March 2004 Issue

Whither the World Bank in the Global Arena?
Strategizing with Dow Jones Exec
Get Your Clubs Out!
Time to Update Your MBA?
Lubin Lauds Etienne Aigner CEO
Distinguished Economist at Henry George Symposium





Whither the World Bank in the Global Arena?

[James D. Wolfensohn]
Beyond the Printed Page
"We won't have peace unless you deal with the question of poverty. You can have as many armies as you want and spend two trillion dollars a year on military expenditures, but if you don't deal with the question of hope for young people, you are never going to have peace," proclaimed James D. Wolfensohn, president of the World Bank, during the Global Finance Leadership Forum breakfast held on February 23, 2004. The Forum was sponsored by Lubin's Center for Global Finance and the Accounting Department, in conjunction with Forbes.com and Gartner, Inc. In the architecturally impressive townhouse setting of the Forbes Building on lower Fifth Avenue, in New York City, the Forum attracted business leaders from institutions such as Ernst & Young, CNN America, and Bear Stearns & Co, to name a few. They all came to hear Paul Maidment, executive editor of Forbes and editor of Forbes.com, conduct a one-on-one interview with Wolfensohn.

Professor Jorge Pinto, director of the Center for Global Finance introduced Wolfensohn and referred to the financial crisis that Mexico faced in 1995 while Pinto was the Counsel General of Mexico in New York City. At that time, the World Bank, among others, came to Mexico's rescue. James J. Spandfeller, president, & CEO, Forbes.com, welcomed guests to hear Wolfensohn describe the role of the Bank in the new millennium.

A Changing Prototype
"I was trying to think if there was a multinational institution that is more disliked than the World Bank and I find it very hard to come up with one," said Maidment provocatively to kick start his interview. In a response that brought comic relief among those in attendance, Wolfensohn responded, "Let me start with your first assumption about dislike, because I don't know who your friends are. But, I actually think the prototype you are describing of the World Bank is one that we have grown up with as students, but is not current. It is important to say that because a flippant description of "the Bank" is that everyone hates it and it does not do a constructive job and if you get rid of it, everything would be wonderful and I don't believe that to be the case at all."

Wolfensohn, who is three and a half years into his second five-year term as president of the World Bank Group, after leaving his own investment banking firm, has stated his dedication, as director of the Bank, to achieving a "new global balance" between the donor and developing nations of the world by trying to persuade both groups to take urgent steps to meet the United Nations Development Goals (MDGs).

"There are five billion people that are clients of ours out of six billion people on the planet. About 2.5 billion or more live on a couple of dollars a day," Wolfensohn said in describing the constantly widening gap between the rich and poor between and within the nations of the world. As a matter of fact, today the Bank functions as the primary source of funding to fight the pandemic of HIV/AIDS and to foster strategic multinational partnerships around culture, peace, development and faith initiatives, and communication technology educational programs such as the Global Distance Learning Network and the Development Gateway program.

Speaking Out
"I am trying as much as I can to speak out, but I have discovered that is a very modest contribution. For a day you're a star and on the front page, but the continuity of it is pretty lousy. I have found a tremendously receptive audience, but the focus is something that I do not have without the leadership of the politicians," Wolfensohn stressed to Maidment when asked if there is anything more "the Bank" can do to turn those good intentions among developed nations into an act of political will and, ultimately, money on the ground for developing countries.

Wolfensohn pointed to the stark demographic reality that the world has over 2.8 billion people under the age of 24 and 1.5 billion under the age of 15. To offer the assistance of the Bank in shaping leadership skills of world youth in preparing for the future, he held a meeting in September 2003 with over 100 youth leaders from 70 countries whose organizations represent more than 120 million members worldwide – "among them, rural youth, street children, children orphaned by AIDS and civil conflict, Roma youth, and youth with disabilities." He said the Bank is establishing youth teams in Bank offices around the world to encourage their active engagement in developing anti-poverty strategies.

