Professor Linda Argote Receives Prestigious INFORMS Fellows Award

 Institute for Operations Research and the Management Sciences Recognizes Outstanding Contributions

 HANOVER, Md.—The Institute for Operations Research and the Management Sciences (INFORMS) has selected Linda Argote, Carnegie Bosch Professor of Organizational Behavior and Theory at the Tepper School of Business at Carnegie Mellon University, to receive the 2008 INFORMS Fellows Award in recognition of her professional contributions to the advancement of operations research and the management sciences.  

 The INFORMS Fellows Award recognizes outstanding achievements in five areas: education in the field of operations research/management science; management of operations research/management science, including responsibility for applying the profession’s techniques within an organization of any type; the practice of operations research/management science; research; and service to INFORMS and the profession of operations research.

 Argote was presented the award at a special luncheon during the INFORMS annual meeting in Washington, D.C. as one of twelve honored by this prestigious recognition in 2008. Linda joins fellow faculty members of the Tepper School of Business: Egon Balas (2002), John Hooker (2007), Gerald Thompson (2004), Michael Trick (2006), and  Ph.D. Alumni Fred Glover (2002), Manfred Padberg (2002), Suresh Sethi (2003), M. Martin Weingartner (2002) and Stan Zionts (2006) as INFORMS Fellows.

 Argote is also a Fellow of the Association for Psychological Science (APS). Her instruction and research focuses on organizational learning, innovation, productivity, knowledge transfer, organizational memory, and group decision making and performance. She is currently serving a second term as Editor-in-Chief of Organization Science.

About INFORMS: The Institute for Operations Research and the Management Sciences (INFORMS^®) is an international scientific society with 10,000 members, including Nobel Prize laureates, dedicated to applying scientific methods to help improve decision making, management, and operations. Members of INFORMS work in business, government, and academia. They are represented in fields as diverse as airlines, health care, law enforcement, the military, financial engineering, and telecommunications. The INFORMS website is www.informs.org. More information about operations research is at www.scienceofbetter.org.

The Tepper School of Business at Carnegie Mellon University announced the creation of two leadership positions that will oversee the teaching and research areas of the institution. Two Tepper faculty members — Robert M. Dammon and Richard C. Green — have been named to new posts as associate deans, with three-year appointments effective July 1.

Dammon, professor of financial economics, will serve as associate dean, education, overseeing all educational programs offered by the school.

Green, the Richard M. and Margaret S. Cyert Chair and professor of financial economics, will serve as associate dean, research, overseeing the school’s research focus as well as the development of tenure-track junior faculty.

“The appointments of these renowned faculty members to the school’s leadership team provides many advantages to Tepper School students and faculty alike, as we continually strive for excellence across all areas of teaching and research,” said Kenneth B. Dunn, dean of the Tepper School of Business and professor of financial economics. “These particular faculty members reflect our high standards for producing world-class research and their many accomplishments reinforce our reputation as a business school that advances global business practice via relevant, path-breaking research.”

Dammon, who has taught at the school since 1984, has among his research interests the effect of taxes on the pricing and trading of financial assets, lifetime portfolio choice and retirement planning, and corporate finance. TIAA-CREF awarded him the Paul A. Samuelson Award for Outstanding Scholarly Writing on Lifelong Financial Security for his 2005 research “Optimal Asset Location and Allocation with Taxable and Tax-Deferred Investing.” He is also the past associate editor of The Review of Financial Studies and Management Science.

Additionally, Dammon is recognized for his exceptional teaching record and is a three-time recipient of the George Leland Bach Award for Excellence in the Classroom distinction (1989, 1997 and 2007). This award is given annually to Tepper School faculty on the basis of MBA student nominations.

Green, who has taught at the school since 1982, has among his research interests the pricing of financial assets, corporate decision-making and the effects of risk and taxes on financial asset returns. Green was the 1996 recipient of the George Leland Bach Award for Excellence in the Classroom. Green served as editor of the Journal of Finance, one of the leading academic journals in the field of financial research, from 2000 to 2003. Most recently, he served as president of the American Finance Association in 2006, an industry group widely recognized as the premier academic organization devoted to the study and promotion of knowledge about financial economics. Prior to assuming his associate dean role, Green was head of the Tepper School’s Ph.D. program, a position now held by Jonathan Glover, professor of accounting. 

