty well. I'm intu-itive. If you get too much information, toomuch data, it locks you in. I believe youneed information, but at some point youhave to make a decision.

MB: What does it take to be successful inthis competitive world?JM: You need to take risks and tell peoplewhat you think. You do not want to work fora firm that doesn't want your opinion. Now,you need to learn how and when to do that.From the management side, you have tonurture an environment where employees

can deliver a construc-tive message and notget shot – for instance,at town hall meetings,which we have atMorgan Stanley.

MB: We're watching alot of financial servicescompanies cut jobs.What do you say to

those who want to work in the industry?JM: I think you're going to see a restruc-turing of jobs in the mortgage area in theUS. People either need to go overseas andstart taking different jobs, or taking differ-ent jobs here. Our job openings today atMorgan Stanley are in our internationalareas. In Asia, we're understaffed, andwe're hiring as many qualified people aswe possibly can get. In the US, job-seekersin the financial sector are going to have ittougher. You just have to knock on doors,be flexible, and be willing to take a joboverseas.

MB: What do you think is the most impor-tant second language, aside from English,that we all should learn?

John Mack is chairman and chiefexecutive officer of MorganStanley, a global financial servic-es company with approximately$782 billion in assets under man-agement, as of November 30,2007. He previously spent nearly30 years at the firm in variouspositions. Prior to his currentrole, Mack served as chairman ofPequot Capital Management, andbefore that, as co-CEO of CreditSuisse Group and CEO of CreditSuisse First Boston. Mack is agraduate of Duke University,where he is a member of theBoard of Trustees. With more than600 offices in 33 countries,Morgan Stanley serves clientsworldwide, providing a range ofinvestment banking, securities,investment management, andwealth management services.

John Mack was interviewed onOctober 1, 2007, by MariaBartiromo, an NYU alumna andmember of NYU's board of trustees.Bartiromo is the anchor of CNBC's"Closing Bell” and the host andmanaging editor of the nationallysyndicated "Wall Street JournalReport.” She writes a biweekly col-umn for BusinessWeek and amonthly column in Reader's Digest.

LeadingIndicators

John Mack chairman and chief executive officer

Morgan Stanley

“I think the US has to become much more proactive in global politics. It is imperative

that we keep feeding this country with bright and talented people from around

the world. Our politicians have to understandthat it's a global economy, and that we

cannot give in to isolationism.”

JM: You should try to get a job in a diver-sified financial service business where thereare so many different disciplines you canget into to create a career. I would go toChina and try to be in investment banking. Ithink skilled labor is in demand around theworld, so I think virtually everything fromthe service industry to the constructionindustry presents opportunity.

Q: In the next 10 to 15 years, do you thinkMorgan Stanley's going to be a US compa-ny with international operations, or do youthink it's going to be a global companywhere it might have its headquarters outsidethe US? And is there any chance of anacquisition?JM: I think it will be a global company. Withwhat's going on overseas and the speed thatit's going on, you want to be on the groundand be there. And if I could find the rightacquisition internationally, I would do it. ■

JM: Either Chinese orSpanish.

MB: Everybody's talkingabout “going green.” Is thisa public relations stunt onthe part of corporations ordo they want to protect theenvironment and do it in anefficient way?JM: I think shareholders aregoing to demand green pro-grams, so corporations haveno choice. If Morgan Stanleyand other firms were notserious about implementinggreen programs, we wouldnot attract a lot of the youngtalent that come to our firm.

MB: What's going to be thenext big thing?JM: I think it's going to bein the environmental area – the opportuni-ties to develop the whole green movement,the industries that will come out of that,and the technology that will be developedfor it.

AUDIENCE QUESTIONSQ: How do you look at the African market,especially countries that have discoveredoil? JM: We have an office in South Africa,and we're trying to figure out how tomove north into Nigeria and otherresource-rich countries. It is still verydifficult to do. We have done some trans-actions in Nigeria. I've been irritated thatour African effort has never gotten a lotof support from the firm as a whole. Thereal opportunity for us is to use SouthAfrica as the base to cover sub-SaharanAfrica, and that's what we'll do. As for thenorth, even though there's a big connec-

tion with the French in Algiers andMorocco, most likely we're going tocover that out of Dubai.

Q: I'm wondering why you support SenatorClinton for 2008?JM: If you go back a couple of elections, Iwas a Ranger or a Cowboy for PresidentBush. I didn't particularly like the Senator.But a few years ago while I was at CreditSuisse, I hosted a panel and reception forher. There was no question you could askher that she couldn't answer with knowledge.Since I've been back at Morgan Stanley,she's our New York senator, and she's repre-sented financial service in an outstandingway. She gets it, and she fights not just forthe City but for New York. If you see her inaction in Washington, you see that sheunderstands how to work both sides of theaisle. One of my big concerns is the globalworld we live in, and she understands globalissues. The only way to create solutions is

through dialogue. I believe she will do that.That's why I'm supporting her.

Q: How do you view your time at CreditSuisse? What lessons did you take awayfrom that personally and professionally?JM: I think that the biggest difference is thatthe culture was very diverse at Credit Suisse;whereas, at Morgan Stanley, even though Ithink they got off track for a while, it still wasa unified culture. The biggest lesson I'vetaken away is that gut feeling, or intuition, isa powerful tool in managing and in makingdecisions. When I meet with my managementcommittee at Morgan Stanley, they hear fromtime to time, "Look, I understand your argu-ments, but my gut tells me we're going to doit this way." And I do it.

Q: When you talk about the growingeconomies in India, China, and Brazil, whatareas of opportunity do you suggest that wetap into once we graduate?

John Mack is interviewed by Maria Bartiromo at a CEO Series event held at NYU Stern on October 1, 2007.

Sternbusiness 25

Books: An Empirical Analysis ofProduct Cannibalization and SocialWelfare,” was awarded the runner-upfor the best published paper appear-ing in 2006 in Information Systems

Research (ISR), the flag-ship journal of the

Information SystemsSociety.

Assistant Professorof Finance and Charles

Schaefer Family FellowThomas Philippon's

book, Le capitalismed'heritiers, about manage-

ment and labor relations inFrance, received the prize forbest management book fromthe French Association ofHuman Resource Managers.

Jeffrey Simonoff, professor ofstatistics and Robert StanskyResearch Faculty Fellow, and BatiaWiesenfeld, associate professor ofmanagement and organizations andDaniel P. Paduano Faculty Fellow,are co-principal investigators undera $125,456 grant recently awardedby the Ewing Marion KauffmanFoundation for “Understanding theRelationship between HigherEducation and InnovativeEntrepreneurship.” This grant consti-tutes the pilot phase of an anticipat-

Sinan Aral, assistant professor ofinformation, operations and manage-ment sciences, was awarded the ACM-SIGMIS Award for the best disser-tation in the field of informationsystems for his thesis entitled,“Information, Technology, andInformation WorkerProductivity.” The awardwas given by theAssociation ofComputing Machineryat the InternationalConference onInformation Systems in Montreal inmid-December.

Anindya Ghose, assistant pro-fessor of information, operations, andmanagement sciences, was nominatedfor the best overall conference paperand for the best paper in the WebBased Information Systems Track at the2007 International Conference onInformation Systems (ICIS), the mostprestigious gathering of informationsystems academics and research-ori-ented practitioners in the world. Hispaper, “Estimating Menu Costs inElectronic Markets,” was selected from60 Web Based Systems Track submis-sions and 674 conference submissionsoverall.

A second paper by ProfessorGhose,“Internet Exchanges for Used

Prospectus

r e s e a r c h r o u n d u p

26 Sternbusiness

Disclosure Rules, was released in April2007. Professor Ryan also spoke aboutaccounting in and for the subprimecrisis, which he covered in his book,at the Financial Accounting StandardsBoard this past March.

Edward J.Lincoln, clinical pro-fessor of economicsand director of theCenter for Japan-USBusiness andEconomic Studies atNYU Stern, authored

the new book, Winners WithoutLosers: Why Americans Should CareMore About Global Economic Policy,in which he contends that the bestchance the US has of ensuring peaceand prosperity for itself and the rest of

the world is by focusing on for-eign trade policy instead of mil-itary power.

Vijay Vaitheeswaran,executive-in-residence atNYU Stern and award-win-ning correspondent forThe Economist, recently

co-authored the book,Zoom: The Global Race to Fuel the Carof the Future, which was chosen asone of five finalists for the FinancialTimes and Goldman Sachs BusinessBook of the Year Award for 2007.

ed multiyear, multinational, multi-insti-tutional, longitudinal study that is partof an effort by NYU Stern's BerkleyCenter for Entrepreneurial Studies, ledby Center Director Professor WilliamBaumol, to improve the production ofinnovative entrepreneurs atStern, in the US, and aroundthe world.

Robert Salomon, assis-tant professor ofmanagement andorganizations, in2007 publishedhis first book, Learningfrom Exporting: NewInsights, New Perspectives.The book analyzes the rela-tionship between exports and

productivity. In addition, ProfessorSalomon's paper, “Learning,Knowledge Transfer, andTechnologyImplementationPerformance: A Study ofTime-to-Build in theGlobal SemiconductorIndustry,” is forthcoming inManagement Science.

The second edition ofAssociate Professor of Accounting andPeat Marwick Faculty Fellow StephenRyan's book, Financial Instrumentsand Institutions: Accounting and

Glucksman Institute Awards its Faculty Research Prizes for 2007-2008

NYU Stern's Glucksman Institute for Research in Securities Markets awarded itsannual prizes to three teams of researchers in February. These awards, recognizingand promoting excellence in financial research, are given to the best researchpapers that have been submitted to an academic journal. First prize, which comeswith $5,000, was awarded to Assistant Professors of Finance Stijn VanNieuwerburgh and Otto Van Hemert for their paper, “Mortgage Timing,” co-authored with Ralph S. J. Koijen. Their study explores how the term structure ofinterest rates relates to mortgage choice and finds that the bulk of the time variationin both aggregate and loan-level mortgage choice can be explained by time varia-tion in the bond risk premium.

Associate Professor of Finance Xavier Gabaix, with Sumit Agrawal, JohnDriscoll, and David Laibson, was awarded the second-place prize of $2,500 forhis paper, “The Age of Reason: Financial Decisions over the Life Cycle.” Hisresearch argues that financial sophistication rises and then falls with age, peakingaround age 53.

Assistant Professor of Finance Daniel Wolfenzon, Associate Professor ofFinance Alexander Ljungqvist, and Professor of Finance Matthew Richardsonwere given honorable mention and $1,000 for their paper entitled, “The InvestmentBehavior of Buyout Funds: Theory and Evidence,” which analyzes the determinants ofbuyout funds’ investment decisions.

Eleven papers, representing the research output of 33 authors, were submitted forconsideration in this year's competition.

Sternbusiness 27

Citi Leadership and Ethics Program Celebrates its FifthAnniversary and Names Alice Tepper Marlin itsDistinguished Fellow

For its fifth year, NYU Stern's CitiLeadership and Ethics Program has setits focus on Global Corporate SocialResponsibility (CSR), a rubric that spansenvironmental stewardship and sustain-ability, respect for labor and its inherentrights, and the responsibilities of globalcapital to developing economies. Theprogram has named Alice TepperMarlin its 2007-2008 Citi DistinguishedFellow in Leadership and Ethics. One of the true pioneers in the field, Tepper Marlinhas been called the “architect” of CSR. She is the founder and current president ofSocial Accountability International (SAI), an organization that addresses the ethics ofsupply chains, which often lead back to countries or regions where labor rights are notrespected. She was also the founder and president of the Council on Economic

Priorities (CEP), the first organization to research and publish information on corporateethics for consumers.

As fellow, Tepper Marlin visits professional responsibility classes and, in February,anchored the Citi Program's annual conference, which included the participation ofPamela Flaherty, president and CEO of the Citi Foundation. At the conference, whichaddressed the challenges and opportunities companies face implementing CSR stan-dards, and the many benefits that sound CSR practices yield, Tepper Marlin said that herorganization, SAI, created the SA 8000 standard, a certification for factories that ensuressound working conditions. Today more than 700,000 people work in factories or farmsthat are SA 8000 certified, and their employers are enjoying the benefits of betteremployee relations, less employee turnover, and enhanced brand reputation.

Also as fellow, Tepper Marlin is meeting with the MBA Social Enterprise Associationand the undergraduate Stern Business Ethics Society student clubs, engaging with mem-bers of the faculty, and bringing leaders from her field to the Stern community.

Established in 2003, the Citi Program, made possible through the generous supportof the Citi Foundation and managed by Stern's Markets, Ethics and Law Program, repre-sents a comprehensive effort on behalf of the School to extend its longstanding commit-ment to the practice of professionally responsible business, and supports the develop-ment of curricular and research innovations in the area of leadership and ethics.

Paduano (MBA'69) to buildand sustain avibrant com-munity of fac-ulty acrossdisciplineswho conductresearch inbusiness ethics and related fields. TheseFellows, chosen both for their records ofresearch excellence and for their potentialto integrate ethical theories and issues intotheir scholarly activities, will participate inregular seminars taught primarily by theleading scholars in the field of businessethics. Invited participants include facultyfrom other NYU departments such as phi-losophy, psychology, and sociology, facultyfrom other universities in the New Yorkarea, and some select leading practitioners.

Beginning in June, Paul Zarowin,associate professor of accounting andCharlotte Lindner MacDowell FacultyFellow, will be an editor of The AccountingReview, the American AccountingAssociation's top academic journal.

Robert Salomon, assistant profes-sor of management and organizations,serves on the editorial boards of theAcademy of Management Journal and theJournal of International Business Studies.

He was recently elected to the executivecommittee of the technology and innovationmanagement group of the Academy ofManagement.

Jeffrey Simonoff, professor of sta-tistics and Robert Stansky Research FacultyFellow, is the co-editor of the journal,Statistical Modelling: An InternationalJournal.

This past March in Beijing, WilliamGreene, Toyota Motor Corporation TermProfessor of Economics and Jules I.Backman Faculty Fellow, presented hispaper on econometrics, entitled, “AStatistical Model for Credit Scoring,” at theprestigious 2008 Peking UniversityInternational Experts Conference onPersonal Credit Reporting in China. He wasone of only two Americans who spoke atthe conference.

