Joint Meeting of the Main Campus Executive Faculty

And the Main Campus Caucus of the Faculty Senate

January 31, 2007

UNAPPROVED MINUTES

Present from the Executive Faculty: George Benke, Dorothy Betz, Sandra Calvert, Robert Cumby, Wayne Davis, William Droms, Carol Dover, Douglas Eagles,Elena Herburger, Harvey Iglarsh, Catherine Keesling, Miklos Kertesz, Charles King, John Kline,Wesley Mathews, Douglas M. McCabe, Alan Mayer-Sommer, Terrence Reynolds, Veronica Salles-Reese, Clay Shields, Robynn Stilwell, Kathy Temple

Present from the Senate: David R. Andrews, Dorothy Betz, Jeffrey T. Connor-Linton, Robert Cumby, Wayne A. Davis, Anna De Fina, Lyndon J. Dominique, Carol Dover, Douglas A. Eagles, Hans Engler, Harvey Iglarsh, Catherine Keesling, Miklos Kertesz, Gwen Kirkpatrick, Douglas M. McCabe, William McFadden,S.J., Gwen Owens, Peter C. Pfeiffer, Ilkka A. Ronkainen, George Shambaugh

Visitor: Provost James O’Donnell

I: Call to Order:

The meeting was called to order at approximately 4:05 pm.

II. Proposed MSB Arrangements:

Provost O’Donnell began the meeting with a brief discussion of the key features of the proposed new arrangements for the McDonough School of Business. His discussion featured what he views at the key principles of those arrangements. The proposed arrangements are essentially changes in the financial structure governing the MSB and the remainder of the Main Campus. An essential piece of the arrangements is that the remainder of the Main Campus is to be held harmless. As outlined by Provost O’Donnell, the proposed arrangementsinclude the following features:

  • Graduate and professional MSB tuition and fee revenues will accrue to the MSB. All other revenue will be kept centrally by the Main Campus.
  • MSB will pay all MSB faculty and staff compensation (including financing all growth in this compensation) and will take on all incremental expenses in operating the new building.
  • The changes that would result from the proposed arrangements are not a zero-sum game. They will enable the MSB to grow beyond what would have been possible otherwise. The additional resources accruing to MSB from this growth will be used to build and strengthen the faculty of MSB.
  • MSB explicitly agrees that MSB undergraduate programs will maintain at least their current quality and will continue to receive at least the current commitment of resources.
  • In two years, the Provost, the Main Campus CFO, the University CFO, the MSB Dean, the MSB finance officer, and the President will review the arrangements and will assess whether everyone has, in fact, been held harmless.

Provost O’Donnell proceeded to make some additional points to illustrate the “hold harmless” nature of the proposed arrangements. As the capital campaign succeeds in raising funds for undergraduate financial aid, any budget relief that results will flow to the Main Campus. The Main Campus is currently required to deliver a surplus (to fund University cash balances as well as capital projects such as a new science building and a new student information system) of approximately $20 million. In conjunction with that, the MSB’s spending authority will be reduced by approximately $2 million relative to previous multiyear financial plans.

After this discussion, the Provost opened the meeting to questions from members of the Senate and the Executive Faculty. In summarizing these questions and answers, these minutes combine some similar questions (and the corresponding answers) that were asked at different times during the meeting.

Question: If the MSB is successful in achieving growth in their graduate programs, what are the prospects for sharing that success, particularly with other graduate programs?

Answer: There are no plans for earmarks. In the near term, growth in MSB revenue will go to strengthen the MSB. Other programs may benefit indirectly since the MSB will not be participating in GraduateSchool faculty fellowships and will not be drawing on GraduateSchool admissions resources. If the MSB is wildly successful, lots of other units will want to share and there will be discussions.

Question: The MSB is currently allocated $2 million in financial aid for MBA students. Will the MSB continue to receive these funds from Main Campus sources or will they need to fund financial aid internally? If they will continue to receive funds from Main Campus sources, is this a subsidy given by the Main Campus to the MSB? (This is a combination of multiple questions that are combined for the purpose of the minutes.)

Answer: The $2 million of Main Campus funding for MBA financial aid will remain. Any increases in MBA financial aid beyond that will be funded by the MSB.

Question: Will the development of new degree programs still be approved through the GraduateSchool?

Answer: There are no changes planned in the governance structure.

Question:Who is responsible for undergraduate programs?

Answer: Nothing involving undergraduate programs changes administratively or operationally.

Question: Large numbers of MSB undergraduates take courses in departments in the College. Will undergraduate MSB tuition revenue follow the students?

Answer: If the number of students increases significantly one would need to ask if that increase reflected a reallocation of courses within the College – in which case it would be an issue to be addressed in the College – or a net increase in College credit hours taken by MSB undergraduates – in which case it would be an issue for the Provost to address.

Question: What is the protection for the rest of the Main Campus should things not go will with the MSB?