These new positions are designed as rotating three-year terms among the Tepper School faculty, and represent an evolution of the previous position of associate dean, intellectual strategy. The prior appointment was recently completed by R. Ravi, Carnegie Bosch Professor of Operations Research and Computer Science, who has returned full-time to the Tepper School faculty following his assignment.

           PITTSBURGH—Robert Kelly, chairman and chief executive officer of BNY Mellon, will deliver the keynote address at Carnegie Mellon University’s Tepper School of Business diploma ceremony for master’s degree and Ph.D. recipients. The ceremony will be held at 2 p.m., Saturday, May 16 at Soldiers and Sailors Memorial Hall, 4141 Fifth Ave., in Pittsburgh’s Oakland neighborhood.

            Identified as one of “America’s Best CEOs” in 2009 by Institutional Investor magazine, Kelly has been recognized for his leadership within the financial sector on numerous occasions. He was named a top 10 bank CEO by U.S. Banker magazine in 2006 and 2007. While serving as chief financial officer of Wachovia, he was voted one of “America’s Best CFOs” by the readers of Institutional Investor magazine in 2004, 2005 and 2006.

            Kelly serves on Carnegie Mellon’s Board of Trustees. He is also member of the Partnership for New York City and the Federal Advisory Council of the Federal Reserve Board. He is a member of the board of directors of the Financial Services Roundtable and serves as vice chairman of the Roundtable's CEO Regulatory Restructuring Advisory Council. In addition, he is a member of the Financial Services Forum and serves as chairman of the Forum's Regulatory Reform and Modernization Task Force.

            With more than 25 years of professional experience in financial services, Kelly also has an extensive background in retail brokerage and securities trading. He is a chartered accountant with an MBA and an honorary doctorate from Cass Business School, City University in London, and a bachelor's degree and honorary doctorate from St. Mary's University in Halifax, Nova Scotia, Canada.

Author:Mark D. Burd 412-268-3486

Event: Carnegie Mellon University Professor Jay Apt is scheduled to testify at a hearing of the U.S. House of Representatives’ Energy and Commerce Subcommittee in Washington, D.C., on “The American Clean Energy and Security Act of 2009.”

When: 9:30 a.m., Thursday, April 23.

Where: Room 2123, Rayburn Office Building, Washington, D.C. 20515.

Apt, executive director of the Carnegie Mellon Electricity Industry Center, distinguished service professor of engineering and public policy, and an associate research professor at the Tepper School of Business, is expected to urge the congressional subcommittee to focus on reducing carbon dioxide rather than singling out renewables, and let alternative technologies compete to achieve the goals of reducing carbon dioxide emissions, improving environmental quality in general, increasing energy security and sustainability, and lowering electricity prices. His testimony will draw on a paper he authored along with Carnegie Mellon’s Lester Lave, the Harry B. and James H. Higgins Professor of Economics and Finance and professor of engineering and public policy, and university Ph.D. student Sompop Pattanariyankool. The paper appeared in the fall 2008 Issues in Science and Technology: “A National Renewable Portfolio Standard? Not Practical” (http://www.issues.org/25.1/apt.html). 

 The committee’s chairman, U.S. Rep. Henry Waxman (D-Calif.), and subcommittee chairman, U.S. Rep. Edward J. Markey (D-Mass.), are holding four days of hearings to discuss the draft of the bill. In February, Professor Lave testified before the U.S. Senate Committee on Energy and Natural Resources on the results of his research.

Author:Mark D. Burd 412-268-3486

 In each track, the winning team’s start-up company will receive a prize of $20,000 cash investment in their firm along with in-kind business services and the opportunity to pitch their concept to a venture capital or early-stage investment firm. Two of the three track winners will receive an automatic invitation to participate in the Global Moot Corp^® competition, which was won in 2008 by a team from Carnegie Mellon University with a venture called NeuroBank that made its debut at the McGinnis competition. Winners of “elevator pitch” rounds will also receive a cash prize of $1000.