Last October, Baruch Lev, PhilipBardes Professor of Accounting andFinance and the director of the Vincent C.

s h o r t t a k e sIn January, Nouriel Roubini, pro-

fessor of economics and internationalbusiness, served as a panelist during sev-eral discussions on the economic outlookfor 2008 at the annual World EconomicForum in Davos, Switzerland. He painted agrim picture for the US and, subsequently,the world markets. Also in January,Professor Roubini and Lawrence White,Arthur E. Imperatore Professor ofEntrepreneurial Studies and deputy chair ofthe economics department, participated ina panel discussion on the subprime mort-gage meltdown at the Annual Meeting ofthe American Economic Association inNew Orleans. Professor White also testi-fied, as part of a panel including the chair-man of the SEC and senior executives fromMoody's Investors Service and Standard &Poor's, in a US Senate hearing of theBanking, Housing and Urban AffairsCommittee on the role of credit ratingagencies in the subprime crisis.

Professors Doug Guthrie and BatiaWiesenfeld from management, FosterProvost from information systems, andDavid Yermack from finance wererecently appointed NYU Stern's first fourFellows of the Daniel P. Paduano FacultySymposium on Business Ethics, whichwas established in 2007 through the gen-erous support of alumnus Daniel P.

Ross Institute of AccountingResearch at NYU Stern, presentedthe keynote address at the 2007NYU Stern Board of OverseersDinner, held at The Harold PrattHouse. Lev discussed how corpo-rate managers should interact,actively or passively, with capitalmarkets.

In November, through the generoussupport of NYU Stern alumni, faculty, andfriends, the finance department conferenceroom was named after Nomura Professor ofFinance Martin Gruber, who chaired thefinance department from 1989 to 1997 andwho, with Nomura Professor of FinanceEdwin Elton, has co-authored approxi-mately 100 journal articles and threebooks, including the best-selling financetextbook, Modern Portfolio Theory andInvestment Analysis.

Celebrating the inaugural Paduano Fellows (from left to right): Bruce Buchanan of the Markets,Ethics and Law Program, Foster Provost, Batia Wiesenfeld, Doug Guthrie, Dean Thomas F. Cooley,Daniel P. Paduano, David Yermack, and Edwin Hartman of the Markets, Ethics and Law Program.

Professors Martin Gruber (right) andEdwin Elton at the naming celebration ofthe Martin J. Gruber Conference Room.

Alice Tepper Marlin spoke about corporatesocial responsibility at the recent CitiLeadership and Ethics Conference.

28 Sternbusiness

Sternbusiness 29

he fallout from the sub-prime mortgage crisis hasbeen roiling the US econ-omy for more than a year

and will certainly continue to have aneffect for some time. Many observerswonder how a situation of such mag-nitude could have developed to sucha disastrous point under the radar, soto speak, of our most sophisticatedfinancial institutions and regulatoryofficials.

As is by now well known, the sub-prime market grew dramaticallystarting in 2001. Based on our data-base, which covered roughly half ofthe subprime mortgage market, thenumber of new loans in each yearmore than quadrupled, and the aver-

age loan size almost doubled over thesample period. The total dollaramount of loans originated in 2001was $94 billion; astoundingly, in2006, it was $685 billion.

We took a close look at the historyof mortgage loans between 2001 and2006 to see if there was any patternevident that could have led people toforesee, and thus forestall, the crisisthat occurred in 2007. Because of thelarge amount of detailed data, we dida number of regressions of differingcomplexity before the answers beganto emerge. For one, we analyzed thequality of subprime loans by adjust-ing their performance for differencesin borrower characteristics, loancharacteristics, and economic cir-

cumstances. The results showed thateven by the end of 2005, a dramaticdeterioration of loan quality couldhave been detected – had it onlybeen observed.

Indeed, problems in the subprimemortgage market were imminentlong before the actual crisis surfaced,but apparently went unnoticed. Ourtheory is that steep appreciation inthe price of houses over the periodsince 2001 – the boom years – actu-ally masked the true riskiness of thesubprime mortgage loans, as dis-tressed homeowners were able torefinance their way out of troubleuntil the chickens came home toroost and the cycle went bust.

TheSubprime

MortgageCrisis :

Could we haveseen it coming?

By Yuliya Demyanyk and Otto Van Hemert

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p r o b l e m s ,which motivat-ed us to use theCLTV as adeterminant ofd e l i n q u e n c yand foreclo-

sure. However, the first-lien LTV isan even more important determinantof the mortgage rate, possiblybecause the loss-given-default on thefirst-lien loan is more related to thefirst-lien LTV than the CLTV. Wewondered whether lenders wereaware of high LTV ratios beingincreasingly associated with riskierborrowers. To this end, we tested, viaa series of regressions, whether thesensitivity of the lender’s interest rateto the first-lien LTV ratio changedover time. We found that lenderswere to some extent aware of theassociation between high LTV ratiosand risky borrowers.

Bad BehaviorIn another exercise, we explored

the behavior of the subprime-primerate spread. In general, the mortgagerate on subprime mortgages is high-er than on prime mortgages in orderto compensate the lender for theadditional default risk associatedwith subprime mortgages. To explorethe rate spread pattern, we focusedon FRMs, not hybrid mortgages,because the price of hybrids is deter-mined by both the initial teaser rateand the margin over the index rate,which complicates the comparison ofsubprime and prime rates. We useddata on subprime rates from theLoanPerformance database, and forthe prime rate, we used the contractrate on FRMs reported by theFederal Housing Finance Board inits Monthly Interest Rate Survey. Wefound that the subprime-prime ratespread declined over time, both with

30 Sternbusiness

Disquieting PatternsWe derived our data from a loan-

level database containing informa-tion on about half of all US subprimemortgages originated between 2001and 2006. What exactly constitutes asubprime loan is a matter of somedebate. For example, the term sub-prime can refer to certain character-istics of a borrower, such as a poorcredit rating or a previous history offoreclosure; or a lender, who mayoriginate high-cost loans or originatemore refinances than purchase-money loans, for example; or a secu-rity, of which a subprime loan canbecome a part; or a borrower with adecent credit history who is risky inother ways, such as providing nodocumentation verifying income orpaying no money down. The com-mon factor across these definitions isthe high risk of default. For purposesof our investigation, we focused onfirst-lien loans over the 2001 to 2007period.

ur findings on delinquentloans revealed note-worthy information. Wedefined a loan to be delin-

quent if payments on the loan were60 or more days late or the loan wasin foreclosure. For the subprime mar-ket as a whole, we found that the vin-tage 2006 loans stood out in terms ofhigh delinquencies and foreclosures.Further, the bad performance of thatvintage was not confined to a partic-ular segment of the subprime mar-ket, but rather reflected a market-wide phenomenon.

It is important to note that, at firstsight, our finding that the crisis alsoworsened the performance of fixed-rate mortgages (FRMs) seems at oddswith remarks in 2007 by FederalReserve Chairman Ben Bernanke,who said that serious delinquenciesin that sector had been “fairly stable

at about 5.5 percent.” The discrepan-cy occurred because we comparedFRMs of the same age that originatedin different years. If just the out-standing mortgages altogether wereanalyzed, the picture more closelyresembles Bernanke’s observation.We plotted exactly this for both FRMsand hybrid mortgages and found thatthe delinquency rate of outstandingFRMs did remain fairly constant as of2005, as the Fed chairman observed.But the result is affected by an agingof the FRM pool caused by a decreasein the popularity of FRMs. FRMs thatoriginated in 2006 performed unusu-ally badly.

Among the interesting results ouranalysis generated was the impact ofthe combined loan-to-value ratio(CLTV) on mortgage rates over time.Considering all first-lien loans, about30 percent have a CLTV smaller than80 percent; about 20 percent have aCLTV of exactly 80 percent; andabout 50 percent have a CLTVgreater than 80 percent. The averageCLTV increased slightly from 80 per-cent in 2001 to 84 percent five yearslater. Also, the distribution shiftedslightly over time: in 2001 the per-centage of loans in these three CLTVcategories was 35 percent, 20 per-cent, and 45 percent, respectively; in2006, it was 28 percent, 14 percent,and 58 percent, respectively. Ouranalysis showed that high CLTVratios have been increasingly associ-ated with higher delinquency rates.

Common sense says that the bur-den of all the debt together may bethe factor that triggers financial

“The combination of a large increase in credit availability, easier financing, lowering price, and

deteriorating loan performance resembles a classiclending boom-bust scenario in which unsustainable

growth lead to the collapse of the market.”

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he combination of a largeincrease in credit avail-ability, easier financing(that is, loosening under-

writing standards in terms of, forinstance, LTV requirements), lower-ing price, and deteriorating loanperformance resembles a classiclending boom-bust scenario inwhich unsustainable growth lead tothe collapse of the market.Argentina in 1980, Chile in 1982,Sweden, Norway, and Finland in1992, Mexico in 1993, andThailand, Indonesia, and Korea in1997 have all experienced lendingboom-bust scenarios, albeit in dif-ferent economic settings.

Were problems in the subprimemortgage market imminent longbefore the actual crisis showedsigns in 2007? Our answer is yes, atleast by the end of 2005. Byexcluding the data for 2006 fromour analysis, we showed that thesteady degradation of the subprimemarket was already clear, with theworsening of loan quality alreadyin progress for five consecutiveyears. The main challenge indetecting this deterioration was thesteep appreciation in housing pricesthat masked the true riskiness ofthe subprime mortgage loans. ■

Y U L I YA D E M YA N Y K is an economistin Banking Supervision and Regulationof the Federal Reserve Bank of St. Louis,and OTTO VAN HEMERT is assistantprofessor of finance at NYU Stern.

The views expressed are those of theauthors and do not necessarily reflectthe official positions of the FederalReserve Bank of St. Louis or the FederalReserve System.

Professor Van Hemert has presented thisresearch to the US Securities and ExchangeCommission, the Board of Governors of theUS Federal Reserve System, and theInternational Monetary Fund. The papercan be downloaded in its entirety athttp://ssrn.com/abstract=1020396.

Sternbusiness 31

and without adjustment for changesin loan and borrower characteristics.At the same time, the riskiness ofloans has increased, implying that ona per-unit basis, the subprime-primespread declined even more.

With all this interesting data inhand, our overriding question was asfollows: Based on information avail-able at the end of 2005, was the dra-matic deterioration of loan qualityalready apparent? To answer this,we had to recalculate existing regres-sions, making use of data between2001 and 2005, not 2006. Theresulting age pattern in the correcteddelinquency rate, after adjusting forloan and borrower characteristicsand economic circumstances, hasbeen rising steadily since 2001, andthe marked deterioration of the loanquality was already apparent by theend of 2005.

Some have argued that the explo-sive growth in the subprime mortgagemarket was largely fueled by the devel-opment of mortgage-backed securities(MBS) into so-called private-labelMBS, which are loans securitized by aparty different from the GovernmentSponsored Enterprises (GSEs) and donot carry any kind of guarantee. Incontrast to buyers of GSE-issued MBS,buyers of the private-label MBS bearthe default risk on the mortgage loan.Searching for a higher yield, the argu-ment goes, investors kept increasingtheir demand for the private-labelMBS, which led to sharp increases inthe subprime share of the mortgagemarket – from around 8 percent in2001 to 20 percent in 2006 – and inthe securitized share of the subprimemortgage market – from 54 percent in2001 to 75 percent in 2006.

Hindsight is 20/20We showed that during the dra-

matic increase of the subprime

(securitized) mortgage market, thequality of the market also dramati-cally deteriorated, vis à vis the per-formance of the loans adjusted fordifferences in borrower characteris-tics, loan characteristics, and subse-quent house appreciation. The degen-eration of the loan quality has beenunvarying and steady, but not equal-ly so among different types of bor-rowers. Over time, high-LTV borrow-ers became increasingly risky com-pared to low-LTV borrowers.Securitizers seem to have been awareof this particular pattern in the rela-tive riskiness of borrowers: wedemonstrated that over time theymade the mortgage interest rate moresensitive to the LTV ratio of borrow-ers. Specifically, in 2001, a borrowerwas hardly charged a higher interestrate for the higher LTV ratio. In con-trast, in 2006, a borrower with a one-standard deviation above-averageLTV ratio was charged an interestrate higher by 30 basis points.

In principle, the subprime-primemortgage rate spread, or subprimemarkup, should account for thedefault risk on subprime loans. As theoverall riskiness of subprime loansrose between 2001 and 2006, for amarket to experience sustainablegrowth, the subprime markup shouldhave risen as well. We proved that thiswas not the case: Both the price of riskand the price per unit of risk (the sub-prime markup adjusted for differencesin borrower and loan characteristics)declined over time. This seems to sup-port the argument that buyers of pri-vate-label MBS were priming thepump, willing to ignore the mountingrisk to satisfy their hunger for higheryields. With the benefit of hindsight,we now know that indeed this situa-tion was not sustainable, and the sub-prime mortgage market experienced asevere crisis in 2007.

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Does ChatterMatter?

By Vasant Dhar and Elaine Chang

32 Sternbusiness

When bloggers and other Web users sound off, the music industry should tune in.

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ne of the most fascinat-ing aspects of theWorld Wide Web’s openaccess is that people

sound off on virtually every topic ofinterest. As a consequence, the Webis fast becoming the repository forglobal information, and an increas-ing share of information on theInternet is being generated by indi-viduals, rather than organizations or“experts.” How people use and areinfluenced by this information is anactive area of research. We particu-larly wanted to understand howmusic sales are affected by user-gen-erated content.

Previous research has found thatonline consumer reviews can predictbook and movie sales, but we don’tknow of any prior study that hasexplored the effects of user-generat-ed content, especially blogs andsocial networking sites as well as tra-ditional sources of reviews, for pre-dicting online music sales. Our ques-tion was whether user-generatedcontent provides any predictivevalue for music sales, or whether it islargely retrospective, or just plainnoise.

We investigated the impact ofuser-generated content on sales ofmusic CDs – which still account for85 percent of the music market – bylooking at blogs and social network-ing sites. A blog (short for Web log)is a website that is usually writtenlike a journal, with users’ postingsarranged in reverse chronologicalorder. Some surveys estimate that astaggering 30 percent of the US pop-ulation considers blogs an importantsource of information. Social net-working sites enable people to create

with others. Readers recognize andpay attention to good blogs. A goodreputation helps blogs attract trafficthat is, in turn, influenced by theircontent.

We also hypothesized that socialnetworks matter. In the music indus-try, the social networking siteMyspace (www.myspace.com) has astrong reputation for promotingmusic artists. The site provides a spe-cial music category that allows artiststo create profile pages, includingband biographies, upcoming tourdates, and streaming music tracks.Through these band profiles,Myspace users can simultaneouslypromote artists they like to theirfriends and bookmark the artists’work. The number of friends dis-played on a band’s Myspace page islike a public badge of popularity. Wewould expect that a band with thou-sands of friends on Myspace wouldbe more popular with Myspace usersthan a band with just a handful.