Giving these young people hope for a genuine future cannot be accomplished without raising their standard of living and persuading the donor nations to accept a major responsibility in this effort, Wolfensohn remarked. He said he regularly goes to each of the G7 leaders (U.S., France, United Kingdom, Italy, Germany, and Canada) making these claims, and, individually, he receives a tremendous response, but as a group they are very reluctant to commit financial and other resources because all of them are facing their own domestic stresses, including unemployment, increasing security demands, immigration conflicts, and economic instability that take priority. For these and other reasons they resist meeting the hard demands of the developing nations for genuine debt-reduction policies, elimination of destructive trade policies, transfer of useful technology and resources, and accountability for unethical government and corporate practices that have permeated these nations, partially as a result of colonialism.

Taking a Hard Line with His Native Land: Australia
"You started the ‘Cairns Group,' so how can you agree with the United States on bilateral agreements," Wolfensohn said he demanded of his Australian compatriots recently when they signed the bilateral agricultural agreement with the U.S. Born in Australia, Wolfensohn is now a naturalized U.S. citizen and a proponent of multilateral trade. He explained that he continually urges wealthy countries to help developing regions build up their agriculture to productive capacity, but because of bilateral agreements, the developed countries engage in trade with other developed countries and, in effect, shut out those countries that they initially had intended to aid.

A Shift in Economic Equilibrium
"I think you are seeing now the beginnings of a new balance between the rich and the less rich and people recognize that the developing world is growing at twice the rate of the developed world," Wolfensohn said of a shift in economic activity that is already in full swing. To reconcile inequity, foster respect for the peoples of the developing countries, tackle the huge problems of corruption in all spheres of society, and highlight the return on development investments, Wolfensohn said pressure must be put on the developed countries to begin learning about and understanding others' cultures, ethics, and values with greater openness. "The world of the future is going to be a world where our kids are really going to have to learn about Islam, China, India, and Pakistan. Our kids have to know, and if not, we are not preparing them for the world they are going to be living in," Wolfensohn commented in describing the global village, where opportunity must be an equal right for all. He admitted that the World Bank is being called upon to do its share to balance the wants of the wealthy donor nations with the eminent needs of the developing world, which is growing at twice the rate of the richer countries. He indicated it was up to the challenge.

Strategizing with Dow Jones Executive Richard F. Zannino, '84

[Richard Zannino]
"The future ain't what it used to be," said Yogi Berra. "Clearly, that's more true today than it's ever been in terms of the complexities of business," said Richard F. Zannino, '84, executive vice president and COO of Dow Jones & Company, in explaining why he referred to this Yogi-ism in his slide presentation to undergraduate students on Monday, March 8, 2004. Zannino discussed the planning and alignment strategies used at Dow Jones when he spent the day at Pace's downtown New York City campus as an Executive in Residence.

"[The strategy] starts with an assessment of your business...we start with evaluating what our shareholders' expectations are and whether we can meet them," commented Zannino, who as a member of the company's executive committee, has all operating, information technology, investor relations, finance operations, and corporate marketing units report to him. "Developing a strategic plan ...we want to bring together our competitive advantages and strengths with stakeholders' preferences," said Zannino.

The Dow Jones organization publishes the world's most vital business and financial news and information through such leading publications as The Wall Street Journal (WSJ) , Barron's, and SmartMoney, and provides the world's most widely followed stock-market indicator Dow Jones Industrial Average.

Beyond the Printed Page
With the growing influence of electronic media, Dow Jones extends its operations beyond the printed page by delivering real time news both online and through the CNBC TV network. "Is the Internet really going to be the end of print, like they said radio, television, and cable TV were going to be? We think not. But over the long term there will be substitutions for electronic media over print media... and we take a long-term view of our future," commented Zannino. He also named revenue and share price increase, operational excellence pursuits, strategic alliances and acquisitions to extend the brands and content, as well as further consumer ad category penetration to reduce the company's reliance on the highly cyclical advertising at the WSJ, as other strategic priorities.

"We want to remain focused on business publishing...and tap the full potential of our very strong brands: The Wall Street Journal and Dow Jones, to get as much value out of those as we can by extending their reach to new product lines and new channels of distribution," Zannino stressed.

