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Count Me Out

Count Me Out
April 7, 2009

Want me to lay off staff? Fine, I quit.

That’s essentially what Nathan Sussman, a professor of economics at the University of Western Ontario, told his dean last week. Sussman, then-chair of his department, relinquished his leadership post rather than develop a plan for eliminating staff positions.

“This is a moral dilemma one has in these positions,” he said. “On the one hand, you’re part of an organization and you have to make some tough decisions. On the other, you are also responsible for the people that you lead. So it puts you in the position where you have to make hard choices.”

“I think the easy thing is to follow orders,” Sussman added. “That’s kind of the safe way.”

The university is facing a shortfall of some $41 million, in large part due to investment declines, university officials acknowledge. Sussman argues that the university should borrow money to address the shortfall.

Sussman further contends that the current budget problems are of the university’s own making. Western Ontario engaged in a “risky” investment strategy, wherein the university took operational funds provided by federal and provincial governments and played the stock market with the money, he said.

“It’s a policy they’ve pursued for many years. To put it bluntly, in a way that Americans will appreciate, basically they’re gambling away taxpayers’ money,” said Sussman, a native of Israel.

Gitta Kulczycki, vice president of resources and operations, told a university-staffed publication that Western Ontario’s investment strategy has a track record of success, generating an average return of 7.8 percent over 20 years. The university’s asset mix is 35 percent bonds, 5 percent hedge funds and 60 percent equities, according to Kulczycki.

Lance Lochner, an associate professor of economics who has supported Sussman's decision to step down, said the university should not have put funds it needed for operations in anything other than safe and “boring” investment vehicles like bonds. The fact that the university had some success with its strategy when the market was performing better doesn’t make a difference, he added.

“That’s like saying you went to the track for 10 days and won, and the next day you bet all of your rent on it and that’s somehow a good strategy,” Lochner said.

Lochner furthered his argument in Western News, a university publication, suggesting that administrators audit the university's "Investment 101" class to learn basic investment strategies for the future.

Dean 'Disappointed' by Resignation

All units at Western Ontario have been asked to cut an average of about 5.5 percent from their budgets.Brian Timney, dean of Faculty of Social Science, said he suggested potential staff reductions to Sussman, but left the former chair the flexibility to develop “creative” approaches to addressing the shortfall.

“We had identified potential positions in the department that we felt he might target,” said Timney, a professor of psychology and neuroscience. “However, we gave -- as with all the other chairs -- the option of coming up with alternative solutions.”

Timney would not say how many layoffs he suggested, but said he was disappointed Sussman hadn’t engaged in more of a dialogue.

“I’m disappointed because I don’t think we had enough chance to talk through what all the options were, and so he made the decision without giving me a chance to see if there was a way to work this out,” Timney said.

Sussman had some encouragement from fellow faculty members to resign, and there’s been widespread support of his decision across the department, according to Lochner.

“In some sense it’s a stand saying this is an unacceptable path,” Lochner said of Sussman’s decision.

While many in the economics department would argue that the university should engage in short-term borrowing to deal with the shortfall, Timney says some of the budget problems are long-term. Ontario recently lifted a requirement that university faculty retire at the age of 65, prompting many faculty to stay on, particularly because their pension investments have taken such a beating. The Faculty of Social Science engaged in aggressive hiring over the last several years in anticipation that retirements would occur, and now there are added expenses because the faculty aren’t leaving, Timney said.

“I think what has been ignored in all of this is, yes, we’ve lost a chunk of investment money, but in fact over the last several years expenditures have been rising much faster than revenues,” he said. “We need an overall correction.”

Since Sussman’s resignation, the department has been under the interim leadership of Julie McMullin, associate dean of the Faculty of Social Sciences. Sussman said the interim chair has moved forward with further negotiations with the dean, and he believes staff layoffs can be avoided this year. While he’s unsure of the cause and effect, Sussman said he’d like to think his resignation has forced a better way forward for his college.

“I’m hopeful,” he said. “Sometimes you need what I’d call a controlled detonation to shake something, and hopefully something positive will turn out of it. There’s no real crisis that I think we’re facing at this point.”

 

 

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