Methodology and DataOur methodology was to gather

data tracing the changes in user-gen-erated content for an album bytracking the volume of blog chatter,the number of friends an artist hason Myspace, and the album reviewsfor four weeks before and after therelease date. We controlled for theinfluence of external differences inpromotion budgets and so on byrecording whether an album isreleased by a major or independentlabel. We constructed measurableindicators for user-generated contentas well as traditional content, such asalbum reviews from mainstreamsources like Rolling Stone, with the

profiles and make connections toothers who live in the same area,share similar interests, or simplyseem interesting. Users create a pub-lic list of mutual friends – that is,both users have listed each other as afriend. In assessing the significanceof user-generated content, we com-pared it to more traditional informa-tion sources, such as professionalreviews in print or electronic media.

Try it, you'll like it!Music, like books, movies, vaca-

tion spots, and even medical andfinancial advice, is considered an“experience good” – a product whosequality is difficult to observe or sam-ple adequately before purchase.People often rely on others for inputin making a decision about whetherto buy or utilize such a product. Theinfluence of traditional and user-gen-erated content – whether by profes-sional or amateur reviewers – hasbeen a key area for research in rela-tion to the movie and book indus-tries.

With the ability to sample musicon the Web, music has become some-what less of an experience good. Doesthat mean that what others say abouta new album shouldn’t matter?Perhaps. But blogs could also serveas an “attention directing” mecha-nism in generating more awareness.In other words, if there is a large vol-ume of blogs about an album,chances are that the album is creat-ing some buzz. Our hypothesis wasthat blogs matter, because we believethat a lot of effort goes into writinggood blogs, and their authors feelpassionate enough to spend timewriting and sharing their thoughts

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intention of understanding their rela-tive significance on music sales. Blogchatter and the extent of social net-work connectivity were employed asthe proxy for user-generated content.We then did modeling to examine therelative significance of the variablesin predicting album unit sales twoweeks ahead.

Our data consisted of album sta-tistics and data collected from pub-licly available information on web-sites. We compiled the sample ofmusic albums by collecting thenames of albums released in the USbetween January 16 and March 6,2007, from Pause & Play(www.pauseandplay.com), a websitedevoted solely to listing upcomingalbum releases. Old material, suchas reissues and compilations, wasexcluded from the sample.

We focused on physical CD sales,since information on digital musicsales is difficult to obtain and down-loading still holds a far smaller mar-ket share. We computed album salesbased on Amazon.com sales ranks,because Amazon is one of thelargest online CD retailers and itssales ranks are easily observed.(Nielsen Soundscan would havebeen the ideal source for album salesdata, as it is the industry standardtracking system for sales of musicproducts in the US, but its data areproprietary and very expensive toobtain.) We cross-checked the releasedate given by Pause & Play withAmazon’s page for the album in orderto verify that the record label had notmoved the release date, and if thealbum did not have a correspondingpage on Amazon, it was eliminatedfrom the sample. Since Amazonallows consumers to preorder or pur-chase products far ahead of the actu-al release date, we were able to sepa-

rate chatter prior to the product beingevaluated from the chatter that fol-lows after release. The final sampleconsisted of a total of 108 albums.

The Chicken or the Egg? One might question whether chat-

ter is truly predictive of subsequentsales, or whether increased sales lead

to increased chatter which, in turn,leads to increased sales. To test this,we divided the dataset described ear-lier such that only pre-release chatterwas considered and paired with post-release sales.

he results show unequiv-ocally that user-generat-ed content as measuredby blog chatter matters

in subsequent sales for music.Interestingly, the increase in size ofthe social network was not significantin the reduced dataset, suggesting thatit may have no predictive value beforerelease or that it may only matterafter release.

Finally, it is natural to ask whetherit is reasonable to conclude thatincreased blog chatter really causes anincrease in sales or whether otherunobserved variables might be affect-ing both blog volume and sales. It isnot possible to make such a conclu-sion based on this study. Perhaps the“quality” of the artist causes bothincreased blog chatter and sales,where high quality is somehow recog-nized in the marketplace by some

mechanism, which, in turn, has itseffect on what we observed. Without astrong prior model that includes sucha variable, it is not possible to drawany causal connection. This is impor-tant not just theoretically but practi-cally, because it means that it may befutile to engineer an increase in blogposts with the expectation that thiswill lead to higher sales!

Chatter MattersWere there any significant interac-

tion effects among the various met-rics? We posited that these would beof particular interest to marketingmanagers interested in sifting throughthe burgeoning volume of Web 2.0metrics becoming available on theInternet. Which ones, when consid-ered simultaneously, would provideinsights not derivable by looking atthem in isolation? It is currently diffi-cult to have well-formulated hypothe-ses about this. However, it is worth-while to work bottom-up using induc-tive pattern-discovery methods to findthe interesting interactions that canbe tested further in future studies.

We analyzed the data to uncoverthe significant interaction effects andfound that blog chatter was the mostimportant variable. If an album hadmore than 40 blog posts, it had anabove-average level of sales. If analbum had more than 40 blog postsand was released by a major label,then it was likely to have very highsales. This was no surprise, as a largenumber of blog posts indicate a highlevel of buzz, and being released by amajor label means it is more likelythat there will be significant promo-tion of the album through channelsother than the Internet. Interestingly,though, if blog chatter was extremelyhigh – above 240 posts – an albumwas able to overcome the disadvan-

“The results show unequivocally that

user-generated content asmeasured by blog chatter

matters in subsequentsales for music.”

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tage of being released by anindependent label. In fact,albums with such extremehighs in chatter corre-sponded to sales evenhigher than major-label, high-chatteralbums. However,even if chatter wasrelatively high foran independent label(above 40 posts),sales were higher thanthe average for the sam-ple, but still relativelylow if the 240-post levelwas not breached. An inde-pendent label with low blog chatterhad very low sales, as expected.

Finally, our results indicated thatmajor label releases with low blogchatter (less than 40 blogs) and lownumbers of Myspace friends wouldhave higher sales than major labelreleases with low blog chatter andhigh numbers of Myspace friends.This seems counter-intuitive at first,but in the sample, major-labelreleases without a Myspace pagewere considered to have zeroMyspace friends, which couldexplain the result. In addition, majorlabel releases that had a Myspacepage but few Myspace friends werefrom artists such as JohnMellencamp and Art Garfunkel; wewould presume that the majority oftheir audiences, who are older, donot generally use Myspace.

ConclusionsChatter does matter. In general,

the Internet has a lot of “organic”content, representing the collectivefeelings and opinions of a lot of peo-ple, many of whom are probablywell-informed individuals on a widerange of subjects.

Our research showsthat the Internet providesconsumers with a powerful word-of-mouth channel for information onupcoming music releases. We ana-lyzed the usefulness of blogs andsocial networks, as well as reviews inconsumer, online media, and main-stream media, in predicting albumsales in the four weeks before andafter the album’s release date. Wefound that the most significant vari-able is blog chatter or the volume ofblog posts on an album, with highernumbers of posts corresponding tohigher sales.

i ghe r-pe rc en tagechanges in Myspacefriends may also besignificant, althoughthe results here were

not consistent. We found that theaverage consumer rating is signifi-cant, while the number of consumerreviews is not. Our results also showedthat average consumer ratings betterpredict sales than average mainstreammedia ratings.

Our analysis also showedthat traditional factors can-

not be ignored. Whileindependent label releas-es with extremely highblog chatter can selleven more units thanmajor label releases,our findings estimatedthat the average majorlabel release soldapproximately 12 times

more than the averageindependent label release.

We also found that thehigher the number of main-

stream media reviews, thegreater the sales. The results of this study suggest

that user-generated content should beconsidered seriously by record labels.Most notably, since blog chatter andMyspace friend information is avail-able before an album releases andships, record labels can examine thesetwo variables to predict future saleswell in advance of when the album isavailable in stores.

At the same time, we cautionagainst assumptions of causality forreasons discussed in the last section. Ifblog posts start becoming manipulat-ed because people think they have animpact on sales, the predictive powermight disappear because the underly-ing reasons for it disappear. There is acrude analogy here to efficiency infinancial markets, where predictivemodels lose their power over time asthe relationships become recognizedand exploited by people who seek tobenefit from them. ■

VA S A N T D H A R is professor of infor-mation systems, chairman of the informa-tion systems group, and co-director of theCenter for Digital Economy Research atNYU Stern, and E L A I N E C H A N G (BS’07) recently graduated with a doublemajor in finance and internationalbusiness from NYU Stern.

HSternbusiness 35

he recent spate of nat-ural disasters, fromHurricane Katrina tothe Malibu fires andNevada floods, has

made insurance coverage a focus ofheightened concern around thecountry. One of the most intriguingquestions to insurance professionalsand academics is why consumersprefer to buy low- or zero-deductible insurance policies.Experts have known for years thatconsumers are paying too much for

tion people make about how a poli-cy should be priced with and with-out a deductible. This initialassumption, together with theresulting method people use to cal-culate and judge the fairness of (inthis case) a policy’s price, follows theanchoring heuristic. We theorizedthat the specific anchoring heuristicworks as follows: people first consid-er the price of a full-coverage policy,then work backward, subtractingthe amount of the deductible fromthe price of the full-coverage policy,

full-coverage insurance policiessince they prefer to completely elim-inate risk and uncertainty.

The explanation that we proposeis that consumers generally thinkthat policies with deductibles costtoo much, and that the greater thedeductible, the more overpriced thepolicy. We wanted to understandwhy this misperception was so com-mon.

We conjectured that the tendencyto buy too much insurance is causedby an initial and erroneous assump-

By Zur Shapira and Itzhak Venezia

Paying a Premium:

Why do consumers buy

too much insurance?

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with no consideration for the proba-bility or likelihood that they will notget into an accident in any givenyear and thus will not have to shellout the deductible amount. A policywith a deductible priced accordingto the true expected payments may,therefore, seem overpriced to theinsured, we hypothesized. Andbecause consumers do not tend tothink that full-coverage policies aresimilarly overpriced, they may con-sider them relatively better “deals.”

We set up a series of experiments

cific rates vary by location, a typicalcollision damage waiver (CDW) fora rental car costs on average $15 perday, which is equal to $5,400 on anannual basis. In stark contrast,comprehensive automobile insur-ance for one’s own car does not costmore than $1,000 per year in mostlocations in the US. The differencein price is clearly non-trivial. Whyare people willing to pay such highrates for CDW when renting a car?

In another example, merchantswho sell various electronic products,

to investigate our hypothesis. Wealso explored whether professionalsin the field of insurance are lessprone to such a bias.

Everyday DecisionsIn the marketplace, there is a high

demand for full-coverage policiesand policies with very lowdeductibles. For example, almost allliability insurance policies providefull coverage or a zero deductible.Consider also collision damageinsurance for rental cars. While spe-

such as cell phones costing $200 orless, also offer insurance against lossfor a non-trivial additional cost,which many consumers purchase.Even when those policies include aservice component, buying themdoes not seem rational compared totheir cost to the consumer over thelife of the product. Yet such policiesare valuable profit centers for manycompanies.

edical insurancepresents anotherstriking example ofthe consumer pref-erence for full cov-

erage. The US Bureau of LaborStatistics reports that during theyears 1994 to 1997, 34 percent offull-time employees in the privatesector who were enrolled in non-HMO medical care organizationshad no deductibles in their medicalplans. This percentage rose to 42percent for “preferred providerorganizations” (US Department ofLabor, 1999). HMOs, of course,typically have zero deductibles.

We tested our theory that theanchoring heuristic affects the pref-erence for full coverage experimen-tally. We argued that the price of afull-coverage policy is a naturalstarting point for evaluating a poli-cy with a deductible. Insureds con-tinue from this starting point andcalculate the price of policies withpartial coverage by “anchoring” onthe value of the deductible. Infocusing on this amount, as we havepointed out, they neglect to takeinto account the probabilities asso-ciated with actual damages – that is,the fact that it is far from a surething that they will get into an acci-dent and incur damages in any par-

their profits. Our amateur subjects were

groups of American MBA and IsraeliMBA students. Prior to participatingin the experiment, the studentscompleted several courses in eco-nomics and statistics and at leastone course in finance. The studentswere offered incentives based on theprofits they generated in the experi-ment, in the form of $100 and $50gift certificates for first and secondplace. Our group of professionalsubjects ranged between 30 and 55years old and had at least five yearsexperience in the insurance indus-try. They were pursuing advancedcourses in insurance at the time.

Almost Pavlovian In our experiment, the amateurs

tended to underestimate the value ofpolicies with a deductible. As wehypothesized, they were inclined toestimate the value of such policiesby calculating the value of an equiv-alent full-coverage policy, and thensubtracting the deductible. In thiscase, the higher the deductible, thehigher the undervaluation of thepolicy. For example, the AmericanMBA students’ average price for thezero-deductible policy was $181.30;it was $125.60 for a policy with $60deductible, and $87.50 for a policywith $120 deductible.

Our subjects clearly appear tohave followed the anchoring heuris-

ticular year. Since they do not adjustfor this probability, they end upunderestimating the worth of suchpolicies. Insurance companies areunlikely to make such errors, andhence the prices they set for policieswith a deductible may seem unjusti-fiably high to customers. On theother hand, insureds are less likely tounderestimate the values of full-cov-erage policies, and hence they maydeem such policies as more ade-quately priced – “fairer,” perhaps –than the partial coverage policiesoffered by the insurance companiesand so prefer them to policies with adeductible.

We conducted three experimentsto test our hypothesis, asking threegroups of subjects, whether amateuror professional, to play the role ofinsurance sellers, and to price poli-cies with and without a deductible.We assumed that insurance sellerswould pay more attention to pricingdecisions than buyers would pay totheir purchasing decisions. The rea-son is that sellers need to think oftheir competitors as well as theirpotential customers in pricing theirproducts. However, we have no rea-son to expect sellers to be less proneto biases such as the anchoringheuristic, unless they have had somereal experience in selling insurancepolicies in the past. They competedwith other sellers, and their objectivewas to set prices so as to maximize

38 Sternbusiness

“The fact that consumers prefer low deductibles is often

interpreted as an indication of high-risk aversion, a preference

to forestall or avoid any damages. Our results suggest that such

behavior can also result from cognitive biases.”

