The Retiring Board Chairman Appoints His Own Daughter to Succeed Him
The most even handed reporting on this story was in Inside Higher Ed,
Leadership of the board that oversees Cornell University’s medical college is passing from father to daughter, an unusual transition of power for a higher education board.
Weill Cornell Medical College’s Board of Overseers has been chaired for the past two decades by its namesake and major donor, Sandy Weill, the former CEO of Citigroup.
His daughter, Jessica Bibliowicz, is now set to take over Weill's role. She is the founder and former CEO of a major insurance brokerage, and has also been on the board for a decade.
Let me just dissect this a bit. Weill Cornell Medical College is a large, prestigious medical school located in New York City, and part of Cornell University. The chair of its Board of Overseers for the last two decades as been one Sanford I Weill. Mr Weill is a famous finance executive, formerly CEO of Citigroup from 1998 - 2003, remained chairman of the board of Citigroup through 2006, and is now chairman emeritus (look here).
According to a Cornell press release, the new chairperson, ms Jessica Bibliowicz, is a
Cornell University graduate in 1981 and after working 18 years in financial services, Ms. Bibliowicz became CEO of National Financial Partners in 1999, a financial services firm that specializes in benefits and wealth management. The company went public in 2003 and was sold to Madison Dearborn in 2013.
Ms. Bibliowicz is a senior advisor at Bridge Growth Partners and serves on the board of directors of Sotheby's(NYSE: BID); Realogy (NYSE: RLGY); and the Asia Pacific Fund (NYSE: APB). She is a board director/trustee of Prudential Insurance Funds....
The Inside Higher Ed article noted that
In a statement, Cornell said, Weill Cornell Medical College engaged in a comprehensive process to select its chair of the Board of Overseers by canvassing multiple members of the board in full consultation with senior leadership. The search was headed by a group of senior trustee overseers with extensive knowledge of the institution and Weill Cornell firmly believes it has selected the best choice as chair.'
The New York Times reporting of the succession, oddly in the Dealbook blog, which is focused on finance and Wall Street, not medicine, made it seem, however, that Mr Weill handpicked his daughter to succeed him,
he increasingly felt that the time was nearing to appoint a successor.
'I felt like it was a good time for younger blood,' he said.Ultimately, he decided upon his daughter,
The Cornell press release lauded Mr Weill, the retiring chair as providing "bold and visionary leadership," having "enduring dedication," exemplifying "benevolence and unwavering resolve to ensure a healthier future," etc, etc. It called him a "self-made man who exemplifies the philosophy of leading by example." It quoted the current dean of the medical school, Dr Laurie Glimcher, (whose apparent conflict of interest as a board member of Bristol-Myers-Squibb we discussed here and here) calling his accomplishments "breathtaking." It quoted the university president, David Skorton, calling him again a "visionary."
In the Dealbook article, Dr Glimcher further praised the chairperson designate, Ms Bibliowicz, as "a person of enormous energy and passion," who will "bring her energy, her connections and her passion for medicine and medical research and education to the role."
The Inside Higher Ed article noted some vague questions about the position of chair of the board of trustees of an important medical school being passed from father to daughter,
'On the other side of the coin, within-family succession planning adds complexity to the issue -- it just raises certain questions,' [former vice president for programs and research at the Association of Governing Boards of Universities and Colleges Peter] Eckel said.
However, Mr Eckel did not really list these questions.
Later, the article referred to "nepotistic arrangements," presumably in part referring to this father - daughter transition, but then found someone to defend them.
The Real Questions
Weill Cornell Medical College is part of a non-profit organization. Nonprofit organizations have no owners. Non-profit organizations are formed to support particular missions, under the stewardship of boards of trustees (or directors or overseers). These boards have three basic duties [italics added]
Duty of care: Board members are expected to actively participate in organizational planning and decision-making and to make sound and informed judgments.
Duty of loyalty: When acting on behalf of the organization, board members must put the interests of the nonprofit before any personal or professional concerns and avoid potential conflicts of interest.
Duty of obedience: Board members must ensure that the organization complies with all applicable federal, state, and local laws and regulations, and that it remains committed to its established mission.
Thus, the transfer of the position of chair of the board from parent to offspring, apparently directly under the control of the parent, is questionable on its face, suggesting that family interests came before the "interests of the nonprofit." Such transfers may commonly occur on the boards of privately family held for-profit companies, but are basically unheard of for medical schools or other large academic medical nonprofit organizations, where they certainly could appear nepotistic.