 In its sixth year, the annual competition will attract more than two-dozen teams from across North America, as well as competitors from Universities based in Asia, Europe and South America. The event is organized by the Donald H. Jones Center for Entrepreneurship at the Tepper School of Business and is made possible by an endowment from Gerald E. McGinnis, a successful entrepreneur and founder of Respironics, Inc.  . Participating teams include:

•              Babson College
•              Boston University
•              Carnegie Mellon University (2)
•              Dartmouth College
•              George Washington University
•              IIFT (2)
•              Illinois Institute of Technology
•              Indian Institute of Technology
•              Johns Hopkins University
•              Kennesaw State University (2)
•              Lund University
•              Queens University
•              Rensselaer Polytechnic Institute
•              Universidad do los Andes
•              University of Arkansas (2)
•              University of Chicago
•              University of Illinois at Chicago
•              University of Manitoba
•              University of Michigan (2)
•              University of Oregon
•              University of Texas-Austin (2)
•              University of Utah
•              University of Virginia
•              Xavier Labour Relations Institute

 “In addition to the prizes, the McGinnis Venture Competition offers bright, young entrepreneurs the opportunity to present their emerging ventures to venture capitalists, private investors, leading entrepeneurs, and successful business leaders” said Dr. Art Boni, director of the Donald H. Jones Center for Entrepreneurship at the Tepper School of Business. “This interaction helps to define and enhance the strengths and identify potential weaknesses of their proposed venture. This process enables the students to refine their approach toward successfully marketing new technology.”

 Winners of this year’s competition will be announced at an awards program on Saturday evening, March 14, 2009, at the Carnegie Science Center in Pittsburgh.  Master of Ceremonies for the keynote address will be given by Glen T. Meakam, co-founder and managing director of Meakam Becker Venture Capital.   A special presentation will also be made at dinner by Michael Kobold, Carnegie Mellon University Graduate, founder of Kobold Watch Company, and leader of an upcoming expedition to Mt. Everest.   

 A detailed schedule of events, teams, sponsors, and additional information is available at: http://www.mcginnisventurecompetition.com.

News Item Updated (March 15, 2000)

2009 McGinnis Competition Final Results:

 Technology Track

Grand Prize - Carnegie Mellon University (Tepper School) – Dynamics, Inc.

Dynamics produces next-generation, interactive payment cards with programmable magnetic strips.

Second Place - Dartmouth College – mPedigree Logistics

mPedigree provides pharmaceutical companies with robust anti-counterfeit solutions appropriate for emerging markets, with added value via mobile marketing and granular supply chain oversight.

 Life Science Track

Grand Prize - University of Utah – ElutInc    (MOOT)

ElutInc is a start-up orthopedic device company that improves orthopedic surgeries and bone healing by creating implantable devices that can release (or elute) antibiotics and various drugs directly into a surgical site. Our patent-pending technology is being developed into a series of orthopedic, controlled-release surgical devices.

 Second Place - University of Illinois at Chicago – Optical In-Sight

Optical In-Sight holds the exclusive rights to a light-powered retinal prosthetic, the first of its kind with the potential to restore functional sight to people blinded by end-stage, age-related macular degeneration (AMD). Optical’s technology closely mimics the normal vision process, using the natural light that enters the eye to trigger the device.

 Sustainable Technology Track

Grand Prize - University of Michigan – Husk    (MOOT)

Husk Insulation is a business-to-business company that will use proprietary technology licensed from the University of Michigan to convert agricultural waste into high-grade, vacuum-insulated panels that will be sold to final-product manufacturers (initially refrigerator manufacturers).

 Second Place - Queen’s University – Green Gold

Green Gold will rehabilitate mine tailings from abandoned gold mines. Many of these tailings are contaminated with toxic wastes (such as mercury and arsenic) that have a terrible impact on the local environment. Green Gold will bid on government contracts to clean up the tailings by processing them through a centrifuge and concentrated leaching process. This will remove the metals and rehabilitate the mine sites. This process will also extract any residual gold and heavy metal deposits that can be used as a secondary source of revenue.

 Third place - University of Virginia – Clean India LLC  

Clean India provides industrial wastewater recycling and water supply services in a profitable, cost-effective, and environmentally friendly manner by utilizing algae as a water treatment vehicle. Clean India will develop a network of water purification plants across industrial cities in India and target customers in the pulp and paper, textiles, steel and engineering industries.

 Elevator Pitch Winners

1^st Place – Dartmouth College – mPedigree Logistics

mPedigree Logistics provides pharmaceutical companies with robust anti-counterfeit solutions appropriate for emerging markets, with added value via mobile marketing and granular supply chain oversight.