M

Sternbusiness 39

tic in solving this problem. Oftenpeople adjust insufficiently fromvalues they generate themselves asstarting points while knowing thatthese values are incorrect but closeto the target value. Such self-gener-ated anchors help simplify the com-plex cognitive process involved inmaking judgments. Along theselines, it appears that our subjectsmight have gone through a similarprocess. They were not providedwith an anchor, but the amount ofthe deductible was construed bythem as a good enough figure withwhich to determine the price of apolicy with a deductible, eventhough they did not verify that itwas the correct value. It definitelyhelped them come up with whatthey considered a plausible valuewithout expending much effort, butthey came out with a biased per-spective.

In comparison with the ama-teurs, we found that the profession-al subjects were less likely to exhib-it the above bias. Professionals werelikely to value and price deductiblepolicies reasonably, i.e., according tothe true expected payments: where-as, the general public (amateurs)may find the prices the professionalsset for policies with a deductible tobe too high compared with theirown underestimated expectations.Though the professionals in ourstudies had similar academic back-grounds to that of the amateurs,their experience in the field helpedthem perform better than the ama-teurs. Possibly the professionals’experience minimized the tendencyto anchor on the deductible whenevaluating policies with deductibles.

The fact that consumers prefer

low deductibles is often interpretedas an indication of high-risk aver-sion, a preference to forestall oravoid any damages. Our results sug-gest that such behavior can alsoresult from cognitive biases.Although it could be argued thatsuch a bias may not significantlyaffect market behavior becausemore sophisticated insurance sellersmay eventually lead the market to amore rational equilibrium, the truthmay actually be the opposite. Evenif professional insurance sellers arerelatively immune from this bias,the fact that consumers are affectedby it has direct implications, sincetwo sides are needed for markettransactions.

real-life examplecan i l lus tratethis argument.During the timewe ran one of theexperiments, theDirect Insurance

Corp., one of the largest insurancecompanies in Israel, advertisedinsurance rates for policies with dif-ferent levels of deductible for a$30,000 2004 Toyota Corolla fordrivers whose age was 25 or higher.We circulated a survey among MBAstudents enrolled in a graduatecourse on risk management andinsurance at the Hebrew University,asking them to indicate what level ofcoverage they would choose. Of the43 students responding to the sur-vey, 22 (51 percent) chose the lowerthree levels of deductible. When thedeductible was raised from $137 to$180, an increase of $43, theinsured saved $35. Practically,unless the insured is certain that heor she will have an accident, or is

extremely risk-averse, the lowerdeductible would seem to be an infe-rior alternative. By increasing thedeductible from $180 to $245, anincrease of $65, the insured saves$42. Again, unless there is a veryhigh probability of an accident,which in order for this policy to bereasonable would have to be anunlikely 71 percent, the higherdeductible makes more sense. We donot have data on the percentage ofinsureds that buy policies at eachlevel of deductible from DirectInsurance, but it is reasonable toassume that if the insurer advertisedthis price list, there was demand forall those deductibles.

The fact that the amateurinsureds in our sample failed tocomprehend the implications of thealternatives presented to them hasdirect market implications. Ourfindings certainly have some ramifi-cations both from the point of viewof consumer groups and from theperspectives of regulators and prac-titioners in the insurance industry.In particular, consumers are not aswell informed as they are sometimesassumed to be, and educating themwould be beneficial. ■

Z U R S H A P I R A is the William R.Berkley Professor of Management andEntrepreneurship at NYU Stern, andI T Z H A K V E N E Z I A is the SangerFamily Professor of Banking and RiskManagement at the Hebrew Universityof Jerusalem School of BusinessAdministration.

The full article is forthcoming in theJournal of Economic Psychology andcan be downloaded in its entirety athttp://dx.doi.org/10.1016/j.joep.2007.07.007.

A

40 Sternbusiness

Community Building on a Global Scale

In January, Stern sophomore Misha Esipov and nine of his fellow undergraduatestudents arrived in San Jose, Costa Rica, one of the most popular vacation destina-tions among 20-somethings today. But there was no surfing or sun-bathing for Esipovand his classmates; rather they headed to an inland town two hours north of San Josécalled Ciudad Quesada (better known by the locals as San Carlos) where they didn'tsee another tourist for a week.

Esipov and his team were there as part of the newly launched program, SternInternational Volunteers, which was established to complement the School's four-course sequence in social impact and to provide a small group of students with first-hand exposure to communities in developing economies through service work. Theinaugural year was made possible through the generosity of Stern alumnus FredPoses (BS '65) and a partnership with New York non-profit Cross-Cultural Solutions.

The students spent the next week scrubbing, scraping, and painting the EscuelaRepública de Italia, a local elementary school. The school, which was built in 1938, isextremely overcrowded, forcing its 300-plus young students to attend in half-dayshifts.

“The experience was really eye-opening. On our first day at the school, we weregiven the most basic tools to work with and the job, in some ways, seemed unattain-able. But, the spirit of the community and our team was really inspiring,” Esipov

explained. “Forinstance, we learnedthat the families inthe community hadcontributed themoney to buy thepaint – somethingthe school couldn't

afford on its own.”The week proved a

true partnershipbetween the community and the Stern team. “It was particularly rewarding to meet thekids who attended the school. Many of them worked hand-in-hand with us as wepainted,” said Esipov. “And, on our last day, a few dozen of the students put on anextravagant dance performance. It felt great to see that we made an impact on theirlives, even though they really made more of an impact on ours.”

The end result of the week's work was a two-toned, vibrantly pink school, a cleanand reorganized school library, and a newly painted computer room. “And our finaltouch was to mark one of the freshly painted cinderblocks with the NYU torch, theStern name, and each of our signatures,” described Esipov. “It was wonderful to leavea piece of NYU Stern and ourselves behind.”

Peer to Peer

Stern Senior Branches Out With Online Résumé Venture

“A résumé can only tell you somuch about a person,” observed Sternsenior Andrés Sette Arruza (BS '08).Arruza, along with NYU alumnusRandall Green (Gallatin '07), conceivedBanyanLink in 2006 as a way to dobetter. BanyanLink is an innovativeprofessional networking website thatprovides students and post-collegejob-seekers with a platform to promotethemselves while connecting withpeers, mentors, and potential employ-ers. The site enables its users to createan interactive résumé by integrating

social networking tools with a professional approach. The venture grew out of the pair's dissatisfaction with the lack of resources

available to help young people develop their passions early in life. “We thought itwould be useful if there was an outlet for students to cultivate their aspirations andcommunicate with like-minded individuals,” Arruza explained. Facilitated by aboard of advisors comprising Stern faculty, university administrators, and industryexperts, Arruza and Green evolved their concept into an online network whereusers can present themselves as marketable professionals while also displayingtheir unique personalities.

“We see BanyanLink as the professional complement to social networkingsites like Facebook,” Arruza said. “A BanyanLink profile is essentially a personalbrochure. You can display the typical qualifications found on a résumé, but you

can also include distinctive details such as what languages you speak, photos ofyour travels, and authors who inspire you. The goal is to encapsulate each personas a well-rounded individual.”

The recently launched BanyanLink is not only a boon for job-seekers, but foremployers as well. “Instead of having to wade through identical-looking résumés,recruiters can search profiles of qualified candidates and obtain a sense ofwhether someone is a good fit for a position,” explained Arruza. He also stressedthat networking on the site is not restricted to employer-student communications.BanyanLink's uniqueness stems from the fact that it works in conjunction withuniversity career centers to facilitate communication between colleges, students,and employers: “BanyanLink isn't necessarily all about finding a job. Our goal isto integrate students, alumni, recruiters, and universities in a collaborative net-work to mentor each other, nurture passions and goals, and help promote person-al growth overall.”

Arruza had originally planned a career in the music business. He credits hisStern education with giving him the skills and confidence to launch his own ven-ture. “I came to Stern with very little business knowledge, and I learned so muchthat directly applies to what I'm doing today,” he said. For example, learning todevelop a comprehensive business plan and understanding the legal aspects ofstarting a business have helped the two students secure financing for theirendeavor. “My Stern education has been instrumental in BanyanLink's implemen-tation,” Arruza remarked.

Upon graduation, Arruza and Green will dedicate themselves full-time toBanyanLink, which takes its name from the banyan tree whose branches generatenew limbs that then dig into the ground and become roots of additional, con-joined trees. “The banyan tree literally networks with itself,” Arruza explained,“which inspired our vision for the website. We envision a worldwide collaborativeprofessional community that encompasses various industries, colleges, andalumni networks and provides a forum for young professionals to network, nur-ture others, and grow.”

Student Life in Washington Square and Beyond

Misha Esipov (front row, second from right) and his fellow class-mates worked with elementary school students in Costa Rica toimprove the appearance of their school.

Business partners and fellow NYU studentsAndrés Sette Arruza (left) and Randall Greencreated BayanLink to provide job-seekers anonline platform to network and promotethemselves.

Sternbusiness 41

Executive MBA Students Learn About Micro-Lendingfrom its Founder, Nobel Laureate Muhammad Yunus

More than 150 MBA andExecutive MBA students at NYUStern in September had the rareopportunity to hear Dr. MuhammadYunus, the 2006 Nobel Peace Prizewinner recognized for his social andeconomic leadership in revolution-ary programs that benefit the ruralpoor. Yunus spoke about microfi-nance – the system he created – andthe role of women in developing astrong family structure throughentrepreneurial activities.

Yunus, founder of the GrameenMovement to promote awareness and action for the elimination of poverty andhunger, discussed the birth of micro-credit more than 25 years ago. He explainedhow he was “pushed by the circumstances” to create what has become a true phe-nomenon. In 1971, he was teaching economics at Chittagong University inBangladesh, when, “after much bloodshed,” the country won its independencefrom Pakistan. Just three years following the war, famine struck and hundreds ofthousands of people died.

Surrounded by the crushing poverty that remained (Bangladesh lacked a wel-fare system), Yunus traveled around the villages offering help. He began trackingthe number of people who had borrowed money from banks. His list totaled mere-ly 42 borrowers with a combined total of $27 borrowed. Ultimately, Yunus said, hediscovered the hard truth that banks would not loan money to the poor. As aresult, he began taking out loans in his name for others. Eventually, he openedGrameen Bank, which now operates 1,092 branches in 36,000 rural Bangladeshvillages, providing unsecured credit to more than two million of the country'spoorest people, and micro-credit – or, as he prefers to call it, micro-capitalism,“because it reflects more clearly what we do” – was born.

Today, almost every country, including the US, has a micro-finance programmodeled after and/or supported by the Grameen Bank Replication Program. Theprograms operate on principles opposite those of traditional banks. “We learnedhow traditional banks work, and then we set up our institutions to do the reverse,”Yunus explained. “The less you have, the bigger the loan. There is no collateral,no guarantee, no legal contract. Loans are built on trust, because these are hard-working people.”

Ninety-four percent of Grameen Bank's borrowers are women, who, in turn,have an unparalleled repayment rate of 98 percent. Women use the loans to buyassets for their micro-businesses that can immediately start paying income – suchas cotton to weave, or raw materials for bangles, or cows to milk. They repay theirloans in tiny weekly installments, at which point they can take out progressivelybigger loans, ultimately becoming self-sufficient.

Yunus argued that poverty is created by the systems and institutions that soci-ety creates, specifically financial institutions, which “require you to have money tomake money.” He said that business, in its simplest form, is the maximization ofprofit. But he declared that there should be a second type of business, one to “dogood for the people.” He explained, “The social dollar is very powerful because itcomes back to you and continues to be used over and over again for social good.”

Yunus closed his talk with a powerful message: “We can put an end to povertyon this earth. It can exist only in museums. All we need is a bold decision that itcan be done.”

NYU Stern “Goes Green” with Campus Greening Initiative

R. J. Panda (MBA '08) has a passion for environmental issues. He studiedenvironmental health engineering at the University of Connecticut, and when hearrived at Stern, he joined the Social Enterprise Association (SEA) – an MBAstudent club focusing on corporate social responsibility, social enterprise, andnon-profit management – with the aim of bringing an environmental mindset tothe School. The result: the Stern Campus Greening Initiative (SCGI), whichPanda started with the support of SEA and Stern leadership. “Through theSCGI, we want to encourage the Stern community to think about its impact onthe environment and, eventually, effect a long-term change in behavior andmindset,” explained Panda. “And with these issues becoming fundamentalcomponents of business strategy in the companies we will be working for whenwe graduate, the Initiative is also providing valuable professional experience forus students.” Helping Panda to green Stern are student Jake Berlin (MBA '09)and the SEA Greening Committee.

First-year MBA students were exposed to Stern's greening efforts onday one at pre-term orientation. Brochures had been printed on recycledpaper, students were given computer “flash” drives loaded with digitalinformation instead of handouts, and sustainable materials were used in allcatering paper products. Other projects include the launch of the SCGIwebsite (www.stern.nyu.edu/green), the inclusion of a “Green Tip of the Week”on student and administrator intranets, a student printing quota, motion sensorlighting in study rooms, and a more aggressive recycling program, all brandedwith the initiative's “identity” to raise awareness on campus. To support thecurricular program in social enterprise, social entrepreneurship, and corporatesocial responsibility, a new course was taught this spring by Frances Milliken,professor of management and organizations, and Mark Tercek, adjunct professorand director of Goldman Sachs's Environmental Markets Initiative. The course,“Leading Sustainable Enterprises,” focuses on creating, leading, and managingbusiness enterprises that seek to facilitate sustainable development.

Vice Dean for MBA Programs and Professor of Marketing Kim Corfman isa member of the SCGI, as well as a strong supporter. “More than 35 years ago,NYU Stern introduced a required 'professional responsibility' core course intothe curriculum, and today, 60 percent of our MBA courses integrate contentrelated to social and environmental impact and stewardship,” she said. “Ourschool-wide sustainability efforts complement all that we are doing in theclassroom to promote a socially responsible mindset in our students.”

Panda's vision has become a force on campus. “As the only school-ledenvironmental initiative, the SCGI, along with the support of administrators,faculty, and students, is leading the University in this area, and is showingother departments the positive effect they can have on their surroundings,” hesaid. Berlin, who will lead the SCGI next year, agrees. “The momentum we'vecreated will continue. These efforts are now a part of the fabric of the School.”While NYU's school color may be purple, Stern is adding a 'green' hue.

Students and administratorsteam up to "green" Stern(from left to right): AssociateDirector of Student ActivitiesJeremy Carrine (Steinhardt'06), Jake Berlin, RobbHenzi (MBA '08), R. J.Panda, Dean of StudentsGary Fraser (MBA '92), andKim Corfman.

Dr. Muhammad Yunus spoke to students last fallabout micro-credit, the revolutionary idea thatwon him the Nobel Peace Prize.

