‘Inside Job’ Causes Changes at Columbia

by John A. Byrne on

Call it the “Inside Job” effect.

Columbia Business School, which came in for a critical drubbing by the Academy Award-winning documentary “Inside Job,” has approved more stringent rules for disclosing potential conflicts of interest among faculty.

The changes, approved last week by B-school professors, come after the provocative documentary brought embarrassing attention to academics who profit from unreported consulting and directorship deals with companies and organizations and then weigh in as “objective” observers on key policy issues in economics and financial regulation. The documentary was especially discomforting to Columbia Business School Dean R. Glenn Hubbard and Columbia B-school professor Frederic S. Mishkin.

Both granted the filmmaker Charles Ferguson on-air interviews that did not show either of them in the best light. Hubbard, who among other things is a MetLife director, came off as imperial and arrogant when asked about his consulting arrangements. Mishkin, who advises investment firms, was revealed to have written a positive white paper on Iceland not long before the country went bankrupt. It was paid for by Iceland’s Chamber of Commerce. His often-befuddled responses to questions made him appear, in the words of a rival dean, “a deer caught in the headlights” (see clip from movie below).

The documentary noted that Mishkin did not disclose publicly that in 2006, he was paid over $100,000 by the Iceland Chamber of Commerce to co-author a paper in which he praised the stability of Iceland’s economy—two years before it collapsed. It also criticizes Hubbard for not disclosing that he is paid $250,000 per year to serve on the board of the insurance giant MetLife.

The film sparked a debate about conflict of interest policies at Columbia, prompting the administration to reexamine the issue and leading the campus newspaper, The Columbia Spectator, to write a series of stories on the university’s conflict of interest rules. Among other things, the newspaper reported that some peer institutions have more comprehensive disclosure policies than Columbia’s. These schools include the University of Chicago, the University of Pennsylvania, Northwestern University, and Stanford University. Those schools require faculty members to disclose their consulting activities—including those unrelated to academic research—on annual, confidential forms.

Under Columbia’s new policy, Business School professors will be required to publicly disclose all outside activities—including consulting—that create or appear to create conflicts of interest. The new policy requires B-school professors to publish up-to-date curricula vitae, including a section on outside activities, on their Columbia webpages. They will be mandated to list all outside organizations to which they have provided paid or unpaid services during the past five years, including but not limited to consulting work, research, membership on a company’s board, and expert witness testimony. They will also have to describe the nature of those services.

The policy resolution approved by the faculty acknowledges that the B-school’s reputation has been called into question, noting that “increasing transparency about research and real or apparent conflict of interests and commitments helps Columbia Business School strengthen its reputation….When faculty members speak, write, or provide testimony, the public should understand their sources of compensation outside the University that might indicate any possible conflict of interests.”

According to the policy, the B-school’s dean’s office will monitor and enforce compliance with the disclosure requirement, and faculty members will be expected to update their CVs at least every six months. Faculty members who do not follow these rules will be subject to sanctions, although the policy does not specify what these sanctions might be.

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  • Jane

    No wonder Columbia faculty is ranked ‘C’!

  • P. Burton

    Was certainly a negative portrayal, but who’s to say the film did not portray Hubbard and Mishkin in the “best light?”

  • Bruce Vann

    This movie was one of the best movies I’ve ever seen and it explained fairly complex economic topics in language and illustrations that a child could grasp. I don’t say that it was good because I agree with all that is therein because I don’t but one of the main points that it proves is what the field of economics has said for a long time “Markets cannot self regulate as long as the persons regulating have an interest(especially a monetary one) in what they’re supposed to be regulating.”

  • Stacy Phillips

    Unless the Dean is considered a professor, shouldn’t he too disclose all such info?

  • http://www.beatthegmat.com DanaJ

    Glad to read this. I admired Mishkin a lot in my undergrad days. In fact, although his book cost the equivalent of a monthly minimum wage in my country, I bought it in 2008 just because I thought. it was worth it. I was so disappointed when I saw Inside Job… I looked up to Mishkin and was actually considering the school just because he’s teaching there. I guess it’s another example why we shouldn’t consider anyone infallible…

  • http://poetsandquants.com/members/llavelle/ Louis Lavelle

    Seems to me that if you want a practice to end you prohibit it, and impose penalties for violations, you don’t require people to disclose the problematic behavior. (If the IRS was operated by Columbia faculty nobody would ever go to jail for tax fraud…as long as they disclosed it.) If you ask me, the faculty approved changes that don’t really solve the problem.

    Louis Lavelle
    Associate Editor
    Bloomberg Businessweek

  • Langley

    Good point Louis Lavelle.
    The other schools mentioned require disclosures in “confidential forms”… perhaps that merely serves as a response to a situation like this one.

    I see from your BW profile that you oversee b-school rankings at BW.
    Do your rankings take into account the contents of this article?

  • Stunpals

    Columbia business school, including all students and staff, should be ashamed at the roll their faculty had in the financial crisis of 2008. If I had a degree from Columbia B school I would tear it up. To think, their dean told the director of Inside Job to “Take his best shot” when questioned about conflicts of interest. WOW.

  • FHS

    I have to say, as a business school applicant and journalist in Washington, I am shocked that Hubbard didn’t lose his job. I just watched “Inside Job” for the first time and would never consider going to Columbia Business School given the information revealed about Hubbard and Mishkin. I’m now researching the schools to which I applied in an effort to make sure I don’t end up at a school with such questionable ethics.

  • Ri

    Why isn’t this guy in jail? He Should NOT be allowed anywhere close to an educational institution.

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