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governance

Literally off the beaten path is the below article I acquired in 1999 which appears nowhere else online today—at least according to Google. One reference to the article by a blogger does exist as learned via offbeat search engines duckduckgo and Dogpile. At 911 words it’s a succinct equation for the global oil business, with effective price setters in the oligopolist Saudis and Iraq, and disgruntled price takers in not simply consumers, but principally less formidable Western suppliers.

It frames US military intervention in Iraq in market terms virtually unfound in Western media.  Western circulated fears for mass consumption concerned a supposed threat of retaliatory diminished oil supply by then Iraq President Saddam Hussein. Unchallenged was the irrationality of a regime whose economy depended on oil sales, foregoing oil sales.

This article presents the opposite case–excess supply and, hence, lower world prices and raised profit thresholds for smaller (Western) suppliers–as the actual fear by the Western investor class unbeknownst to the electorate.  It remains instructive on the oil market today. The article’s premise—rarely heard by American audiences—is directly supported in U.S. legislative transcripts like that of Senate Hearing 106-86.

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In its 2013 large firm census Catalyst has assembled this Appendix of Fortune 500 firms with zero female executive officers.  Catalyst characterizes its broader research project as follows:

This project examines women’s representation in corporate governance at the largest companies in the United States. It provides critical statistics to gauge women’s advancement into leadership and highlights the gender diversity gap. Each year Catalyst tracks:

          • Women’s share of all board seats and of positions of board leadership.
          • The representation of women of color directors.
          • Companies with 0%, 25% or more, and 40% or more women directors
          • Companies with zero to three or more women of color directors.

It’s generally believed that education and development raise standards of living and improve the general welfare.  This post from The 50 Million Missing Campaign concerned with female genocide in India frames an opposite and startling case.

I literally feel ill. One place where education and economics are not solutions: @drlisaDCook @JustinWolfers

The historically free New York City-based Cooper Union University is a unique valuation case study. NYU journalism professor Jay Rosen captured the sentiment in under 140 characters :

Following mismanagement of its endowment, the school is set to begin charging tuition for the first time in its 154-year history. In this video students of the architecture school aim to raise $600K for gifting to future architecture students via a One Year Fund to buy the school time to identify an alternative to charging tuition, a financing change that students believe will irreparably alter the school’s culture, content and mission. For the record I support the free education model and the students of Cooper Union.

Consumers of ever pricier higher education are derelict not to question governance. Education brands are life-long pacts. For the record this was the delivery, reproduced below, of MIT Professor Kevin Slavin to his alma mater, Cooper Union, a few years back.  As widely reported, Cooper Union is in trouble. It’s accented by the school’s unique history as a premium tuition-free academy set to charge tuition for the first time.

I applaud candor in university governance:

criticize the lack of transparency as I see it.

Evidence of too little inquiry into Boards includes inexplicable enrollment growth in academies like my own private women’s college; successful lobbying of entities like Kaplan University to shut down federal reform efforts in its for-profit business model and industry; and the weighty fact of class action litigation by ABA graduates—a new phenomenon—a number slated for expansion to a group of 35 academies.

This was Kevin Slavin’s address to his board.

Kevin Slavin — Cooper Union Community Summit – talk as presented Dec 5, 2011

Thank you. I’m Kevin Slavin. I entered the Cooper Union school of Art in 1989, graduated in 1995, and began teaching as an adjunct in 2011.

I was in the audience here on November 7th, when the Chairman of the Board of Trustees, Mark Epstein, was asked, how did we arrive at a $16MM annual deficit without warning or hope of repair?

His answer was that the alumni were — quote — a failed investment. As if 38% of the funds outlined in the decennial report is a failed investment. Not the new building. Not the loans whose interest repayments alone form half the deficit. But us. The alumni.

And then, three weeks later, Cooper Union asked me for $10,000.
I’ve brought it here tonight.

I’m pledging it to the contingent fund that’s been set up. I’m pledging that $10,000, here, publicly, to the Cooper Union I went to, the Cooper Union I’m looking to invest in, a Cooper Union which is tuition-free.

Mr. Epstein, President Bharucha, the money is on the table. Let’s see whose investment fails whom.

I was on this stage in 1995, when I gave the graduating speech. It was 10 minutes and it was composed entirely of quotes from graduating speeches from 20 years before me. That was not a cynical act. It was to say: it didn’t start when I got here and it didn’t end as I was leaving. Not for me, not for the institution.

So when I heard President Bharucha speak in early November, the phrase that struck me, what is so important, is “sustainability.” If nowhere else, this is one point in which the President and I are in perfect alignment, as with all of you. We are all looking for a sustainable solution to produce another 20 years of graduating speeches for some other student to steal from.

The question, then, is: what makes Cooper Union sustainable?

It means using a resource that’s producing more than it’s consumed.

And the mistake that’s been made, systemically, is believing that the resource at the bottom of all this, the resource that must be sustained, is money.

It’s not money. Money is a derivative. The resource it’s derived from, the resource it maps to, the resource it measures, is trust.