42 Sternbusiness

Alumni News & Events

1

2

ALUMNI AFFAIRS

2 0 0 7 A L U M N I B A L L

1. Alumni danced the night away, celebratingthe chance to reconnect with each other, theSchool, and its fabulous New York Citylocation.

2. From left to right: Sally Blount-Lyon, ViceDean and Dean of the Undergraduate College;Mary Ellen Georgas (MBA '93), Chair of theAlumni Council; William R. Berkley (BS '66),Chairman of the Board of Overseers; andThomas F. Cooley, Dean, at the Alumni Ball.

3. Members of the 2007 Alumni BallCommittee helped plan the event.

4. The New York Public Library's stately Astor Hall provided a grand entrance andmeeting place for Stern alumni and theirguests.

5. Attendees took advantage of the opportunityfor a private viewing of the Library's specialexhibition: "Beatific Soul: Jack Kerouac on theRoad.”

6 - 14. Alumni and guests enjoyed a festiveholiday evening in one of New York City'smost esteemed historic landmarks. 3

6

11 12

7 8 9

10

1413

4

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Sternbusiness 43

SWAP Enhancements Provide More ProfessionalResources for Alumni

The Office of Alumni Relations & Development is pleased to announce the launch of thenewly enhanced online alumni community, SWAP. The new system has been redesigned tooffer a more robust, comprehensive, and user-friendly site for the Stern community. The revi-talized SWAP still contains all your favorite features, like an advanced search tool to help youfind your friends and classmates; class notes, so you can stay abreast of your fellow alumniaccomplishments and announcements; a comprehensive calendar of events and RSVP tool;and online management of your profile, including the ability to update your contact informa-tion and set up your e-mail forwarding for life. In addition, the new SWAP has three new andimproved resources that we encourage you to explore: Career Center, SternBID, and GABE.

Career CenterTo better serve the alumni community, we have partnered with the Career Center for

Working Professionals (CCWP), to manage the career center portion of SWAP. In the improvedcareer center, you can now access all of your career-related resources through a newly devel-oped personalized Career Account. Some new and exciting features of the system include theability to:

■ Apply to job postings directly through your account ■ Customize job agents that will e-mail relevant job postings to you at the frequency of

your choice ■ View and register for career workshops and seminars delivered through CCWP■ Upload and save résumés and cover letters ■ Access career resources and handouts for your job search all in one place

SternBIDStern Business Information Directory (SternBID) is a suite of online business databases,

academic journals, newspapers, and other resources, which has been made possible by a gen-erous gift from the MBA Class of 2006. The system provides free access to the followingonline research resources:

■ Tablebase, which provides access to tabular information on companies, products, industries, countries, and markets

■ Business Source Alumni, a database that provides more than 1,540 full-text businessmagazines and journals

■ Business Monitor Online, which offers daily macroeconomic, financial, and companynews and analysis on emerging and key global markets

■ Research Library, which features a diverse mix of scholarly journals, trade publications,magazines, and newspapers covering a wide range of subject areas

■ ABI/INFORM, which provides access to management and business literature andincludes articles from academic, trade, and popular press journals

■ ProQuest Newspapers, which offers access to the full-text articles of approximately 27national, financial, and regional newspapers

■ ProQuest Health Management, which provides access to journal literature in healthadministration

GABENYU Stern's Global Alumni Business Exchange (GABE) is an online forum, housed within

SWAP, created to foster and support the entrepreneurial spirit abundant in the Stern communi-ty. Through GABE, alumni interested in entrepreneurship have the opportunity to exchangeideas, request and offer advice, and support each other in their new ventures, financially orotherwise.

Expand Your Network Today!Visit the website at www.stern.nyu.edu/alumni to log on to SWAP to start exploring the

new system – we hope you find these enhancements to be useful, both personally and profes-sionally. With nearly 75,000 alumni in more than 100 countries worldwide, the Stern alumninetwork is growing stronger every year.

Strengthening Our Community through theSupport of the Stern Fund

Over the past three years, Caroline McKeon (BS '09) has worked hard at building asense of community at NYU Stern, which isn't easy, given the School's urban setting andnon-traditional campus. “Coming to Stern from a small town in Massachusetts, having asense of community was extremely important to me,” said McKeon. “I was delighted thaton my first day of freshman orientation, I was connected to a small group of students withwhom I would spend the next four years.” McKeon explained that throughout her time atStern, her group continually reconnected with one another. “From eating soup at Au BonPain after Professor Al Lieberman's class to taking a group golf lesson at Chelsea Piers,we had some great times exploring the City together.”

McKeon's experience was the product of a program launched by Stern UndergraduateCollege Dean Sally Blount-Lyon in 2004 to foster a sense of camaraderie, pride, and com-munity among students. Called the Cohort Program, it is funded by alumni and corporatesupport of the Stern Fund and lasts throughout all four years of the students’ academiccareer. Upon matriculation, students are placed into groups of approximately 50 students,with whom they share experiences from their first day at Stern through graduation day.

The Cohort Program has become extremely successful, allowing students to enjoymany enriching cultural, social, and intellectual experiences, such as exclusive dinners andnetworking events, Broadway shows, and museum exhibitions. They also visit the head-quarters of local corporations and are mentored by alumni sponsors, who bring high-levelwork knowledge and experience to them outside the classroom. This initiative has beenenthusiastically received by students and has become a hallmark of Stern's UndergraduateCollege.

McKeon has served as the programming director for her Cohort Group for the pastthree years. In this role, she is the student solely responsible for planning all of theiradventures. “I have been able to not only gain a great deal of leadership skills, but also asense of personal accomplishment,” she explained.

NYU Stern's community extends far beyond the reaches of its students. The ability tobuild lasting personal and professional relationships at the School does not end the day astudent graduates. Both students and alumni can avail themselves of the School'sresources. One such valuable resource is the Career Center for Working Professionals,which was established in 2003 with the generous support of the Stern Fund.

Exclusively reserved for NYU Stern working professionals – alumni of both the MBAand undergraduate programs, and Part-time and Executive MBA students – the CCWPgives alumni and students access to an experienced and dedicated group of professionalsthat can assist them as they advance through career transitions. Through individual coun-seling, mock interviews, workshops, professional development seminars, networkingforums, and job postings, the CCWP assists with career planning and job development atevery stage of the job search. Since its inception, the CCWP has been able to assist morethan 1,700 alumni and 3,000 students with their careers.

Eduardo Carbajosa (MBA '01) is one such beneficiary. “As an alumnus,” he said, “theCCWP has been the greatest resource in my most recent job search. I was able to meetwith members of the CCWP for both career guidance and to examine their job postings. Inaddition, they were able to help me tailor my résumé for the specific position that I waslooking for, which was an extremely beneficial service. The office was professional andhelpful, assisting me every step of the way. As a result, I was able to secure two solid offersin one week, plus the potential to be selected by a third employer.”

The Cohort Program and the CCWP are just two of the initiatives that NYU Sternoffers to enable alumni and students to find meaningful ways to connect with the School.Both programs are made possible through the support of the Stern Fund, the annual fundin which unrestricted alumni gifts are invested. The flexibility of unrestricted Stern Fundgifts – and continuing donations – are vital to the growth of the School, as the dollarsenable Stern to fund the projects that keep it on the cutting edge of business education andto develop much-needed programs, such as the Cohort Program and CCWP, that enrich thelives of both students and alumni.

44 Sternbusiness

SATURDAY, DECEMBER 6, 2008 ◆ 8:00 PM - MIDNIGHT ◆ NEW YORK, NEW YORK

NYU Stern Alumni Council Helps Set the Stage forStern's First Alumni Business Conference in NYC

The NYU Stern Alumni Council is a working committee of 21 to 24 alumni, comprising representa-tives from all of Stern's degree programs and a wide range of graduating years. As Council members,these alumni serve as ambassadors for Stern, actively engaging other alumni in support of the educa-tional excellence of the School. The Council is also tasked with advising and assisting the administrationon alumni interests and opinions, and growing and strengthening the community among and betweenalumni, students, and the School. To this end, the Alumni Council works on a variety of initiativesthroughout the year, including working on the School's signature alumni events: the Alumni Ball, GlobalAlumni Conference, and, for the first time, the Alumni Business Conference in New York City.

New York 2008: Alumni Business Conference – A Look to the Future was developed by theCouncil, in conjunction with the Office of Alumni Relations & Development, as a sister event to theGlobal Alumni Conference – Stern's widely successful biennial international symposium. The AlumniBusiness Conference was conceived to offer alumni robust, content-driven programming locally in theyears that the Global Alumni Conference is not being held. The Conference will feature industry leadersand scholars discussing a range of current and future market issues in breakout presentations, keynoteaddresses, and plenary sessions.

“Working with the School, fellow alumni, and friends to host an event of this magnitude in ourhometown has been such a thrill,” noted Mary Ellen Georgas (MBA '93), Chair of the Alumni Council.“Being a part of the Alumni Council over the last four years has truly been a life-changing experience forme. It has deepened my relationship with the School; given me the opportunity to expand my network,both professionally and personally; and offered me a way to give back to Stern, not just financially, butwith my time, my ideas, and my experience.”

To learn more about the Alumni Council and other ways you can get involved with the School, visitthe website at www.stern.nyu.edu/alumni. For more information about the Alumni Business Conference,held May 16, 2008, visit www.stern.nyu.edu/alumni/newyork2008.

The NYU Stern Office of Alumni Relations & Development and the Los Angeles-area Stern Alumni Regional Group held a brunch, “Where Creativity Meets Business,”for 60 alumni in February, highlighting Stern's emerging role in the entertainment indus-try. The brunch featured Executive Director of Stern's Entertainment, Media andTechnology (EMT) program, Al Lieberman, Clinical Associate Professor of Marketing,Entrepreneurship and Innovation, and was graciously hosted at the Beverly Hills home ofinternational entertainment entrepreneur and Stern Overseer Michael Jay Solomon,Chairman and Chief Executive Officer of Solomon Entertainment Enterprises.

In addition to the Alumni Regional Group leaders Carolyn Chen (MBA '07), DavidKelly (MBA '90), Eric Stern (BS '01), and John Ward (MBA '05), the Alumni HostCommittee included Faisel Hussein (MBA '06), Joyce Lee (BA '86), and Mary JoanSchwab (MBA '89).

Alumni especially enjoyed the opportunity to see Lieberman, their beloved formerprofessor, and to catch up with one another while taking in the breathtaking view ofBeverly Hills. During his remarks, Lieberman shared updates about the EMT programand the advances it is making, as well as the new joint MBA/MFA degree offered byStern and the Tisch School of the Arts.

Michael Jay Solomon (left)with Bernie Beiser (BS '62)at the Los Angeles-areaStern Alumni RegionalGroup brunch.

S A V E T H E D A T E

EIGHTH ANNUALSTERN ALUMNI BALL

1940sRuth Shapiro (BS '47, MA '73), of NewYork, NY, is founder of Ruth ShapiroAssociates. Her job search, résumé, andcover letter approaches were featured inMcCall's, The Christian Science Monitor, andthe Dow Jones' National BusinessEmployment Weekly.

Paul Steiner (BS '47), of New York, NY,has authored sixteen books and contributesto the New York Post, Star Magazine, andzingmagazine. He also writes a weekly col-umn for Jewish Voice in the New York andFlorida area.

Alan Greenspan (BS '48, MA '50, PhD'77), of Washington, DC, has penned TheAge of Turbulence: Adventures in a NewWorld. He has also joined Paulson & Co.Inc., an investment management company, asa member of its advisory board. Greenspanwas former Chairman of the US FederalReserve Bank.

1950sFred J. Lo Faso (BS '54), of MassapequaPark, NY, has retired from the MearlCorporation as Senior Vice President ofGlobal Sales to start his own company,Global Sales & Marketing, which offers pearlpigments and glitters to US and overseasmarkets.

Stuart I. Greenbaum (BS '58), of SaintLouis, MO, has been appointed as an inde-pendent director of Brooke CreditCorporation. Greenbaum was Dean of theJohn M. Olin School of Business atWashington University in St. Louis from1995 to 2005.

Calvin E. Ramsey (BS '59), of New York,NY, known as the “Mayor of Harlem,” is aDirector of Special Projects and CommunityRelations for the NY Knicks. Ramsey was oneof the nation's top 100 high school basketballrecruits and has been inducted into the NYCSports Hall of Fame and the Brooklyn USAHall of Fame.

1960sDwight B. Massey (MBA '62), ofHaledon, NJ, founded Massey Quick, a finan-cial management firm based in New Jersey.

Robert F. Johnston (MBA '64), ofPrinceton, NJ, has been appointedExecutive Chairman of the PharmosCorporation's Board of Directors.Johnston, a venture capitalist, is Presidentof Johnston Associates.

Peter Warren (BS '65), of Morganville,NJ, serves on the Executive AdvisoryBoards of the Tisch Center for Hospitality,Tourism, and Sports Management and theAcademy of Hospitality and Tourism.

Irwin H. Block (MBA '66), of Norwalk,CT, retired in 2004 from Purdue PharmaL.P. as Senior Executive Director ofCreative Services after 46 years of service.Block, also a photographer, has widelyexhibited his black and white silver gelatinimages which have appeared in The NewYork Times.

Francis P. Mulvey (BS '66), ofBethesda, MD, has been nominated byPresident George W. Bush for an additionalfive-year term to be a member of theSurface Transportation Board.

Shau Wai Lam (MBA '67), of Summit,NJ, has been awarded the New Jersey“Ernst & Young Entrepreneur of the Year2007” award. Lam is Chairman of DCHAuto Group, one of the largest auto dealergroups in the country.

M. Faroq Kathwari (MBA '68), of NewRochelle, NY, was one of three SouthAsians who received the “American byChoice” award, which recognizes outstand-ing achievement by naturalized US citizens.Kathwari is Chairman, President, and CEOof Ethan Allen Interiors, Inc.

Thomas E. Freston, III (MBA '69), ofNew York, NY, has been appointed to theBoard of Directors at DreamWorksAnimation. Freston most recently served asPresident and CEO of Viacom.

James H. Herbert (MBA '69), of SanFrancisco, CA, has been appointedChairman at First Republic Bank. Herbertwas the founding President and CEO ofFirst Republic.

1970sLewis J. Altfest (MBA '70), of NewYork, NY, is the recipient of the 2007

Charles R. Schwab IMPACT Award®. Inconnection with the award, The Wall StreetJournal honored Altfest for his continuingquest to provide independent advice toindividual investors. Altfest is currentlyPresident of L.J. Altfest & Co., Inc.

