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http://www.post-gazette.com/regionstate/19990215profitshare2.asp
Professors earn 'stock' at Pitt business school The stock options program for faculty and staff is believed to be the only one of its kind in the United States.
Monday, February 15, 1999
By Bill Schackner, Post-Gazette Staff Writer
College professors have always enjoyed a few perks - from tuition discounts for their children to a break at the cash register in the campus bookstore.
But stock options courtesy of their dean?
At the University of Pittsburgh, faculty and staff in the business school did double takes when they opened their mail recently and learned they were being offered a financial stake in the school's future performance.
A not-for-profit institution such as Pitt may not issue actual shares of market stock, so instead, every permanent employee in the Katz Graduate School of Business is getting dozens of phantom shares with an assigned value of $20 each. If the school prospers, the shares will be assigned a higher value. And that increase can be cashed for a bonus amounting to a couple hundred dollars.
The program, believed to be the only one of its kind in the United States, is one more way that universities are being prodded to act more like corporations. The stock options are the brainchild of Frederick Winter, the school's dean, who has made it plain since arriving nearly two years ago he wanted to improve the school and achieve a higher standing in the national magazine rankings of business schools.
His idea has evoked a range of reactions, from high praise to
derision.
A St. Louis-based association that represents more than 800 business
schools in the United States and abroad said it had never heard of
such an approach.
"It's clever," said Charles Hickman, a staff director with the
AACSB-International Association for Management Education. "The only
piece of skepticism I have is whether this is just symbolism or
whether there is actually enough financial incentive."
But the American Association of University Professors in Washington,
D.C., is not amused. It says a Wall Street approach to running things
that emphasizes individual profit misses the point of what education
is about - even in a business school.
"A university is not a corporation, and it should not be. God knows
we have enough corporations," said Mary Burgan, general secretary.
"The symbolism of this thing to me seems questionable."
Revenue sharing is not new to campuses.
For generations, university departments that pull down hefty research
grants have been allowed to pocket some of the income to pay overhead
and fund new initiatives. But the practice of rewarding individuals
who are income producers is spreading as campuses, increasingly
worried about the bottom line, urge their employees to be more
innovative and entrepreneurial.
At Penn State University, a new revenue-sharing plan enables 80
percent of the net income from distance learning programs to flow
back to the school or department that generated them. Deans and
department chairmen can decide how the money is spent.
"It might be used to fund graduate assistantships or for
departmentally funded research or to support instructional innovation
or to buy equipment," said Gary Miller, associate vice president for
distance education at Penn State and executive director of its World
Campus.
New York University went even further in October by establishing a
for-profit subsidiary, NYU Online Inc., to produce "courseware" for
its online learning programs.
What's different about Pitt's venture is it aspires to give outright
cash payments to everyone from secretaries and administrators to
professors.
In upcoming weeks, about 160 Katz employees, including those in the
undergraduate program that it oversees, will be issued 80 shares of a
fictitious company called Katz Inc. Each share's value will be
reassessed periodically based on how the school fares in such areas
as student test scores, job placement rates, student satisfaction and
magazine rankings.
The payouts will come from interest on a half-million-dollar gift
made in December by a Katz alumnus.
"Nobody is going to get rich from this," Winter said. "I am under no
illusions that the current dollars allocated are large enough to
significantly change our lives."
But he said the plan should get people thinking about ways they can
work collectively for the school's good.
A recently completed strategic plan for the school sets as a primary
goal ascendancy into the ranks of the Top 25 MBA programs in America.
The two publications that annually do the ranking - Business Week and
U.S. News and World Report - now put Katz in the mid-40s.
Initially, everyone will get the same number of shares but, Winter
said, "it is possible that we will issue more options to high
performers in the years ahead."
Burgan, from the AAUP, said that would open the door to favoritism.
Some in the school are skeptical of the program, but others who
support it say the critics miss the point.
"We are a business organization whether we want to admit it or not.
We compete with other universities for students and tuition," said
Kenneth Lehn, a business administration professor. "To the extent
something like a stock option focuses attention on overall school
performance, I think it's good."