As the passive investing strategy has taken the market by storm, criticism of index funds and common ownership have increased: Are index funds evil (as asked by The Atlantic)? Are they bad for the economy?
Common ownership came under fire last year with a study finding that “airlines compete less vigorously on price because they are owned by the same handful of investors,” writes David Nicklaus.
However, in an interview with The St. Louis Post-Dispatch, Olin’s Todd Gormley, associate professor of finance, provides a defense for companies with higher index-fund ownership: They actually have better governance.
An active money manager who doesn’t like the way a company is run can simply sell the shares. The passive manager doesn’t have that choice. “In their view, the only way they can protect themselves is to make sure there are good governance structures in place,” Gormley said.
Besides, he said, long-term passive investors often back activist hedge funds that attempt to shake up a company. “We found a positive influence on governance,” Gormley said. “The presence of these index funds makes it easier for other investors, the activists, to get into a company and provide discipline over management.”
Gormley was recently quoted in the Princeton Alumni Weekly on the same subject, where he discusses the evidence of some positive effects of passive ownership.
The piece quoted students such as Ashia Powers, who said her visit to campus during admitted students weekend really sold her on Olin’s program: “The community here is everything, and everyone takes pride in it. They made me feel special, important, and valued.”
The detailed article also took note of application and admission trends that resulted in a group of 2019 MBA prospects with strong academic credentials:
Like many American MBA programs, Olin’s 2016-2017 recruiting cycle could be boiled down to fewer applications but higher caliber students. This year, applications fell off from 1,579 to 1,174 – a near 26% drop. Despite this, the class is actually 17 students larger than its predecessor, with an acceptance rate that jumped 10 points to 40%. Still, the average GMAT score climbed seven points to 694 with the Class of 2019 – a score higher than those produced by new classes at small school gems like Notre Dame Mendoza, Vanderbilt Owen, and Emory Goizueta.
The article featured extended profiles of 14 students. “Everyone who comes to Olin has a name and a story,” Dean Mark Taylor said in the piece. “You are well known by the faculty and supported by an excellent staff.”
The MBA Class of 2017 will have a record-breaking number of female members thanks in part to Allison Campbell, MBA’16. Allison tells Poets & Quants about her recruiting achievement at Olin:
“When I joined Olin, my class was 28% female, resulting in over half the core teams only having one female. I wanted to change that. I wanted to implement the personal touch Olin had the ability to offer, especially females.
During my free time, I reached out to prospective students, offering to share my personal experiences. I was talking to at least three people a week, telling my MBA story and answering questions about Olin.
Through Olin Women in Business, I pushed for a new Vice President position to work with the admissions office. I joined the executive board in this role, and I forged a connection with Admissions to emphasize this focus. Last spring, I also co-chaired our Admitted Students Weekend. I stayed in touch with those students over the summer, and was proud to see the female enrollment jump to 40%.
This year, every core team had two female students. To this day, I continue to work with Admissions to make 40% a rule, not an exception.”
Allison will be an Associate Marketing Manager at Walmart after she graduates.
The Huffington Post reports on the St. Louis MetroMarket, “the Grocery Store on wheels that brings fresh food to low-income areas.” The bus, dubbed “Turnip1,” is stocked with fresh fruit, vegetables, meat, dairy and bread from local farmers and community gardens.
Jeremy Goss and Colin Dowling sit behind the wheel of the donated Metro bus that was converted into St. Louis MetroMarket in 2015. Photo: Corey Mauer, St. Louis University.
“I would hate people to get lost in the novelty of what we do because we sell groceries on a bus,” said Jeremy Goss, a Saint Louis University medical student and one of the founders of MetroMarket. Co-founders include Washington University graduates Colin Dowling, PMBA’12 and Tej Azad, AB’12. Link to article
In a myriad of workplace settings, standard processes are key to a successful operation, ensuring efficiency and safety. For these processes to work, employees must comply. But what’s the best way to go about enforcing that compliance, and sustain it?
New research from Olin Business School at Washington University in St. Louis shows that motivating compliance with standard processes via electronic monitoring can be a highly effective approach, despite concerns about employee backlash. However, the research also highlights that managers cannot simply “monitor and forget,” and that a long-term plan for supporting the retention of monitoring is critical. The findings were published online May 5 in Management Science.
Hengchen Dai, assistant professor of organizational behavior at Olin, along with co-authors Bradley A. Staats and David Hofmann from the University of North Carolina at Chapel Hill and Katherine L. Milkman from the University of Pennsylvania’s Wharton School, studied compliance with hand-hygiene guidelines among more than 5,200 caregivers at 42 hospitals for more than three years.
They collaborated with Proventix, a company that uses a radio frequency-based system to track whether health-care workers wash their hands. More than 20 million hand-hygiene opportunities — incidences when hand hygiene is expected — were captured; each with the potential to prevent, or spread, a hospital-borne illness or infection.
“Maintaining high compliance with standard processes is a challenge for many industries,” Dai said. “We examined hand-hygiene compliance in hospitals because this is a setting where consistent compliance is extremely important in an effort to eliminate hospital-acquired infections. This is an area where improvements can, and should, be made.”
Dai and her co-authors found that on average, electronic monitoring resulted in a large increase in hand-hygiene compliance during their study period. Interestingly, compliance initially increased, and then gradually declined, after approximately two years. When electronic monitoring was stopped, hand-washing rates dropped, suggesting that hand-hygiene habits weren’t formed.
In fact, researchers discovered that compliance rates for hand-washing dropped to below the levels seenbefore the monitoring began, a finding that is surprising to both the researchers and health-care practitioners.
“While we thought decreased compliance after the monitoring could perhaps be a possible outcome, we were still somewhat surprised to see the result,” Dai said. “We based our prediction on past research about ‘crowding out,’ whereby caregivers’ internal motivation for compliance may have been replaced by external forces associated with monitoring, such as the fear of penalties or punishments for not washing their hands.
“When the external stimulus of monitoring was removed, their compliance behavior declined below the initial level as both the external forces and internal motivations were gone,” she said. “We do not have the data to get into the underlying psychology, but it is certainly worth examining in future research.”
While the findings focused on the health-care profession, Dai said all managers should take note, no matter their field. While electronic monitoring is an important motivation and compliance tool, it’s a single piece of a larger strategy.
“Individual electronic monitoring is one tool managers can use to dramatically improve standardized process compliance, but that it is not a panacea,” Dai said. “Managers looking to build process compliance must think about how electronic monitoring fits within a broader system encompassing not only technology, but also norms, culture and leadership.
“Managers should not ‘monitor and forget,’ ” Dai said.