Richard S. Fuld (MBA '72), ofGreenwich, CT, has been re-elected a ClassB Director of the Federal Reserve Bank ofNew York for a three-year term. Fuld isChairman and Chief Executive Officer ofLehman Brothers Holdings Inc.

Mary C. Gelormino (BS '75, MBA 79),of Brooklyn, NY, has been appointed SeniorVice President and Regional Executive atSovereign Bank. Prior to joining Sovereign,Gelormino was Senior Vice President andClient Relations Manager for Bank ofAmerica.

Ann M. Stordahl (BS '75), of Dallas,TX, is the Executive Vice President ofWomen's Apparel at Neiman Marcus.Stordahl is responsible for all women'sapparel categories and the company's fash-ion offices in New York.

Kenneth J. Witkin (MBA '75), ofBrookline, MA, has been appointedPresident and CEO of CBRE Realty Finance,Inc. Witkin most recently served asExecutive Vice President in the CommercialReal Estate Banking Group of Bank ofAmerica.

Brandes S. Elitch (MBA '76), ofSebastopol, CA, has been appointedDirector of Sales and Marketing at AvalonInternational, a software provider. Brandeshas previously worked as Corporate CashManager.

Richard A. Lorraine (BS '76), ofJonesborough, TN, has been awardedChemical Weekly's annual “SeniorFinancial Officer of the Year” award. He iscurrently the Senior Vice President andCFO of Eastman Chemical.

Richard E. Kolman (MBA '77), ofGreenwich, CT, Managing Director atGoldman Sachs, was honored by theSecurities Industry and Financial MarketsAssociation for his “significant contribu-tions to the Association and the municipalsecurities industry thoughout his career.”

Cathy E. Minehan (MBA '77), ofBoston, MA, has been appointed to theBoard of Directors at Becton, Dickinsonand Company. Minehan most recentlyserved as President and CEO of the FederalReserve Bank of Boston.

Gary M. Rautenstrauch (MBA '77), ofCharlotte, NC, has been appointed CEO ofSirsiDynic. Previously, he held severalmanagement positions at Baker & Taylor,including Chief Information Officer, VicePresident of Operations, and CEO.

Raymond S. Baxter (MBA '78), ofVienna, VA, is Vice President, GovernmentSales, at Mobile Satellite Ventures, anoperator of a satellite-based telecommuni-cations network.

Gail D. Fosler (MBA '78), of New York,NY, has been appointed President of TheConference Board, a global research andbusiness membership organization. Foslermost recently served as Executive VicePresident and Chief Economist at TheConference Board.

David E. Mack (MBA '78), of Evanston,IL, has been appointed Managing Directorat Morris Anderson & Associates' Chicagooffice. Before joining Morris Anderson &Associates, Mack was Senior ManagingDirector at Mesirow Financial Consultingand Managing Partner of White OakGroup.

Marc J. Oppenheimer (BS '79, MBA'84), of Fort Lee, NJ, has been appointedExecutive Vice President, CFO, andTreasurer at IDT Corporation, an interna-tional telecommunications and technologycompany. Oppenheimer was previouslyExecutive Vice President of Kenmar GlobalInvestment Management, Inc.

1980sJohn Cherkezian (MBA '80), ofEnglewood Cliffs, NJ, has been appointedCOO at The Armenian General BenevolentUnion. He was previously ManagingDirector of Trade Finance at InternationalAsset Holdings Corporation.

David J. McCue (MBA '80), ofFlorence, MT, has been appointed CIO atComputer Sciences Corporation (CSC).

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His previous CSC assignments includeVice President of Application PortfolioManagement and Chief Information andResource Officer for the company's healthcare group.

Lance S. Miller (MBA '80), of Leonia,NJ, has been appointed Managing Directorof Morris Anderson & Associates in NewYork. Before joining Morris Anderson,Miller served as Managing Director of KLBPartners, LLC.

Lawrence R. Litowitz (MBA '81), ofPalm City, FL, has been appointed CFO ofSilverstar Holdings. Previously, he heldCFO and Senior Vice President positionsat a number of companies.

David N. Spiselman (MBA '81), ofSalinas, CA, has been appointed CFO ofWineNationTV.com. Spiselman was alsorecently elected to a four-year term on theMonterey Bay Blues Festival Board ofDirectors as Chair of the Audit Committee.

Steven H. Tishman (MBA '81), of NewYork, NY, has been made Head of Mergersand Acquisitions at Rothschild NorthAmerica.

Jack D. Cogen (MS '82, MBA '87), ofNew York, NY, has been elected Chairmanat The International Emissions TradingAssociation. Cogen is President and CEOof Natsource and is one of the founders ofthe Natsource group of companies.

Alexander D. Dembitzer (BS '82), ofNew York, NY, is the Principal andManaging Partner of the Northern Group, areal estate development company.Northern Group is currently developing a$150 million project in downtown Detroit.

Paul E. Simons (MBA '82), ofWashington, DC, has been nominated byPresident George W. Bush to beAmbassador Extraordinary andPlenipotentiary of the United States ofAmerica to the Republic of Chile.

Rodolfo L. Archbold (MBA '83), ofActon, MA, has been appointed VicePresident of Operations at Evergreen Solar,Inc., a manufacturer of solar power prod-ucts. He most recently served as anOperations Consultant at Teradyne, Inc.and other electronics manufacturing firms.

Elyse Douglas (MBA '83), of Cos Cob,CT, has been appointed Executive Vice

President and CFO of Hertz GlobalHoldings, Inc. Before joining Hertz in2006, Douglas served as Senior VicePresident and Treasurer of COTY, Inc.

Michael E. Hess (MBA '83), ofWashington, DC, is the AssistantAdministrator for the Bureau forDemocracy, Conflict, and HumanitarianAssistance, US Agency for InternationalDevelopment. Hess was appointed byPresident George W. Bush for this Senate-confirmed position.

Angelo C. Malahias (BS '83), ofWeston, FL, has been appointed to theBoard of Directors at Eurand, a pharma-ceutical company. Malahias was previous-ly CFO at Andrx.

Edward T. Manzitti (APC '83), ofHillsborough, NJ, has recently beenappointed Vice President of Research atthe Direct Marketing Association, the lead-ing global trade association for businessand nonprofit organizations using andsupporting direct marketing tools andtechniques.

Barbara L. Rambo (MBA '83), ofSandisfield, MA, has been appointed tothe Board of Directors of UnionBanCalCorporation. She is a director and vicechair of Nietech Corporation.

Jeffrey J. Woodward (MBA '83), ofHopewell, NJ, has been appointedManaging Director at Syracuse Stage, atheatre company. He is currently ManagingDirector of the McCarter Theatre Center forthe Performing Arts in Princeton, NJ.

Leo P. Grohowski (MBA '84), ofBernardsville, NJ, has been appointedChief Investment Officer for The Bank ofNew York Mellon Corporation. He waspreviously Head of Investments at US Trust.

Evan A. Marks (MBA '84), of NewYork, NY, has joined Vestar CapitalPartners, a private equity firm, as a princi-pal. He previously served as Senior VicePresident of Marketing at WebMD HealthCorporation.

Michael P. Tarnok (MBA '84), ofMount Kisco, NY, has been appointed tothe Board of Directors at KeryxBiopharmaceuticals, Inc. He most recentlyserved as Senior Vice President of Financeat Pfizer Inc.

A successful career, the theory goes,often results from working hard to cre-ate opportunities, and then being alertand daring enough to take advantageof them. Charlie Chasin, currentlyManaging Director in Firm Managementfor Morgan Stanley, could be the posterboy for that theory.

Chasin, armed with both anaccounting degree from NYU Stern anda JD from NYU School of Law, spent thefirst part of his career as a law clerk toUS District Judge John Bartels, a litiga-tor at Dewey, Ballantine, Bushby,

Palmer & Wood, and an adjunct professor of business law at Stern.In 1988, he joined Morgan Stanley’s legal department, where heworked for 12 years, ultimately serving as Head of Litigation andRegulatory Affairs. In 2001, Chasin made the first of several careershifts at Morgan Stanley, becoming the Legal and Regulatory RiskManager for the Fixed Income Division. “I have always loved busi-ness, so the transition from the legal side, while challenging, was anatural one for me,” Chasin explained. “The timing was right, theposition was right, and I knew I could always move back into thelegal arena if I wanted to. Luckily, I haven’t wanted to – being onthe business side has been terrific.”

Four years into the risk management position, Chasin sawanother opportunity to broaden his skills and went for it: Chief ofStaff to Morgan Stanley’s former Co-president Zoe Cruz.“Something that Morgan Stanley promotes firm-wide, and that Iascribe to on a personal level as well,” said Chasin, “is to go outsideyour comfort zone. Once you challenge yourself and succeed, youdevelop the confidence and courage to continue to expand yourhorizons.” In December 2007, Chasin accepted his current positionworking for Morgan Stanley’s new Co-president Walid Chammah.

Chasin attributes much of his success to his educational experi-ence. “NYU gave me the chance,” he said. “Without the opportuni-ties I had in school, I wouldn’t be where I am today.” As a result,he’s stayed connected. “It has been important for me to stayinvolved with NYU over the course of my career. I have worn manyhats for NYU since my graduation: I have served as a mentor, anadjunct professor, a recruiter for the firm’s Fixed Income Division,and currently, as Morgan Stanley’s University RelationshipManager (URM) for NYU. As the URM, I have worked to buildbridges between Morgan Stanley and NYU; develop meaningfulrelationships with the deans, students, and alumni; create greateropportunities for collaboration; and forge a strong partnershipbetween NYU and Morgan Stanley.”

Reflecting on his achievements, Chasin said, “I never had amaster plan. My education and career have been much more evolu-tionary in nature. My philosophy is to roll up my sleeves, workhard, and not take anything for granted.”

O p e n t o P o s s i b i l i t i e s

Charlie Chasin (BS '80, Law JD '83)

46 Sternbusiness

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It takes a daunting combinationof skills to run IBM’s global, end-to-end technical support and develop-ment transformations operation, andlead the computer giant’s globalquality initiatives. That’s the charterof Susan Puglia, a double-degreegraduate of NYU, who currentlygoes by the hefty title of VicePresident, IBM Quality and ProcessTransformation for Developmentand Technical Support. Puglia joinedIBM in software product develop-ment after earning a BA in comput-er science and math from NYU’sWashington Square College in 1981.

She had planned to work just a few years and then attend Sternfull-time for an MBA in international business and finance, buther flourishing career altered the game plan. “I hadn’t planned onenjoying my job so much,” she said. “In the end, I decided to goback to school part-time. It took me five years to graduate, but thedecision to stay with IBM is one I’m still grateful I made.”

Puglia’s career carved a linear path upwards. From 2002 to2004, as Vice President for Systems Architecture, Design, andDevelopment, Puglia led the development and delivery of IBM’svirtualization solutions (the abstraction of computer resources)and user technologies. She also gained IT experience in IBM’s CIOorganization when, in 2000 and 2001, she set the direction forIBM’s information technology, established the company’s globalIT infrastructure and applications’ standards and architecture,and managed the worldwide deployment of these technologies.Earlier in her IBM career, Puglia held a variety of technical andmanagement positions in marketing and mainframe hardwareand software development.

With equal intensity, Puglia has figured out a way to strike abalance in her life. “I’ve given my entire career to IBM,” she said.“I waited a long time to start a family, and, in doing so, I achievedmuch success professionally, which has been really rewarding.However, now that I do have a family, with two wonderful smallchildren at home, it is extremely important to me that I achieveand maintain that same level of success personally with both mykids and my husband. I strive every day to make a tremendousimpact at work and an even greater one at home with my family.”

Puglia is also committed to making an impact on her almamater. She is a long-time Stern Fund and Courant Institute donorand serves as the NYU-IBM Partnership Executive, working toforge a strong partnership between IBM and the University. As aPartnership Executive, she is building the Stern alumni commu-nity at IBM, aligning IBM support of Stern research, and bringingprestigious IBM executives to speak on campus. She is also active-ly involved with the NYU Courant Institute of MathematicalSciences, serving on its Advisory Board, as well as with NYU’sWomen’s Initiative Steering Committee.

A P a s s i o n f o r E x c e l l e n c e

Susan M. Puglia (WSC BA '81, MBA '88)

George S. Barrett (MBA '88), of Rydal,PA, has been appointed CEO of CardinalHealth's health care supply chain servicessector. Barrett currently serves as CEO ofTeva North America.

Robert H. Eller (MBA '88), of Milan,Italy, announced the formation of GMATPrep Europe, a GMAT preparation and MBAapplication consulting services firm based inMilan that serves all of Italy.

Kenneth L. Sperling (MBA '88), ofOrange, CT, has been appointed Senior VicePresident of Retiree Solutions for CIGNA’ssenior segment. Sperling was previously amember of CIGNA's national accounts lead-ership team.

Paul W. Staby (MBA '88), of Watertown,MA, has started a new company, ResoluteMarine Energy, Inc., to develop technologiesfor extracting energy from ocean waves.

Ronald E. Blaylock (MBA '89), of NewYork, NY, has been elected to serve on theBoard of Directors of CarMax, Inc. Blaylockis Managing Partner at GenNx360 CapitalPartners and is a member of the Stern Boardof Overseers.

Jeffrey M. Fischer (MBA '89), ofMamaroneck, NY, has been appointedDirector of the MBA Career ManagementCenter at the University of North Carolina atChapel Hill's Kenan-Flagler BusinessSchool. Most recently, Fischer was co-founder and Managing Partner of an invest-ment advisory firm specializing in hedgefunds.

Richard S. Gold (MBA '89), of EastAmherst, NY, has been appointed to themanagement committee at M&T Bank Corp.Gold is Executive Vice President at M&TBank Corp.

JoAnne R. Jensen (MBA '89), ofLarchmont, NY, has been selected by GlobalInvestor as one of the “20 highly regardedwomen in wealth in the US.” Jensen isManaging Director at Citi Private Bank.

Paul S. Lambdin (MBA '89), of NewCanaan, CT, has been appointed President ofHealth Net of the Northeast. Lambdin cur-rently serves as the Northeast's ChiefCommercial and Medicaid Officer.

1990sMark E. Almeida (MBA '90), ofBrooklyn, NY, has been named Senior Vice

Catherine M. Avery (MBA '85), of NewCanaan, CT, has recently formed her owninvestment firm. The firm creates and man-ages customized investment portfolios forprivate investors.

Alexander P. Moon (MBA '85), of NewYork, NY, has been named Partner atPillsbury Winthrop Shaw Pittman, LLP inNew York. He was previously with the NewYork office of Duane Morris.

