Mount St. Mary's Update: This Is What Happens When You Trust a Finance Guy

William Agee, former CEO of Bendix is a man of many failures, but his destruction of Morrison Knudson is particularly instructive on the skill set of finance types:

………

Mr. Agee further estranged insiders by quietly moving the CEO's office to his Pebble Beach estate, and worse, scoffing at the company's engineer-oriented culture. "You construction guys have been trying to run the company for 75 years," Keith Price, who headed Morrison Knudsen's MK Ferguson unit until he retired in April 1991, recalls Mr. Agee telling him. "Now I'm going to show you how the financial guys do it."

The November letter pointed out just how the financial guy did his numbers. Using numbers available from earnings reports and filings with the Securities and Exchange Commission, the letter writers pointed out that the percentage of the company's pretax income from nonoperating sources such as asset sales and interest for the five years ending 1993 averaged 43%. In other words, Mr. Agee was sweetening profit reports by selling Morrison off piece by piece, and investing Morrison's cash.

Meanwhile, lease obligations had rocketed. During the five years ended 1993, they had jumped, to $266 million at the end of 1993 from $38 million at the end of 1988. (To shore up cash, Mr. Agee had begun selling assets, such as equipment, and leasing them back, Morrison executives say.)

This is how finance works.  Find out a loophole, and use it to benefit personally, the future be damned.

At Mount St. Mary's, Simon Newman, the recently appointed college President, a hedge fund type, decided to try to expel 5% of the freshman class to create the illusion that the retention rates.

When people complained, he fired them including a tenured professor with no due process.

We are now seeing the push back, with the faculty calling for his resignation by a vote of 87 to 3, which he promptly ignored.

Additionally, the alumni are freaking out, and the The Washington Post condemned the behavior of the President and the Board of Directors in no uncertain terms:

Mr. Newman has only himself to blame for the mess at “the Mount,” as the university is known, despite his and the board of trustees’ despicable efforts to deflect fault to what they regard as a cabal of infidels among the faculty and alumni. It was Mr. Newman who, in a conversation with professors, said that struggling freshmen should be culled in order to improve Mount St. Mary’s student retention rate, which affects its standing in U.S. News and World Report’s rankings of colleges and universities.

(Emphasis mine)

When I first posted about this, I jokingly suggested that Newman's plan was to burn down the university for the insurance money.

More and more, it seems like my joke is reality.