That concern is amplified when neither parent or child have any appreciable background or training in the work of the nonprofit. Neither Mr Weill nor Ms Bibliowicz seem to have any training or background in health care, biomedical research, or specifically medicine. Yet Weill Cornell Medical School's basic mission is to train students to be physicians. So how well either or their personal judgments about the policy and operations of a medical school are "informed" is not exactly clear.
Further concerns are raised by the background of the father in this father daughter transaction, the part of the background that was entirely ignored by the rather fawning public discussion of the transaction in the Cornell press release, and also the NY Times Dealbook article.
In fact, Mr Weill's leadership in the past was of Citigroup during the lead up to the global financial collapse of 2008. Citigroup, the poster child for the too big to fail bank, nearly went bankrupt, and required a huge government bailout. Its near collapse, again apparently only prevented by government action, is widely considered to have been a major cause of the finance disaster starting in 2008. As we noted in a 2009 blog post about Weill Cornell, The Sellout, by Charles Gasparino, featured vivid portraits of the bad leadership that lead to the collapse, including specifically Mr Weill,
But in reality, Will never really ran anything. He was a visionary, to be sure, but one whose vision was so myopically focused on building the empire had lusted for for so long and on its share price that he ignored just about everything else. (p. 144)
Furthermore, this was Mr Weill's listing in the "key people" section of the book,
Former CEO and chairman of Citigroup, Weill created the idea of the one-stop-shopping mega-financial conglomerate, engineering a series of mergers ... and in the process created the world's largest financial company. Famously obsessed with his firm's stock price, Weill announced his resignation in 2003 after investigators discovered he'd pressured a stock analyst, Jack Grubman, to raise his rating on AT&T, where Weill was on the board, in return for ensuring that Grubman's children got into an exclusive preschool.
Furthermore, in the Time magazine series on the "25 People to Blame for the Financial Crisis," Mr Weill is listed as "blameworthy" because,
Who decided banks had to be all things to all customers? Weill did. Starting with a low-end lender in Baltimore, he cobbled together the first great financial supermarket, Citigroup. Along the way, Weill's acquisitions (Smith Barney, Travelers, etc.) and persistent lobbying shattered Glass-Steagall, the law that limited the investing risks banks could take. Rivals followed Citi. The swollen banks are now one of the country's major economic problems. Every major financial firm seems too big to fail, leading the government to spend hundreds of billions of dollars to keep them afloat. The biggest problem bank is Weill's Citigroup. The government has already spent $45 billion trying to fix it.
In a post on the Baseline Scenario blog, Simon Johnson, author of another authoritative book on the financial crisis, 13 Bankers, wrote this about Citigroup leadership,
Citigroup is a very large bank that has amassed a huge amount of political power. Its current and former executives consistently push laws and regulations in the direction of allowing Citi and other megabanks to take on more risk, particularly in the form of complex highly leveraged bets. Taking these risks allows the executives and traders to get a lot of upside compensation in the form of bonuses when things go well – while the downside losses, when they materialize, become the taxpayer’s problem.
Citigroup is also, collectively, stupid on a grand scale. The supposedly smart people at the helm of Citi in the mid-2000s ran them hard around – and to the edge of bankruptcy. A series of unprecedented massive government bailouts was required in 2000-09 – and still the collateral damage to the economy has proved enormous. Give enough clever people the wrong incentives and they will destroy anything.
Physicians are supposedly rigorously trained, and tasked with upholding important ethical principles. So did it make sense to entrust the stewardship of a premier American medical school to the man who engineered the expansion of Citigroup that turned out to be "stupid on a grand scale," in order to "get a lot of upside compensation," while leaving the "downside losses" to become "the taxpayer's problem," so that the "collateral damage to the economy has proved enormous?" Does it make sense to allow him to choose his own daughter, who has no more medical experience than he did (which was zero), to steward the school in the future?
I wonder what Cornell medical students, or physician alumni would say, if they felt safe enough to answer the question?
As we wrote in 2009, boards of trustees of not-for-profit health care institutions have a primary duty to uphold the institutions' missions. Thus, one would think such boards would be selected according to their dedication to their missions. But perhaps, in the grubby real world, there may be more important criteria, possibly such as the size of their donations to the institution. Furthermore, those likely to donate the most may be more likely to be richest (and perhaps most in need to making themselves appear philanthropic and public-spirited) than the most fervent upholders of patient care, teaching and research.
Maybe giving stewardship of our once proud health care institutuions to people most likely to defend their missions, rather than most likely to donate a lot of money, would result in somewhat poorer institutions which do a better job of patient care, teaching and research.
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