Poets&Quants’ Professor Of The Year: London Business School’s Alex Edmans 

RESEARCH: THE BUSINESS CASE FOR RESPONSIBILITY

Edmans switched to academia in 2003, attending MIT Sloan as a Fulbright Scholar and earning his PhD in Financial Economics. He won the MIT Sloan Outstanding Teaching Assistant of the Year as well as the MIT Graduate Teaching Award. He also published his first paper: “Sports Sentiment and Stock Returns,” studying the effects of soccer results on the stock market.

“Basically, what I wanted to show was that markets are inefficient; they’re affected by emotions and psychology,” he says. “What I found was that when a country is knocked out of the World Cup, the market goes down a lot because of bad mood and investor sentiment. So that was a paper that got me onto not just CNBC and CNN, but also ESPN.

“And I thought, this is really cool. Research is something that can be interesting, and it is something that can impact everybody.”

In 2011, as an assistant professor at Wharton, Edmans published a paper considered a pioneering work in CSR: “Does the stock market fully value intangibles? Employee satisfaction and equity prices.” In it, he compared the long-term returns of companies listed on Fortune magazine’s “100 Best Companies to Work For in America” and found that they outperformed companies that did not make the list. While leaders in CSR often make the ethical case for corporate social responsibility – treating employees well is the right thing to do, for example – Edmans set out to study the business case – treating employees well is profitable in the long run. 

“Back then, CSR was an unfashionable thing to be researching. He was taking a big risk at that time in studying it,” Taylor says. For a long time, finance research followed the Milton Friedman paradigm that said the purpose of a company is to maximize shareholder value. Then, Edmans’ came along and showed that companies that were taking actions not for the sole purpose of maximizing profits were also profitable. 

“He helped reconcile the two views by showing that actually when companies treat their employees well, it does seem to be good for the company’s future profits,” Taylor says. “I admire that paper, and clearly the profession does too – look at how many times it’s been cited.”

‘GROW THE PIE: HOW GREAT COMPANIES DELIVER BOTH PURPOSE AND PROFIT’

Shortly after earning tenure at Wharton in 2013, Edmans joined the faculty of London Business School where he is academic director of LBS’ Centre for Corporate Governance.

In 2018, he was appointed as Mercers’ School Memorial Professor of Business at Gresham College, in which he gives a series of free lectures for the public which are streamed to a global audience. His 2018 series, “How Business Can Better Serve Society,” were adapted from his book, Grow the Pie: How Great Companies Deliver Both Purpose and Profit, published in March 2020. The book, a Financial Times’ Best Books of 2020, uses research, data and real-life examples to argue that when companies work to serve society, they often end up more profitable than when chasing profits alone.  

 

Jessica Ground, Global Head of ESG at Capital Group, has worked in investment management for 24 years. In 2014, she noticed that a lot of her most successful investments were coming from companies that endeavored to operate with responsibility and purpose, and she wanted a better, more data-driven way to analyze how companies were creating value. That led her to Edmans’ employee satisfaction paper, and she started engaging with Edmans through her work. Edmans, in turn, asked her to speak at his Grow the Pie launch (which was delayed because of the pandemic.)

“I think what resonates with Alex’s work, and I talked a little bit about this in my introduction, is that it’s very easy to say that businesses should have purpose because who’s gonna say that’s a bad thing. But Alex looks at purpose in a way that links back to how you can create value. And he really shows people how to do it. He thinks about solving problems in a data-driven way,” Ground says.

“Purpose untethered from profit or from what the business is good at doesn’t add value. It needs to be thoughtful.”

‘BEING A PROFESSOR IS ABOUT THE CREATION OF KNOWLEDGE’

In his MBA classrooms, Edmans strives to teach beyond, say, the calculation for the weighted average of the cost of capital – which he does teach, his students say, in clear, real-world language. He wants to educate the whole student. He combines the theory and formulas with lessons on public speaking, finding purpose and passion, mental and physical well-being, time management, and more. 

Students seem to appreciate the approach. He racked up more than 14 teaching awards at Wharton, including ones designated as “tough but (students will) thank this professor in five years.” At LBS, he won Best Teacher awards in both the MBA and Masters in Financial Analysis programs and the Excellence in Teaching award for best professor across all programs. 

“I love being a professor because it’s about the creation of knowledge. The creation of knowledge involves researching big, creative, open questions and taking risks. The dissemination of knowledge involves teaching even though teaching isn’t necessarily rewarded,” Edmans tells P&Q. 

“It’s a privilege to meet hundreds of smart young students every year and teach them skills that they will use to run companies, allocate capital, and lead fulfilling and purposeful lives … I’m grateful for the teaching awards that I get, but I don’t get them because my classes are entertainment or because I used to play ice hockey with students. I get them because I tackle complex concepts rather than avoiding them, I try to relate the theory to the real world, and I bring in rigorous research wherever possible.”

TEACHING THE WHOLE STUDENT

Ben Corkin, MBA ‘22, met Edmans for the first time at Barry’s, a gym known for its high-intensity workouts. At that time, lectures were still happening over Zoom, so Edmans arranged for a limited number of students at a time to work out with him (if they wanted) so he could meet them in person. While Corkin considers himself pretty fit, he was no match for his lean, compact professor. 

Before starting his MBA at LBS, Corkin was an engineer working on oil rigs. He wanted to pivot to the financial sector, and he wanted to study responsible business practices. He struggled, at first, in any class that had anything to do with financing. But Edmans’ clear instruction in real, everyday language guided him through. 

“When he teaches, he presents the opposite side of the argument first, to eliminate biases and make sure that he’s being challenged in every way that he can,” Corkin says. “I think he genuinely cares about the world around him, and he genuinely cares about the influence that he has. A lot of his students are going to be in important positions, and he’s making every effort to influence at an individual level the people who are going to be making the decisions at these companies in the future.”

For Shivangi Kumra, MBA ‘23, Edmans’ was the only class she remembers in which students hung on his every word. He responded to every email. He took time to answer every question and pointed students to more resources when he couldn’t answer to his satisfaction. She was surprised how he could remember what students were interested in and that he went out of his way to further engage them. 

For example, Edmans reached out to Kumra unprompted and invited her to an LBS investor forum based solely on a conversation on sustainable investing they’d had earlier in the semester. 

“We’ve got 515 people in the MBA, and to remember what everyone’s interested in and then reach out to them, I think that’s special,” Kumra says. “He really cares about students, and it comes across in everything he does.“

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