It’s a logical fallacy, it’s called “argumentum ad crumenam” — “the logic of the purse”. In this fallacy, to acquire money means to administer trust. But we don’t live there anymore. It’s over. If anything, the acquisition of money, these days, doesn’t provide trust … it demands trust. Greater and greater amounts of trust.

Trust is the resource that was depleted first. And I’m here tonight to talk about how it went away, and what it will take to get it back. Because the deficit of trust has made the hole we’ve dug unfillable.

I’ve invested in my own companies, in large public companies, in non-profits, in New York City start ups. Money has always followed trust, and that trust came from a sense of transparency and communication. A sense that I knew where the money would go.

But I never gave to Cooper Union. Because I never could figure it out. I can hardly figure it out now, in spite of the amazing efforts of Barry and Professor Stock earlier in the evening. Because meanwhile I have a team of forensic accountants who say they haven’t seen anything this fucked up from anyone who wasn’t being deliberately obstructive.

I want you to think about it: if someone asked you for $10,000 — whoever they are — and when you asked, can I find out how that’s been spent, be told, that’s not really your business…would you invest it?

If someone asked you for $10,000 and had a board of people who were going to spend it, and no one was supervising them — no one! — and they were accountable to no one — no one! — and if you asked, can I find out what you guys are even talking about and they said — no! — and you said, can I even talk to you — and they said — no! — would you invest in that? If it were for profit, would you believe that it would be likely to be profitable?

And yet, that’s where we are. Can you imagine a company, in a crisis, that would bar the NYT, Reuters, and the Wall Street Journal from the room — from this room! The Great Hall! — and bring it’s chairman to address its shareholders who will only answer prepared questions with a lawyer at his side?

What is produced in a spectacle like that? What is consumed? What is exhausted?

Transparency is not a promise. It’s not an idea. It’s action. The answer to whether Cooper Union should be more transparent is not the word “yes.” The answer is to be more transparent.

And so we asked, on November 7th, whether there were any conflicts of interest between the business operations of the Board of Trustees and the business operations of Cooper Union. The Chairman said:

“Every year, the trustees fill out a conflict of interest statement and that’s made public. If there’s any conflict, potential conflict, or appearance of conflict involving Cooper Union, its public.”

In following up on this publicness, we received the following response from TC Westcott:

“Regarding the COI, we can make the policy available not the completed questionnaires… The actual questionnaires are confidential because they include personal information. However, when a potential conflict is disclosed that information appears in the 990.”

But a bunch of forensic accountants, when crunching the 990s found one — but not because it was listed as potential conflict, but rather because it emerged from information that they puzzled together.

This one is just an example, I don’t mean to give it undue weight. It concerns Sandra Priest Rose, who was a trustee for several years, including the years in which the New Building contracts were initiated and fulfilled.

Between 2006 and 2009, as part of those contracts, Cooper Union paid Jonathan Rose Companies $2MM to supervise construction. That company is run by Jonathan F. P. Rose. The trustee Sandra Priest Rose is his mother. [Audience: “oh my god.”] Oh my god.

Let me be clear: the Rose family does amazing things, for Cooper Union, for New York City. We all of us, owe them. We really owe them! And perhaps her son’s company really happened to be the very best for the job and provided the most competitive bid. That is entirely possible. But that’s why it’s a fucking question.

And that’s why the answer is not to state policy. It’s to state fact. It’s to address the spirit of the question, which is not about policy. If we’d heard about this potential conflict when we asked about potential conflicts, instead of from forensic accountants, then we wouldn’t have used up so much of those precious resources: not just time, but trust.

I’m happy if the Roses thrive, I really am. For their generosity if for no other reason. I just want to know, if you ask me for $10,000, and say it’s going to be spent responsibly, I’d like to get a heads up that responsible spending will keep it in the family. It’s possible to do that. I don’t discourage it. I just want to know.

There is an alumni representative to the Trustees, Don Blauweiss. I offered him my spot here tonight, because I would rather listen than talk. What he said — and god knows I don’t blame Don for this — is that he can’t, because he’s privy to sensitive and confidential information. But if the delegate to the trustees cannot speak to the group that has delegated him, what is he there for?Everyone tells me, everyone says, we have to put the past behind us and just move forward, just build. And I say, yes, let’s build. We are all of us here, makers, builders.

We’re makers and builders, but so if we don’t know what we’re working with, how are we to build? If we can’t see the material, how can we work with it?

I say, let’s work with trust. And I challenge Cooper Union to help restore that resource, that foundation, I offer my help however I can, and say, let’s build.

After a month of pestering, one week ago, you released the KPMG docs. Thank you for that, no really: thank you. Released a bunch of numbers that were erroneous and then quickly corrected them. Thank you for that too.

You stopped secretly editing the mission statement of the institution on the website. Thank you for that. You are going to have the trustees review the trustees. Fewer thanks for that. Less gratitude. If you will provide us with the minutes and notes that are germane to the financial situation of Cooper Union, to its investments, business interests, transactions, et al, we would thank you for that. If you would stop saying that Cooper Union dodged a bullet without mentioning that it’s because it was falling down at the time, we’d thank you for that. If you will stop pretending that things are alright, when we know that they are not, we would thank you for that. If you would admit that the hole that is dug is dug with bad information and with silence, we would thank you for that and set out to fill it together with something solid.

