Stanford: What's All The Fuss About?

Stanford University Graduate School of Business

Aside from all this, didn’t Saloner do a good job at dean?

Much of the school’s progress in recent years can really be traced to Saloner’s predecessor, Robert Joss. Though less popular with the faculty, Joss can count among his achievements the new GSB campus that opened in 2011. It is a vast improvement from the single building with windowless classrooms that had housed the school. Joss lobbied for the campus, oversaw all the planning for it, raised the money to fund it, including what was at the time the largest gift to a business school in history, a $105 million gift from Nike founder and Chairman Philip H. Knight. Under Joss, the school’s endowment grew to more than $1 billion from $387 million from 1999 to 2008.

Under Saloner, it’s not known what has happened to the endowment because he decided several years ago to no longer report publicly on its annual market value. What’s certain is that the increase of the endowment under Saloner is a mere fraction of the gains achieved by Joss and that the school has fallen further behind Harvard Business School’s endowment of $3.2 billion.

Still, in announcing the decision to step down, Saloner’s news release tries to put a positive slant on things, noting he had raised more than $500 million in “private support” as dean. Much of that money, however, has helped to fund a 17% expansion of the faculty since 2009 to 124 tenure-line faculty and a near doubling of the lecturers and other teaching staff to 90—even though there has been no substantial increase in MBA enrollment at the school.

The relatively new MBA curriculum at GSB—which helped to propel Saloner to the deanship because he headed that review—was initiated by Joss as well. Joss added two new joint degrees – the MBA-MS Environment and Resources and MBA-MA Public Policy. In addition, faculty developed a four-week Summer Institute for Entrepreneurship for non-business graduate students designed to help them understand business and startup needs.

The school’s rise in the rankings, overtaking Harvard as the No. 1 business school in both U.S. News and Forbes, has little to do with Saloner. It is a largely a function of the school’s location in the midst of a booming tech-driven economy, paradise-like weather all year round, and the new campus and larger endowment that was Joss’ doing.

Okay. But the dean has already announced that he is stepping down. What more can happen?

Because the university allowed the dean to set his own timetable for leaving, the school will now be led by a highly discredited lame duck leader. That’s not good for the university or the school. The provost, moreover, also is leaving the university. But if Saloner’s conversation with his lover is to be believed, the provost also should be reprimanded for his failure to insist that the dean follow university policy in recusing himself from personnel decisions involving Phills.

However, the provost’s departure has already been announced as well. Stanford President Hennessy disclosed last June that he’ll step down in the summer of 2016. In his announcement, he also gave notice of Provost Etchemendy’s departure. “To ensure a smooth transition to new leadership, the provost has graciously agreed to stay on for up to one year with my successor, but he will not be a candidate for the position of president,” Hennessy said.

What about Phills? Isn’t he just angry and bitter about losing his wife to the dean?

Wouldn’t you be angry if your boss started dating your wife and encouraged her to go the police to file a restraining order against you? That’s exactly what happened, according to the court records. Still, Phills does seem especially intent on making sure the court filings contain many embarrassing and highly damaged personal details about both his estranged wife and her lover. It’s hard not to imagine he isn’t after some sort of revenge here, especially because he really didn’t need his job at the GSB and the litigation is costing him hundreds of thousands of dollars. He’s earning far more at Apple University. His income last year was $1.7 million.

A friend claims that Phills is not intent on seeking revenge over losing his wife and his job, nor, for that matter, is he interested in winning for the sake of it. “He is doing this out of principle,” the friend says. “He says he does not want his children to live in a world where this behavior is tolerated.”

Isn’t the lawsuit alleging wrongful dismissal bogus because Phills was on a leave of absence at Apple University and when that leave was over he failed to return to the school?

It’s true that Phills was required under his contract to return to the school once his leave was over, but at that point several actions had been taken by Saloner to diminish his role at the school and to hurt him financially. Among these actions, Saloner decided to call in a $250,000 loan given to Phills and his wife to help them with the purchase of their home when they first came to the school in 2000. The school’s reasoning here was that because Phills’ wife left the home and was separated from her husband, the school could then force Phills to immediately pay back the loan with interest and a portion of the appreciation on the house. Phills also claims that Saloner removed him as director of executive education programs he had developed and taught for years on top of his MBA-program duties, replacing him with less-qualified faculty. The school also, according to Phills, had others teach the programs he had created, even though the programs used used teaching materials and a textbook that he had authored.

As a result, Phills argues that he could not return to what he perceived to be “a hostile workplace.”

What impact will this really have on the school?

That’s hard to tell. Most applicants won’t care all that much because most of these issues don’t really impact the value of Stanford’s MBA program or alumni network. Some alumni may be less likely to hand over money to the school, especially when the university will end up spending well over $1 million in legal costs on this lawsuit. Not many alums want to see their money go to lawyers instead of the school. It may also be slightly difficult, at least in the short-term, to recruit high quality faculty. Given the charges made by current and former GSB staffers, the school is not going to be perceived as a very cozy and comfortable place to work. Recruiting top faculty talent is a highly competitive game and decisions can often turn on small issues. Finally, there’s a very good likelihood that Stanford will lose its No. 1 ranking in U.S. News next year because the damage to the school’s reputation will impact its performance in the magazine’s peer assessment survey.

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