The Alignment Model
Dow Jones uses an alignment model to communicate the strategic plan to its 6,000 employees, according to Zannino. To illustrate his point, he said, "Here is one of my favorite Yogi-isms. 'When you come to a fork on the road take it.' Strategic planning helps you decide which fork (and there are many of them in business) to take. The plan is your roadmap; it sets guardrails for you in making those decisions. You want to make sure business units and corporate departments are aligned with your strategies... and that the individuals within those units understand what the strategy is," said Zannino in addressing a group of MBA students during his evening lecture. Speaking about the importance of attracting, motivating, and retaining smart and talented people, he stressed the value of diversity and teamwork: "If you know how to motivate teams and you believe in [the] exponential power of team work, you are going to be great.... Sometimes our divisions don't talk to each other, so we always tell people 'think Dow Jones, don't just think Wall Street Journal or Barron's."

Speaking about the way Dow Jones monitors the success of their strategy implementation, Zannino said: "The measurement is all about watching and keeping score.... We have a matrix so that we know if these things are happening [at every level of the organization] and we measure it.... We look at it monthly, quarterly, and report [the results] twice a year to our board of directors."

Cultural Strategy
"We don't want anybody to pursue our business strategy by violating our core values of quality, integrity, independence, collegiality, serving the public at large, etc.," commented Zannino. He pointed out the significance of having a clearly defined cultural strategy as a way of codifying Dow Jones' policies on acceptable behavior in pursuing business strategies. "Ethics always starts with the tone at the top and this is how we help set the tone at the top."

During a luncheon earlier that day, Zannino involved the small group of faculty and students present in a discussion of ethical issues facing the business community today, mentioning the ethical dilemma he had to solve when, at the age of 24 and just out of school, he had to prepare an analysis for his boss's boss to present to his boss. "I realized the huge mistake I made in the analysis when they were walking to the building where their boss was." Knowing they would never catch the mistake if he did not tell them about it, Zannino decided to reveal his error and proceeded to get the correct numbers to his superiors. "I survived and actually ended up getting points for it," he said. Zannino emphasized this point throughout his lectures and told the students, "not everybody is doing it. If you find yourself in a company that asks you to do something improper, get up and leave."

Passion for Excellence
"If you are just happy with the status quo and being average, then you probably will have that same job for a long time," opined Zannino in speaking about leadership attributes. "If you really want to get ahead in business or in life, then have this passion for excellence, don't tolerate the status quo, and always ask if there is a better way to do it."

Zannino also underlined the importance of solving problems oneself rather than delegating them. "People who succeed... go to their boss's office with recommended solutions...." In laying out his philosophy for success, he said, "finally, meet your commitments. There is nothing worse in school, life, or business than not meeting your commitments and being late or not prepared," he concluded.

Prior to joining Dow Jones & Company, Zannino held senior executive positions at Liz Claiborne, Inc., General Signal Corporation, and Saks Fifth Avenue. He received a B.S. degree in finance and economics from Bentley College in Waltham, MA, and an MBA in financial management from Lubin.

Lubin Lauds Michael P. Cangemi, '70, Head of Etienne Aigner

[Michael P. Cangemi]
"This is a dream come true for me," said Michael P. Cangemi,'70, the recipient of the Lubin Alumni Achievement Award—the most prestigious award the Lubin School presents in recognition of professional accomplishments and service to Pace University and the School. Addressing over 300 fellow alumni, colleagues, Lubin faculty, staff, students, and family gathered at a luncheon in his honor, Cangemi went on to explain, "I had dreams as I walked these canyons of Wall Street as a kid working at Merrill Lynch and [later] working there and going to school at Pace University. I was an impressionable young man from a very happy middle class family from Brooklyn, New York." He recalled how excited his family was when he announced he was going to receive his education at Pace. "I realized at that moment, looking at their happy faces, that they came to America with their dreams and, today, if they were to see what has happened to me, their dreams were coming true."

The 11th Annual Alumni Achievement luncheon was held at JP Morgan Chase's Executive Dining Room in downtown New York City, donated each year by the event's title sponsor, JP Morgan Chase.

President, CEO and director of the Etienne Aigner Group, Inc., a leading designer of women's footwear and accessories, Cangemi is also coauthor of the popular auditing guidebook, Managing the Audit Function, a Corporate Audit Department Procedures Guide. He began his career at Merrill Lynch, while simultaneously pursuing his B.B.A. in accounting at the Lubin School. After completing his degree, he began working at Ernst & Young, LLP, as a principal, then became a corporate vice president at Phelps Dodge Corporation, and later a partner at BDO Seidman. Possessing a wealth of business knowledge and experience, Cangemi joined Etienne Aigner as a senior vice president and progressed to executive vice president and finance director of the UK parent company before assuming his current position.