Let me be clear. I am not trying to pay back the education I got. That’s called a student loan.

No, when I give, I am funding the education of the future. That’s not repaying something. That’s investing in something. So as an investor, I challenge you, President Bharucha, the Board, I challenge you to find the real and sustainable resources — transparency, communication, trust, and integrity — resources that can be renewed endlessly. I’ll break my back to build on those and I know that’s true of everyone here.

Do not allow our investment to fail.

Finally, hinting of an Arab spring in higher education, the presidential office occupiers of Cooper Union, @FreeCooperUnion, today retweeted this:

Or rather it bans big sugary drinks. It’s one of the shrewdest moves I’ve seen in the public sphere around psychologically resetting beverage serving sizes and, by extension, sugar and caloric intake per serving.

Given NYC Mayor Bloomberg’s ban’s arguable practicality it’s interesting it’s just now happening, though admittedly, it’s not for the risk-averse. A mayor of the free world’s largest city has a fiduciary duty to the citizenry to take on big problems in creative and efficient ways. A national epidemic of overweight and obesity requires such an official to vote. And the ban will meaningfully add to an experiential public health and policy database about what levers may alter behavior affecting the public’s health interest. It’s a bold stroke of leadership. I support it.

It’s unclear where behavioral change thresholds are for big sugary drink servings. But Bloomberg is willing to search. We do know Americans don’t eat or drink purely due to hunger or thirst–so by definition serving size is malleable.

Naysayer group 1: “big government”

These opponents are misdirected: Any nation’s first duty is self-defense. So in a country without conscription, government has a primary duty to regulate the health profile—among other things—of the general population from which the military is  drawn; hence, vaccinations for public school teachers and pupils, regulation of the agriculture industry, quarantine law, etc.  Some of our most important and long-instituted food regulations and nutritional standards today derived straight from the Department of Defense. We can’t source a military with insulin dependents.

Naysayer group 2: “too many loopholes”

They claim folks will just buy two 16-oz big sugary drinks to get the old 32 oz. they used to.  Not necessarily: It’s less convenient and inconvenience is a tax. From web pages that load seconds too slowly; to stepping well outside to smoke; to voice-automated menus with excessive steps; to merchandise too low on a shelf; to right houses in wrong locations; we avoid inconvenience. Over the course of one New York City minute and time-sensitive day, that can include queuing up for a refill, additional beckonings of a waiter, multiple treks to the movie concession area, or carrying 2 drinks vs. 1 from the start. Lastly, even if they refill, the point is they refill at a lower caloric rate—sugar and calories per refill. That’s a plus.

For the record, of course, overweight and obesity cost.

Screenshot: In my quarters there was a chromosomatic split: Those who thought a now resigned congressman’s career was salvageable after explicit photos of him rounded the public sphere, and that only any illegal conduct by him ultimately mattered, were mostly men. Those who immediately declared him finished mostly had 2 X chromosomes. And some of them—like me—said it’s all about the pictures and they matter really really hard.

When the story broke, Arianna Huffington called it (the end of the congressman’s House career) with one tweet, in that dark, succinct and characteristic 2 X style in which our finest aunts have ominously murmured when somebody went too far at the church supper.  And unquestionably, it was time to go.

The end of this congressman’s authority and House career was so foregone a conclusion for me, that some male acquaintances’ early protestations to the contrary—primarily because of some “ranking” they envisioned of the congressman’s infraction relative to that of other still-sitting legislators (none of whose foibles, however, had been photographically captured, never mind infinitely digitally disseminated)—made me want to lay it out nicely and prove it. Like a math theorem. Not to “make” one agree, but allow one to hear Aunt Julia—whose voice clearly had not gone off in their heads.  It was mostly with such fellows in mind that I originally wrote in calm consideration of what struck me as more than axiomatic—my earnest explanation that fire is indeed hot:

Leadership is part optics.

In a recently resigned congressman’s story people have talked law, lies, and other still-sitting politicians’ foibles. Unmentioned is how the New York congressman failed the optics test endemic to political leadership:

  • that Obama passed by not being photographed smoking on the campaign;
  • that Bush 1 failed by glancing at his watch during a debate;
  • that a paralyzed FDR passed by “walking” before a troubled country;
  • that frontrunner Nixon failed under television lights in the 1960 debate with Kennedy;
  • that Reagan passed by understanding cameras as an actor and staffing accordingly;
  • and that Gary Hart failed when pictured with a companion.

Knowing (for example that some other politician consummated an extramarital affair) and seeing (for example pictures as in the present case, in absence of such consummation) don’t drive the same optics or outcomes in politics. In court. In sales. In management. Or in courtship. What we see (and don’t see) regularly trumps what we know. Or becomes it. And leaders of duration generally know that.

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