Denis J. O'Leary (MBA '85), ofScarsdale, NY, has joined the Board ofDirectors at Fisery, Inc. O'Leary is a privateinvestor and consultant.

Cynthia L. Shereda (BS '85), of PoundRidge, NY, has been appointed ExecutiveVice President, General Counsel, andCorporate Secretary at ConverseTechnology. She was previously ExecutiveVice President, Chief Legal Officer, andSecretary at ATMI, Inc., a semiconductormaterials company.

Dawn A. Fisher Albin (BS '86, MBA'90), of Westfield, NJ, joined BrownBrothers Harriman as Senior Vice Presidentof Risk Management. She was previouslyDirector at DB Services New Jersey, Inc.

John Gaffney (MBA '86), of WestOrange, NJ, has been appointed ExecutiveVice President and General Counsel at FirstSolar, Inc. in Phoenix. Gaffney was previ-ously a partner at Cravath, Swaine &Moore.

Peter D. Galasinao (MBA '86), ofBrooklyn, NY, has joined Willis Mergersand Acquisitions Group as Senior VicePresident. Prior to Willis, Galasinao workedfor KPMG and Ernst & Young.

Steven G. Milewicz (MBA '86), ofArmonk, NY, has been appointed ExecutiveVice President at RailWork Corporation, aprovider of track and transit systems con-struction. Milewicz most recently served asGeneral Counsel for Atlantic Housing andScaffolding, a hoisting and scaffolding con-tractor.

Herbert J. Roberts (MBA '87), ofAlbany, NY, has been appointed SeniorVice President, CFO, and Secretary atJuniper Content. Roberts was previouslyan operations and financial consultant tocompanies in the electronics and mediaindustries.

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President at Moody's Corporation, withresponsibility for directing the newly formedMoody's Analytics division. Almeida hasbeen with Moody's for 19 years, servingmost recently as Senior Managing Directorof the Investor Services Group.

Mark C. Portu (MBA '90), of Dix Hills,NY, has been appointed CEO and Presidentat FeedRoom, Inc., a provider of Web videoand digital media services. Portu was previ-ously Senior Vice President at Open TextCorporation.

Mitchell S. Stern (MBA '90), of NewYork, NY, has been appointed ManagingDirector at SMH Capital Markets. Stern wasmost recently Managing Director and Headof the Health Care and Life SciencesInvestment Banking unit at Glocap Advisors.

James W. Sullivan (MBA '90), of SanJose, CA, has been appointed Vice Presidentof Finance and CFO of MoSys, Inc.Previously, Sullivan was Vice President ofFinance and CFO of Apptera, Inc.

Alan Weichselbaum (MBA '90), ofLawrence, NY, has been appointed to theBoard of Directors at Star Scientific, Inc.Weichselbaum is Chairman and the GeneralPartner of Gimmel Partners, an asset man-agement firm in New York.

Tayeb Tahir (MBA '91), of Barrington, RI,has been appointed President of PeabodyChina. Tahir joined Peabody in April 2006as Senior Vice President of InternationalDevelopment.

Jesse D. Greenberg (MBA '92), ofMorganville, NJ, debuted his Larger ThanLife series at the Jersey Shore in the ShoreInstitute of Contemporary Art (SICA) outdoorsculpture exhibit, “SCULPTOURE.”

Rana K. Gupta (MBA '92), of Somerville,MA, has been appointed CEO of HistoRx,Inc., a tissue-based diagnostic productscompany. Gupta had served as interim CEOsince August 2006.

Gregory B. Luttrell (MBA '92), ofPrinceton Junction, NJ, has been appointedSenior Portfolio Manager at JPMorgan AssetManagement. He was previously a portfoliomanager at TIAA-CREF.

Mitchell J. Speiser (MBA '92), of NewYork, NY, has been appointed Director atTelsey Advisory Group LLC, an independentresearch and consulting firm. Speiser previ-

ously served as Senior Vice President andbuy-side equity Analyst for Jeffries AssetManagement.

Stephen A. Velgot (MBA '92), of NewYork, NY, has been appointed SpecialSituations Analyst at SusquehannaFinancial Group, LLP. Velgot was previouslySituations Analyst at Cathay Financial.

Frank DeMaria (MBA '93), of Allendale,NJ, has been appointed Managing Directorof Business Development at The DepositoryTrust & Clearing Corporation, an over-the-counter derivatives provider. Previously,DeMaria was Global Head of DerivativeClient Services and Operations at MerrillLynch.

Peter J. Eliopoulos (MBA '93), ofLarchmont, NY, has been appointed SeniorVice President and Chief Marketing Officerat M&T Bank Corp. Previously, Eliopouloswas Senior Vice President and Director ofStrategic Planning with Citibank NorthAmerica.

Douglas M. Mazlich (MBA '93), ofPound Ridge, NY, has been appointed VicePresident of Channel and BusinessDevelopment at Tizor Systems, a providerof data auditing and protection solutions.Mazlich is a former vice president atMicrosoft's Whale CommunicationsSubsidiary.

Leela Petrakis (MBA '93), of New York,NY, was featured at CEW's Women inBeauty event on October 24, 2007. Petrakisis General Manager for NeutrogenaCosmetics at Johnson & Johnson.

Michael S. Vincent (MBA '93), ofEdison, NJ, has been appointed VicePresident and Treasurer of SaksIncorporated. Vincent joined Saks inFebruary 2007 as Assistant Treasurer.

Darryl S. Zaontz (MBA '93), ofWoodmere, NY, has been appointed to theconsulting staff at Innovative Designs, amanufacturer of outdoor apparel and equip-ment. Zaontz is one of Innovative Designs'largest shareholders.

Charles R. Barton (MBA '94), ofChatham, NJ, has been appointed COO atThe Barton Group, a mining company.

David S. Klein (MBA '94), of LosAngeles, CA, has joined CENTRIS asExecutive Vice President, running its West

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David “Tiger” Williams (MBA ’89) likes to hire ath-letes for his firm, though sticks, bats, pucks, or mitts aren’tthe tools of his trade. Williams Trading, located on theCanal in Stamford, Connecticut, offers high-level execu-tion, liquidity, and market insight to its clients. SaidWilliams of his hiring practice: “I usually get a sense ofsomeone I would like to work with, and it just works outthat way.” Not surprisingly, Williams is also an athlete – anavid cyclist. “Most cyclists are extremely competitive andfocused. The same skill set works well in finance,” heexplained.

Williams made his name as the former head of equitiestrading at the New York hedge fund Tiger Management. In1997, he founded Williams Trading, an outsource tradingdesk for hedge funds and high net worth individuals.Williams’s clients are willing to pay top dollar for thefirm’s services. “We provide our clients white-glove serv-ice, not just through trading, but also through our collec-tive knowledge. Our clients look to us for an edge,”Williams said.

The firm recently expanded its high-touch services out-side the US, opening a London office to trade Europeansecurities. “With all we are seeing now in international mar-kets, the volatility and the strengths and weaknesses of cur-rencies, Europe is an important place to be and has extend-ed our global perspective,” he said.

Beyond trading, Williams is active philanthropically,focusing on cancer-related charities, including theArmstrong Foundation, cyclist Lance Armstrong’s organiza-tion. “I work hard, I play hard, and it feels good to giveback,” he explained. Williams currently serves as trustee forThe Tiger Foundation and is a member of the DevelopmentBoard at Yale University, the Leadership Committee atMilton Academy, and the Development Board for USACycling.

He has also spent time with Stern MBA students, speak-ing at Association for Investment Management student clubevents about his industry experiences. “During my time atStern, I learned from some of the top players in the business– Finance Professor Roy Smith was one of my favorites.Learning from someone so plugged into the business was anincredible experience. By interacting with students, I hope tohave that same effect.”

And how about that nickname? “They began callingme that in high school after the hockey player TigerWilliams,” who was known to intimidate opponents andracked up the most penalties in the league, he explained.“It just stuck.”

P l a y i n g t o W i n

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Coast office based in Los Angeles. Kleinrecently served as Vice President for TNS'Media and Entertainment Group.

Andre J. Koo (MBA '94), of Taiwan, isChairman and CEO of FinancialOne/Chailease, a Taiwan-based financingand leasing company.

Raymond Quartararo (MBA '94), ofRye, NY, has been appointed InternationalDirector at Jones Lang LaSalle. Quartararowas previously Northeast Regional Managerwith the company's project and develop-ment services group.

Martin O. Vidaeus (MBA '94), ofStockholm, Sweden, has just accepted anew post as Director of Marketing withUniTech Biopharma, which provides spe-cialized manufacturing capabilities of bio-pharmaceuticals to biotechnology and phar-maceutical firms in Scandinavia.

Juli R. Branson (MBA '95), ofAlexandria, VA, was named speechwriter forUS Secretary of Defense Robert Gates. Priorto this, Branson worked at the Departmentof Defense for the Under Secretary ofDefense for Acquisition, Technology, andLogistics.

Salvatore J. Bruno (MBA '95), of DixHills, NY, has been named Senior VicePresident and Head of Research andProduct Development at IndexIQ, a dedicat-ed developer of innovative quantitativeinvestment strategies. Bruno previouslyserved as Director at Deutsche AssetManagement.

Roger Burkhardt (MBA '95), ofIrvington, NY, has been appointed to theBoard of Directors at Market-AxessHoldings, an electronic trading platformprovider. Burkhardt is President and CEO ofIngres Corporation.

Peter G. Klein (MBA '95), of New York,NY, was named a “Forty Under Forty” RisingStar of the Class of 2007 by WestchesterCounty Business Journal. Klein is currentlyVice President of Fidelco Realty Group.

Kyungwon Lee (MBA '95), of ForestHills, NY, has been named a partner atShearman & Sterling's Hong Kong office.Lee practices in the firm's capital marketsgroup.

John C. Redett (MBA '95), of New York,NY, has joined the Carlyle Group's recently-formed Global Financial Services Group.Redett is a former vice president of the

Financial Institutions Group at GoldmanSachs.

Paul H. Simpson (MBA '95), of NewSouth Wales, Australia, has been appoint-ed as Head of Global Public Sector andHealth Care Markets for the global trans-action services business at Citi Markets &Banking. Simpson was previously anexecutive in the Treasury services depart-ment at JPMorgan Chase.

Gene Boxer (BS '96), of New York, NY,has joined American International Group,Inc. as Assistant General Counsel in theCorporate Legal/Mergers & AcquisitionsGroup. Prior to AIG, he spent eight yearsat Milibank, Tweed, Hadley & McCloyLLP.

Travis E. Bradford (MBA '96), ofCambridge, MA, has been appointed tothe Board of Directors at Hy-DriveTechnologies. Bradford is the founder andManaging Partner of Atlas CapitalInvestments, a hedge fund based inMassachusetts.

Aviram “Rami” Branitzky (MBA'96), of San Jose, CA, has been namedManaging Director of SAP AG Labs NorthAmerica, a company in Silicon Valley.Branitzky previously served as Senior VicePresident in charge of SAP global soft-ware solution partnerships.

Scott K. Larson (MBA '96), ofMilwaukee, WI, is President and COO ofGustave A. Larson Co. The Larson fami-ly's business success has earned thecompany the Generational SustainabilityAward from the Wisconsin 75 annualawards program sponsored by Deloitte &Touche.

Edward D. Reiskin (MBA '96), of SanFrancisco, CA, has been appointed by SanFrancisco Mayor Gavin Newsom as theDirector of the city's new 311 CustomerService Center. He most recently servedas the city administrator in Washington,DC.

Glenn M. Saldanha (MBA '96), ofMumbai, India, is the CEO of GlenmarkPharmaceuticals, a drug research anddevelopment company located in Mumbai.

Randle G. Schumacher (BS '96), ofDel Mar, CA, has accepted a position atLPL Financial as Director of Marketing inSan Diego. He previously worked for sixyears at AXA Financial in New York.

Denise M. Valentine (MBA '96), ofNorwalk, CT, has joined Aite Group tofocus on institutional asset managementand hedge funds. Previously, she was asenior analyst with Celent, a financial tech-nology research and advisory firm.

Ruaridh “Rory” Cumming (MBA '97),of Darien, CT, has been appointed CEOof ShopWiki, the shopping searchengine. Cumming most recently servedas Vice President of Online Marketing forRodale Inc.

Meridith F. Dennes (MBA '98), of NewYork, NY, and Mark Dennes welcomed adaughter, Addison Ryder Dennes, on June30, 2007.

Allison J. Galligan (MBA '98), ofBronxville, NY, has recently been promotedto Managing Director at Charles J. McBride& Associates, Inc., a boutique executivesearch firm specializing in the real estateindustry.

Guillaume A. Jesel (MBA '98), of NewYork, NY, was promoted to Vice Presidentof Global Marketing at MAC Cosmetics.Previously, he served as Vice President ofMakeup Marketing at Estée Lauder.

Sajid A. Khan (MBA '98), ofPlainsboro, NJ, is President ofMicroAgility, Inc., which has recently beennamed one of the “Top 100 Diversity-Owned Businesses” in New Jersey byDiversityBusiness.com.

Thomas P. Lukacovic (MBA '98), ofSyosset, NY, has accepted a new position atBNY Convergex as Equity Sales Trader.

Ian A. Post (MBA '98), of New York, NY,recently launched an investment advisoryfirm called Post Asset Management, LLC.The firm designs and manages investmentportfolios for individuals and small busi-nesses using passive investment strategies.

Harry Prassakos (BS '98), of ElmwoodPark, NJ, and his wife, Sandy, welcomedtheir first child, George H. Prassakos, onJuly 31, 2007.

Brett B. Rochkind (BS '98), of NewYork, NY, has been appointed ManagingDirector at General Atlantic (GA) LLC, aglobal growth equity firm. Prior to joiningGA in 2002, Rochkind was an investmentbanker with Morgan Stanley & Co.

Mark A. Glickman (MBA '99), ofMarlboro, NJ, has been appointed Vice

President of Sales at OscientPharmaceuticals Corporation. Glickman waspreviously Vice President of Sales at KosPharmaceuticals.

Djena N. Graves (MBA '99), of NewYork, NY, is the Director of BusinessDevelopment at ICV Capital Partners. Graveswas previously Senior Associate in theMergers and Acquisitions Group at MorganStanley.

Kevin N. Hinton (MBA '99), ofWashington, DC, has joined the NationalAssociation of Investment Companies(NAIC) as Vice President. NAIC is aWashington, DC-based trade association forinvestment companies dedicating financialresources to the development of an ethnical-ly diverse marketplace.

David Orozco (BS '99), of Evanston, IL,has accepted a faculty appointment asAssistant Professor of Business Law at theSchool of Business and Economics atMichigan Technological University.