 2^nd Place – Carnegie Mellon University (Tepper School) – Dynamics, Inc.

Dynamics produces next-generation, interactive payment cards with programmable magnetic strips.

 3^rd Place - Universidad de los Andes – CareCure

CareCure offers low-cost, high-quality alternative solutions to cardiac surgery in developing countries. The first product is the DCN (Double Cone Nitinol) Device, which is a minimally invasive occluder device used to close congenital heart defects in children.

Author:Mark D. Burd 412-268-3486

Release Date: Jul 16, 2009

           PITTSBURGH—Eliminating incentive-based components of executive pay packages — such as bonuses, stocks and options — could cut the value of U.S. firms by half over a period of just eight years because executives would have less reason to be mindful of shareholder interests, particularly in larger firms that are more difficult to manage, according to research from the Tepper School of Business at Carnegie Mellon University.

            For example, the research predicts that financial returns in the aerospace industry would fall by almost 9 percent per year if the chief executive officers in each firm were paid a fixed wage. At the heart of these findings is the concept of moral hazard, in which an executive insulated from risk through a fixed wage may behave differently than one who was fully exposed to the risk associated with the management of the firm. The study is forthcoming in the American Economic Review.

            “Properly designed incentive-based pay helps to discourage excessive risk-taking, and eliminating such compensation would undercut the critical role that it plays in ensuring the alignment of interests between shareholders and executives,” said Robert Miller, professor of economics and strategy. “Such a change would do serious harm to the fiscal health of corporations and the wealth of shareholders, which in some cases is the U.S. taxpayer.”

 A more accurate measure of executive compensation

            Co-authored with fellow Tepper School Professor George-Levi Gayle, the study uses a more accurate measure of executive compensation that goes beyond year-to-year earnings to take into account an executive’s existing wealth in company stock and options, and the effects of his or her management on the performance of those holdings. “The total value of previously held stocks and options are often overlooked by analysts but represent the most volatile component of executive pay packages,” Miller said. “An executive’s total compensation can lead to windfalls during successful years but also yield situations where an executive loses a significant amount of wealth by working at a particular company.”

Applying this new methodology and adjusting for the risk associated with a highly uncertain income, Gayle and Miller determined that CEO pay at an average-sized firm that maintained their size from 1944 to 2003 increased by a factor of 2.3, which is approximately equal to the growth rate of per capita national income over this same period. Per capita nonwage income — such as dividends and interest income — grew more quickly during this time period than average wages, which rose by only 55 percent.

In the case of the aerospace industry, average risk-adjusted CEO compensation between 1944 and 1978 for sampled firms employing an average of about 50,000 workers was $450,000 (measured in Year 2000 dollars), while average risk-adjusted compensation between 1993 and 2003 — when firms averaged more than 58,000 employees and had more than 10 times the asset value — was $1,314,000. Taken together, these findings fly in the face of widely held beliefs that high-ranking executives have seen their earnings skyrocket compared to the general population without good reason, such as increased volatility of earnings.

Not surprisingly, the authors found that CEO pay does increase with firm size, and firms achieved an average of triple the sales and six times the asset value over the 60-year time period. According to the study, the dramatic increase in the size of the firms that executives are being asked to manage is the single most significant factor explaining the rise in executive compensation, with its attendant moral hazard problems of incentivizing managers to maximize shareholder value. This has led compensation boards to leverage executive pay to more closely track firm value, and consequently increase the cost of the risk premium required to attract qualified people to positions of leadership in industry.

“Fundamental misunderstandings about executive pay have led many to demonize compensation practices that are not only on par with the rise in national income, but benefit shareholders as much or more than CEOs,” Miller said. “Policymakers and citizens making the case to eliminate such compensation should carefully consider the consequences to ensure that government actions don’t inadvertently diminish the worth of U.S. corporations, a recipe for disaster in the current economic climate.” 

The study analyzed a wide range of compensation and firm data — primarily from the S&P ExecuComp, S&P COMPUSTAT North America and the Center for Securities Research (CSP) databases — for the aerospace, electronics and chemicals industries from 1944 to 1978 and 1993 to 2003.

The paper, “Has Moral Hazard Become a More Important Factor in Managerial Compensation?” is available for download at http://www.comlabgames.com/ramiller/AER.pdf.

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