A Certified Public Accountant and a Certified Information Systems Auditor, Cangemi is a member of the Fashion Accessories Advisory Board, AICPA, NYSSCPA, the Financial Executives Institute, the Institute of Internal Auditors, and serves as the director of the National Fashion Accessories Association. A trustee of the Institute of Internal Auditors Research Foundation, Cangemi is a lifetime honorary member of the Information Systems Audit Control Association, as well as the Information Systems Audit Control Foundation, and the 10th recipient of the Joseph J. Wasserman Award for outstanding achievement in the field of information systems and control. As if all this were not enough, Cangemi has written business articles that have been published in numerous journals and serves as editor in chief of the I S CONTROL Journal.

"The Lubin School of Business is indeed proud of your professional success, but we are especially grateful for your commitment to the University," said Dean Arthur L. Centonze in introducing the awardee. "Your impressive career and dedication to Pace are an inspiration to us all. You are a remarkable role model: balanced, determined, and committed to excellence and service. Our goal at Pace University has been to educate our students to lead successful lives, you have accomplished this objective." Pace President David A. Caputo greeted the guests and also praised the honoree for his exceptional contributions to the accounting profession.

Honoring Recent Alumni and Scholarship Awardees
The 7th annual Recent Alumni Service Award, recognizing the significant accomplishments and contributions of the School's recent graduates, their outstanding professional leadership and service to the University, the School, and the community, was presented to Kelvin Joseph, '01, CPA, senior auditor at Ernst and Young, LLP, and the vice president of the National Association of Black Accountants (NABA), New York Chapter. A passionate and dedicated person, Joseph is the recipient of a number of awards such as 2001 Pace University Trustees' Award, NABA's Student of the Year Award, City Intern of the Year Award, and the AICPA Scholar Award. He also has found time to establish a mentoring organization to help highly motivated students and professionals exceed their goals and reach their full potentials and, together with his wife, he recently launched "Samantha," a retail and apparel company that specializes in footwear.

Erica Caplan, an MBA student majoring in Organizational Behavior, received the annual scholarship award as the student demonstrating outstanding academic achievement, leadership potential, and financial need. A member of Sigma Iota Epsilon Honor Society, cofounder and current president of the Lubin Graduate Society, Caplan has represented the Graduate Society at a number of orientation fairs. She has also represented Pace at Crain's Business' Breakfast. Holding a B.B.A. in Psychology from Lafayette College, Caplan served at KPMG as a global mobility coordinator where for two years she managed and implemented international assignments for over 70 KPMG U.S. partners and employees. In addition, she has devoted her energies to volunteer work with local underprivileged children, counseled fellow students experiencing social and academic problems, and participated in organizing a camp to teach English to underprivileged teens in Israel.

Fundraising Success
John E. Boyd, '76, president and CEO of EUR Systems and chair of the 2002-2003 Steering Committee, pointed out that over $219,000 was raised for students' scholarships, which set a new record. "This could never be achieved without the generosity, commitment, and contribution of all of you here, in addition to the organizations that you represent," he said and touted the event's major sponsors, which included American International Group, Inc.; Etienne Aigner Group, Inc.; the Chubb Corporation; Deloitte & Touche, LLP; Ernst and Young, LLP; KPMG, LLP; Ingersoll Rand Company; Information Systems Audit and Control Association; the IT Governance Institute; MIM Corporation; Morgan Lewis and Bockius, LLP; and Verizon Communications.

Boyd also recognized vice chairs of the Steering Committee (Philip F. Bleser '81, '84, and '94; Susan Caldwell; and Maria Fiorini Ramirez,'72), as well as many of the past honorees of the Alumni Achievement Award (Mark M. Besca, '81; John A. Gerson, '69; Bridget-Anne Hampden, '79; Edward F. Murphy, '74; James E. Healy, '64; Jack L. Salzman, '68; and Maria Fiorini Ramirez, '72).

Other distinguished members of the Lubin advisory board and trustees of the University present at the luncheon included Marie J. Toulantis, '81; Thomas B. Hogan, Jr.; Herbert Henkel, '79; Michael Monteleone, '79; Louis F. Laucirica, '66 and '71; Michael O'Reilly, '71; and Ian McDougall, '54.