Answer: The MSB will be expected to pay its bills. The Provost’s office and the Main Campus CFO will watch things closely. If a problem arises, they will notice it and raise the issue.

Question: Do you foresee a reallocation of undergraduate enrollments across units of the Main Campus (e.g. MSB, College, SFS)? (Responses to multiple questions are combined.)

Answer: A trial balloon was floated suggesting that MSB might be interested in a reduction in numbers. If the circumstances arise under which that would make sense for the University and changes suggested by that trial balloon were to proceed, there would need to be financial adjustments. There is not currently any planning going on in anticipation of any such changes.

Question: To what extent will MSB be expected to participate in unfunded future initiatives or future changes in the Campus’s required surplus?

Answer: The MSB is and will remain part of the Main Campus. They will be involved in discussions about the funding of future initiatives and should the Main Campus surplus target be increased, there would need to be discussions with the MSB.

Question: Will the MSB’s contribution to the University’s cash position increase with success? Don’t other programs contribute more (through GTRs) as they are more successful? Wouldn’t it be a good idea to link the MSB contribution to the University’s cash position to it gross revenue rather than to fix it in dollar terms. (Multiple questions combined.)

Answer: We don’t want to tax success. The President doesn’t believe other units have similar opportunities for success so others should not expect the same deal.

Question: The MSB faculty are currently covered by the Main Campus salary and merit plans, and salary pool increases are reviewed by the MCPC. What kind of faculty oversight will exist for the proposed MSB salary pool? Will faculty governance continue?

Answer: The MSB was a bit ahead of the curve when the Executive Faculty passed its guidelines in 2003 and has continued as before, informed by the Main Campus guidelines. I will make sure they have an equitable and transparent process. The increase in the MSB pool will be at least as large as the increase in the pool for the rest of the Main Campus. The appropriate role for the Executive Faculty is to ask if implementation is consistent with the guidelines.

Follow-up Question: With the increased autonomy of the MSB Dean, will faculty be constrained from voicing its views by fear of the Dean’s autonomy and power?

Answer: The Executive Faculty has a role to represent faculty.

Question: The document refers to other leading business schools as a model. Others have profitable executive education programs. The MSB does not and it would cost a lot to develop them here. This raises several questions. Isn’t there a significant risk of adverse financial outcomes with this proposal? Will new faculty recruited for executive education be governed by Main Campus policy?

Answer: The MSB will likely pursue executive education; they will do it in a way that is distinctively Georgetown, and it may benefit other units on campus. Any new faculty will be governed by Main Campus policy.

A faculty member from MSB added that the MSB has made little progress in executive education but has a very successful executive MBA program. He added that the MSB has a core of faculty that can do executive education; we simply need to build the programs.

Question:What are the incentives for the MSB to focus energies on undergraduate education?

Answer: The undergraduate program will require review and monitoring. I anticipate efforts to improve the undergraduate MSB program.

A faculty member from MSB added that an improvement in the quality of faculty will spill over into the undergraduate program.

Question: Who will conduct the review in two years?

Answer: Thereview will involve the Provost, the Main Campus CFO, the University CFO, the MSB Dean, the MSB finance officer, and the President. There may also be a role for the Executive Faculty.

As there were no additional questions for Provost O’Donnell, he left the meeting.

The chair then asked for discussion so that he could get a sense of which questions have been answer to the satisfaction of the group, which remained to be answered more fully, and what concerns might remain.

Several members of the Executive Faculty expressed support for the idea of linking the MSB “surplus” to gross revenue, noting that such a link would provide a mechanism for the University to benefit financially should the MSB be successful in pursuing revenue growth, that the argument that it is prudent for the Main Campus to run a surplus would apply equally to the MSB, and that doing so now would be easier than doing so later. One member suggested that we vote on the question.

A member of the MSB faculty discussed the differences between gross revenue and net revenue, along with other thoughts involving the meaning of “success” of the new arrangements and concluded with a call to be careful on how any recommendation might be worded. Another member of the MSB faculty called the proposed arrangements an experiment and noted that a more formal document could be produced in two years.

Others expressed concerns that the document is “loose,” which could cause problems in the future. Making changes to tighten the agreement now, they argued, are very important. One member argued that the MSB Dean reporting to the President was perhaps the most important part of the arrangements and might make it difficult to change the agreement in the future.

Additional members of the Executive Faculty expressed concerns about the $2 million in MBA financial aid.

Another member noted that we should keep in mind the potential for the proposed arrangement to be beneficial for everyone. Others agreed.

At the suggestion of other members of the Executive Faculty, Professor Davis made the following motion:

Motion 1: The MSB operating surplus target should be at least $2 million and should grow with MSB gross revenue.

The motion was seconded. A discussion followed, generally covering points noted above. As the discussion pursued and several members had to leave, it was apparent to everyone a quorum was no longer present and the meeting adjourned at approximately 6:05.