George J. Pagano (BS '99), of StatenIsland, NY, has joined the law firm ofMorgan Lewis & Bockius LLP as an associ-ate in the firm's Finance Group.

2000sMelissa M. Coker (BS '00), of LosAngeles, CA, owns a clothing label, Wren,which has been named “one of three younglabels to watch” by Women's Wear Daily.

Ronald Lamprecht (MBA '00) andSusanne Mei (MBA '00), of New York,NY, welcomed their second child, a babygirl, Lucia Olivia, on August 2, 2007.

Jeremy W. Szeto (BS '00), of MissouriCity, TX, recently began his private medicalpractice specializing in family medicine.

C. Mark Tang (MBA '00), of Jersey City,NJ, has been appointed to the Board ofDirectors at Puda Coal, Inc. Tang is thefounder and Chairman of WorldTechnology Ventures, LLC, an internationalmerchant banking and advisory firm.

Erik J. Blum (BS '01), of Forest Hills,NY, has joined the staff of New York CityCouncil Member Helen Sears asLegislative Counsel.

Alisha N. James (MBA '01), of OzonePark, NY, married Donald M. Graham onNovember 25, 2006, in Garden City, NY.

Christy Y. Shue (MBA '01), ofShoreham, NY, has been appointedExecutive Vice President of Finance andInvestor Relations at Harbin Electric. Shuewas previously Vice President and SeniorInvestor Relations Consultant atChristensen, an investor relations advisory firm.

Gary Bennaim (MBA '02), of London,England, together with his wife, Olivia,and their daughter, Emma, welcomedMichael Saadia, on April 21, 2007.

Eric J. Bertrand (MBA '02), of NewYork, NY, and Julie Dellinger were married

in November 2007. Bertrand is a manag-ing director with Greystone Private Equity.

JonPaul Checa (BS '02), of New York,NY, is founder and CEO of Convos, anonline venture that helps small businessesand their employees manage informationonline. He was previously a consultantwith Acquis Consulting.

David L. Feldman (MBA '02), ofScotch Plains, NJ, was recently designat-ed a certified physician executive. He iscurrently Vice President of PerioperativeServices, Vice Chairman of theDepartment of Surgery, and Co-director of

c l a s s n o t e s

Eric S. Nonacs (MBA '01), ofBrooklyn, NY, is a senior advisor to theWilliam J. Clinton Foundation. FromJune 2002 until August 2007, he was theForeign Policy Advisor to President BillClinton and the Clinton Foundation.

Jo-Ellen Pozner (MBA '01), ofBerkeley, CA, has accepted a position asAssistant Professor at the University ofCalifornia, Berkeley Haas School ofBusiness.

Ann M. Sheridan (MBA '01), of NewYork, NY, married Erich Steinbrunn onSeptember 22, 2007, in Spray Beach, NJ.

50 Sternbusiness

Leadership Development at MaimonidesMedical Center.

Heather F. McMeekin (MBA '02), ofPhiladelphia, PA, has been appointed Co-manager in the Growth Equity InvestingTeam at Turner Investment Partners, aninvestment firm that manages more than$25 billion in assets on behalf of institu-tions and individuals.

John-David Schramm, II (MBA '02),of San Francisco, CA, accepted an appoint-ment to the faculty at the Stanford UniversityGraduate School of Business. Previously aStern faculty member, he will be leading aneffort to re-introduce communication cours-es to the MBA curriculum at Stanford.

Jim P. O'Neill (MBA '03), of Evanston,IL, has been named Vice President andDirector of Product Development for SocialSciences at McDougal Littell, a division ofglobal educational publisher HoughtonMifflin.

Rao A.S. Khan (BS '04), of Brooklyn,NY, has been promoted by ManhattanBorough President Scott Stringer as hisnew Director of Community Affairs andConstituent Services. He most recentlyserved as Deputy Director of CommunityAffairs and Constituent Services.

Jay A. Legenhausen (MBA '04), ofPalo Alto, CA, has been appointed SeniorVice President of Worldwide Sales at Actel.Previously, Legenhausen was VicePresident of Sales at CypressSemiconductor.

Samantha G. Woodruff (MBA '04),of New York, NY, has been promoted toVice President of Strategy and BusinessDevelopment at Nickelodeon/MTV Kidsand Family Group.

Jason Halpern (MBA '05), of ElkinsPark, PA, and his wife, Rebecca, wel-comed son, Isaac Benjamin Halpern, onMarch 5, 2007.

Shiri C. Leventhal (BS '05), ofCanton, MI, is participating in the firstnon-stop relay around the world. The runis organized by Blue Planet RunFoundation with sponsorship by DowChemical in order to highlight the cleanwater shortage in many countries.

Angela G. Salomon (MBA '05), ofNew York, NY, married Ryan Barkan onOctober 28, 2007, in New York, NY.

Mexico City native Humberto Zesati has a bold vision for hishomeland. The self-described “stubborn” venture capitalist seesripe investment opportunities where others see none.

Zesati serves as Managing Partner of Latin Idea Ventures, a pri-vate equity fund that provides late-stage venture capital to nascentMexican companies – a concept generally considered a nonstarter.“People have said to us, ‘You’re not going to get any money. There’sno venture money to be made in Mexico,’” he said.

But Zesati ignores the naysayers. “I’ve always believed thatthere are very good companies and very good entrepreneurs inMexico that lack access to capital,” he explained. “I see privateequity as a way to develop my country and a way to build world-class companies. The Mexican credit markets have been very inef-fective at bringing capital to the people. Ten years ago, there were

no venture funds investing in India and China. But now there are hundreds of them investing bil-lions of dollars there. We hope to replicate that model in Mexico.”

Zesati started Latin Idea in 2000 with a $5 million incubator fund that invested in dot-comcompanies. “This was a small fund in comparison to those in the US, but $5 million is a lot ofmoney for most Mexican ventures,” said Zesati. The fund was financed by private investors and,despite the dot-com bust, it netted a profit.

As a result of Zesati’s tenacity, his company continues to grow. “We’ve been successful becausewe’re basically the only active fund in Mexico dedicated to this niche,” he said. “So we see thecrème de la crème of the deals here, and we can cherry-pick which ones we want to take on.”

In 2005, fellow Stern alumnus Alex Rossi (MBA ’96) joined Zesati as Managing Partner in LatinIdea. The pair then began raising capital for the firm’s second fund and, in three years, has raisedfour times the amount of its first. The goal is to raise $28 million total; the company is workingwith European institutional investors to raise the remaining $8 million.

“The process of raising a fund in Mexico is hard because the local community cannot supportit,” Zesati said. “There are few high net worth individuals here and only a few Mexican institutionsthat have the money to invest in the fund.” Once fundraising is completed, Latin Idea will focusthe fund’s investments in technology, communications, and media companies that have potentialfor growth. Also this year, the company will start marketing a couple of new funds: a $75 millionto $100 million real estate fund, and a $100 million to $150 million mezzanine debt fund.

But the biggest challenge for Zesati is how to take his idea to the next level: building a vibrantindustry in venture capital in Mexico. “One fund doesn’t make an industry,” he asserted. “We needan ecosystem that can foster entrepreneurship and innovation here in Mexico.”

Of course, if anyone is going to make that happen, it’s going to be the trailblazing Zesati.

B l a z i n g a P r i v a t e E q u i t y T r a i l S o u t h o f t h e B o r d e r

Humberto Zesati (MBA '96)

Sternbusiness 51

Salomon is Director of Marketing andPublicity at Sony BMG MusicEntertainment.

Fikre Bizuneh (MBA '06), of Peoria,AZ, has been appointed Senior RiskAnalyst at FiREapps, a provider of foreignexchange exposure management tech-nologies.

Theresa A. Harrison (MBA '06), ofFalls Church, VA, has been appointedDirector of Government Relations atPIERS Global Intelligence Solutions, adivision of Commonwealth BusinessMedia. Previously, she worked in gov-ernment relations at Factiva.

Leneve Simkins Leatham (MS '40)

Chester Kaplan (BS '42)

John M. Dee (MS '49)

Arnold J. Meistrich (BS '55)

Wilbur A. Clarke, Jr. (MBA '61)

Brian P. Walsh (MBA '84)

Noliyuky Nakano (MBA '89)

Nancy G. Orland (MBA '91)

Brian Silvert (BS '99)

In Memoriam

To access the contact information of your fellow alumni and to update your own,log on to SWAP, Stern's online alumni community, at www.stern.nyu.edu/alumni.

NEWSSEND US YOUR NEWSDo you have a new job or promotion? An award, honor, or achievement to share?How about a marriage, new baby, or adoption? Let other alumni know about thethings happening in your life.Send us your news online through Class Notes in SWAP – the Stern WorldwideAlumni Platform – at www.stern.nyu.edu/alumni, or mail or fax your news to: Office of Alumni Relations & DevelopmentNYU Stern School of Business44 West Fourth Street, Suite 10-160New York, NY 10012-1126Fax: 212-995-4515

Iheanyi “Ik” Kanu (MBA '06), ofBrooklyn, NY, has joined Arthur D. Little,Inc., a global management consultingfirm, as a consultant. Kanu was previ-ously a consultant at PA Consulting.

Alexander B. Panov (MBA '06), ofMoscow, Russia, has recently beenappointed CFO of Transstroy after work-ing five years in planning at TNK-BP.

Nils Weber (MBA '06), of Basel,Switzerland, has started a new venture,Wizable, which develops business classmobility software.

Melissa F. Desjardins (MBA '07),of New York, NY, and her husband,John, welcomed a daughter, OliviaRose, on August 14, 2007.

Jen T. Hu (MBA '07), of New York,NY, has joined Earnest Partners as anequity trader. Hu was previously withGoldman Sachs' equity trading group.

Joseph M. Miscione (MBA '07), ofHoboken, NJ, founded ProvidgeConsulting, which was ranked number

332 in Inc.com's 5,000 Fastest GrowingPrivate Companies in America. ProvidgeConsulting customizes financial, humanresources, and customer service soft-ware applications.

Howard Schor (MBA '07), of GreatNeck, NY, was promoted to ExecutiveVice President of Strategic Operationsand Planning at Treeline. Prior toTreeline, Schor was Associate MediaDirector at advertising agency TheMedia Kitchen.

Thanks to the hundreds of alumni from around the world who joined us for Florence 2007: Global Alumni Conference.

Stay tuned for information on the next Global Alumni Conference to be held in

Barcelona, Spain - June 2009

52 Sternbusiness

By Marilyn Harris

Charles WaldoHaskins was the origi-nal accounting evangel-ist. He didn’t just co-found Haskins & Sellsin 1895, which within afew short years was thecountry’s preeminentpublic accounting firm(and which later mor-phed into the modernaccounting giant,Deloitte & Touche). Heserved on a joint com-mission of the US House and Senatethat investigated the executive depart-ments of the government, examinedCuban finances after the Spanish-American War, held key state officesrelating to the regulation of account-ing, secured legislation in New YorkState that led to the creation of thefirst CPA exam, and in 1900 co-founded, with his partner Elijah Sells,the NYU School of Commerce,Accounts, and Finance – knowntoday as NYU Stern. With all this, healso wrote a manual – “a pleasant lit-tle book,” he called it, aimed atwomen – on household bookkeeping.The absence of accounting practicesfrom the masses of instructional liter-ature about the domestic sciences wasa “staring gap” that troubled him, sohe took it upon himself to fill thatgap.

Haskins was born in 1852 inBrooklyn to a renowned Americanfamily with substantial business inter-ests and New England origins – hisuncle was Ralph Waldo Emerson.Originally intending to become a civilengineer, at 17 he changed his mindand joined the accounting departmentof a New York importing house. Fiveyears later, he took a break to travel

finance and com-merce,” who “under-stands the anatomyand physiology ofbusiness and the rulesof health of corpora-tions, partnerships,and individual enter-prises. He diagnosesabnormal conditionsand suggests approvedremedies. His studyand interest is thesoundness of theworld of affairs.”

Three years after founding Stern, in1903, Haskins died of pneumonia.

Today, the School honors Haskinsby giving its most prestigious awardhis name. The Haskins Award wasestablished to recognize outstandingindividuals whose careers have beencharacterized by the highest level ofachievement in business and publicservice. Past recipients have includedPaul Volcker and Alan Greenspan(BS ’48, MA ’50, PhD ’77), formerchairmen of the Federal ReserveBoard; Henry Kaufman (PhD ’58),president of Henry Kaufman & Co.;and William H. Donaldson, formerchairman and CEO of the New YorkStock Exchange.

Those who support Stern mostgenerously belong to a cadre knownas The Haskins Partners. Theirefforts fuel the Campaign for NYUStern with consistent dedication tothe School’s strategic priorities,including strong support of scholar-ships, facility renovations, and newprograms, as well as the annualStern Fund, which provides criticalfunding for a host of initiatives.Haskins, the accounting evangelist,would be pleased. ■

MARILYN HARRIS is editor of STERNbusiness.

in Europe and study in Paris, butultimately stuck with accounting,eventually working for the New York,West Shore, and Buffalo Railway. In1886, shortly following his marriageto Henrietta Havemeyer, daughter ofan even wealthier, politically connect-ed New York family, Haskins openedhis own practice. His clients includedsome of the nation’s most importantbusinesses, including banks, rail-roads, and steamship lines.

At Stern, Haskins taught andserved as its first dean, fostering anapproach that went beyond the nar-row accounting training that charac-terized business programs of the day.The public accountant, he stated,was “the consulting physician of

PastPerformance

Founding�Spirit

The American Book Co. building (top photo), now NYU'sMain Building, constructed in 1894, served as the School'sfirst location when Charles Waldo Haskins (bottom photo)founded Stern in 1900.

From a single drop,mighty rivers flow.And from your individual alumni contribution to theStern Fund, the vitality of your business school willbe strengthened.

Stern has great momentum.

We’re ranked among the top business schools in thecountry. We’re attracting the highest quality facultyand students. And we continue to be a launch padfor the future leadership of global business.

Just as Stern helped ensure your future success, weneed your help to ensure ours. Your annual supportof the Stern Fund is critical to our ongoing success.

Be part of our momentum.

Your generosity enables us to offer more scholarships,continue to attract and support top quality facultyand students, fund technological enhancements, and develop many other momentum-sustaininginitiatives.

To make a gift to the Stern Fund, return thebusiness reply envelope found in STERNbusiness ordonate online at www.stern.nyu.edu/giving. For more information, contact us at 212-998-0496 or at giving@stern.nyu.edu.

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