Henry George Forum: Distinguished Economist William J. Baumol Presents Paradigm for Social Well-Being

[Dr. William J. Baumol]
"It is the rent phenomenon which lies at the heart of what I consider the most striking economic issue that faces the world today," argued Dr. William J. Baumol, professor of Economics at NYU and professor emeritus and senior research economist at Princeton University, during his lecture "Free Market Growth and Rent Beyond Land" to a fascinated audience of Lubin faculty and students at the downtown New York City campus on October 29, 2003. This was the 4th Annual Henry George Symposium, organized by Lubin's Henry George Professor of International Management, Robert Isaak, and sponsored by the Robert Shalkenbach Foundation.

Baumol referred to Henry George (the unknown printer from San Francisco who, without formal training in political economy, wrote a seminal text in the late 19th century called Progress and Poverty) and discussed his idea that the price of land increases more rapidly than the wages of workers, thus leading to increasing impoverishment; that the supply of land is more or less fixed; and that a tax on land is different from all other taxes because landlords do nothing in return for the money they earn, making rent the ultimate payment for which society gets nothing in return. He indicated one way in which these concepts retain and even expand in importance for today: "For reasons that have evolved since Henry George's time... the analysis goes beyond just the soil itself.... Modern economists use the term 'rent' not only to apply to the payment for acreage, but call rent any form of payment that is not a reward for contribution to production. [The rent] issue is what explains the fact that the free market economies have been able to achieve rates of economic growth, levels of output, outpourings of innovation, such as the world has never even remotely paralleled before," he opined.

Innovation as a Productive Way to Free Market Growth
Citing the Roman Empire, where 'rents' such as aggressive warfare, blackmail, or forgery were considered respectable ways to pursue wealth, and ancient China, where numerous inventions occurred and within a century were totally forgotten, Baumol underlined the importance of innovation as the process of bringing an invention into its full utilization, for the development of the society: "[Despite the fact that] there is poverty, misery, recessions, and unemployment under capitalism, in the free market, the capitalist system is incredibly good at ...producing an outpouring of output and innovation," he said. Baumol pointed to one's ability to contribute to the well being of society by means of innovation as a productive way to accumulate wealth, as opposed to rent seeking.

David/Goliath Partnership
"The rate of innovation that we experience today is something so rapid, so unprecedented, so extreme that we cannot comprehend it," said Baumol in commenting on the flood of innovations in the 20th century. "We take innovations for granted.... It is the century in which astonishing inventions have become a banality and that is really quite an accomplishment."

Suggesting that in today's business environment having a better and newer product than your rival's is one of the best weapons of competition, he said that about 70 percent of U.S. R&D spending is done by large corporations in seeking inventions and innovations (rather than advertising and price) that can top the competition. Baumol said this represents an increase of 700 percent over the last 45 years. He commented: "The small entrepreneur is being overrun by these giant enterprises...[but] if you think the entrepreneur is dead as a contributor to growth, you are wrong...The giant oligopolies play a critical role [in the innovation process] ...but the small innovative entrepreneurs are equally indispensable and together they have formed a David/Goliath partnership in which each plays a crucial but different role."

Rent Seeking Is Still a Problem
"The warning that Henry George gave us pertains today as it did a century ago because there are still plenty of opportunities for rent seeking in our economy. We have read plenty of scandals in the newspapers... The CEO of Enron got a rather substantial payment and did nothing for society in exchange.... If rents become where the money is, as it was in ancient Rome, then you will find people turning to rent seeking rather than production. So the moral of this story is that rent seeking opportunities still represent a problem," concluded the sagacious Dr. Baumol.

In the political dialogue taking place worldwide today, the scandals being uncovered concerning people's abuse of the "rents" concept is one of the most relevant economic issues under examination; and one that may topple governments and corporations alike in its wake.

The author of numerous books and publications, and a recipient of numerous honors and awards, including ten honorary degrees, Baumol was born in New York City and received his B.B.S. at the College of the City of New York and a Ph.D. at the University of London. The President of the American Economic Association, and a member of the National Academy of Sciences, Baumol is also a distinguished painter (whose artwork can be seen at www.econ.nyu.edu/user/baumolw/).

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