Major Changes Afoot at Top Business Schools

You can ask any business school professor who has been around 30 years or so; do they remember a time in the early 1980’s when a full professor had to make due on a $50,000 a year salary while B-schools were paying junior faculty in finance almost twice as much. Deans saw finance was a way to legitimize the B-school, climb up in the rankings and pull in students and establish relations with wealthy bankers. Consequently deans were busy building finance departments. It was the new discipline and the most popular discipline to come along since marketing. The quality of the MBA students increased as engineers, mathematicians, and science educated students entered with high GPA’s and GMAT scores. Newly created Finance and Financial Engineering Departments sprung up in every MBA program. Several studies concluded that the quality of management capabilities decreased as the quality of MBA students increased and this was certainly the case at the so-called elite B-schools. In the 1980s and 90s, the ‘nerds”, and quant’s were sitting in finance class learning and developing complicated formulas to not only evaluate manufacturing industries, but all facets of financial institutions. These MBA’s were taught to go beyond the typical investments of cash, bonds, public equities, real estate and private equity investments, instead they were taught to engage in creating loosely regulated hedge funds that could offer a wide range of investments and products. Finance MBAs were taught diverse and alternative investing ranging from financing IPO’s and leveraged buy-outs and they made obtaining a finance degree as vital to entry into this rapidly growing and lucrative field.

czander of NY 8:27PM January 28, 2011