It's common to hear business school deans moan privately about how their universities mistreat them. Some grouse that their institutions are used as cash cows: milked for money to subsidize arts and philosophy majors. Other deans lament that they fail to get the respect their schools deserve.

It's far less common for B-school deans to go public with their complaints. But that's just what's happening at the University of Rochester's William E. Simon Graduate School of Business. A mere eight months after taking the job, Dean William E. Mayer resigned on May 7 over a funding dispute. His abrupt departure shines a spotlight on a long-simmering feud between university President G. Dennis O'Brien and the Simon School.

A former Wall Street executive, Mayer arrived in Rochester, N.Y., last year with a mission to increase the school's prominence: In BUSINESS WEEK surveys of top B-schools, it has twice been ranked as 20th in the nation. Mayer quickly gained a following among the school's well-regarded faculty and students.

But Mayer soon found he had few resources available for raising the school's standing--a highly competitive business. "Wharton spent a quarter of a million dollars to find out what business wanted in its MBAs," Mayer says. "Chicago spent nearly a half-million on its leadership program. I had to do it with a couple of mirrors and Band-Aids."

`FATAL CUT'? O'Brien says the resignation--prompted when he rejected Mayer's request to spend $250,000 to hire a marketing firm--took him by surprise. He says Mayer sent him a memo detailing his concerns over the budget. "But I have a lot of memos from deans concerned about their budgets," O'Brien adds. "I didn't believe that the amount of money we were talking about would cause him to resign."

Simon faculty members fault O'Brien for failing to recognize the importance Mayer attached to the issue. They fear the contretemps has dealt a blow to the B-school. "This is a grievous and serious wound, possibly a fatal cut," says former Dean Paul W. MacAvoy. "What kind of national leader is O'Brien going to get to come to Monroe County to sit in that office and pull the school into Stage Two?"

For O'Brien, a bow-tied professor of philosophy, the incident is an embarrassment--and the most recent manifestation of deeper financial woes at Rochester. Five years ago, he came under attack after he rescinded the admission to the B-school of a Japanese manager from Fuji Photo Film Co. He acted after Eastman Kodak Co., a Rochester neighbor and a big donor to the school, complained. In 1990, O'Brien got into hot water when he told the Class of 1965 that its modest $50,000 gift to the university was "not worthy of you." He was forced to apologize for the remark. And he argued for years over funding with MacAvoy, who with former Treasury Secretary William E. Simon helped to raise $30 million for the B-school.

Aside from all the brickbats, O'Brien also has presided over one of the weakest-performing endowments at any major university. A decade ago, Rochester boasted the seventh-largest endowment among U.S. universities. It now ranks 20th, with a market value of $578.4 million in fiscal year 1991. While the funds of the largest 20 have tripled in value, on average, since 1981, Rochester's has risen a measly 15%. If its capital had grown at merely the average of the 20 largest, Rochester would easily boast an extra $60 million in income a year.

NO RUSH. Why the dismal record? Not obsessive financial conservatism. The university has clung to a risky strategy of investing in fledgling enterprises and venture-capital funds. When O'Brien became president in 1984, 75% of the funds were tied up in either venture-capital or small-capitalization stocks. O'Brien didn't rush to shift strategies. "We waited for the investments to mature rather than sell," explains Richard W. Greene, university treasurer.

Bad move. The endowment since has been reorganized, but its value has actually fallen in the past five years. Says O'Brien: "I can't argue against the figures. The endowment's performance has made it more difficult for the university overall. But the Simon School has suffered less than other schools."

That reply doesn't appease O'Brien's critics. "They need operating money, so they're draining the business school," complains a member of the Simon School's advisory committee. Indeed, the business school's financial support to the university is budgeted to hit $3.6 million in the June, 1993, fiscal year, up from $1.2 million five years ago. A contribution that large would force the B-school into a 1993 operating deficit of about $600,000. O'Brien's defenders say other such schools are in a similar pinch.

Maybe so. But not many universities have posted an investment record as poor as Rochester's. William Simon hopes that some good may come of the blowup. "It has had a sobering effect on the university," he says. "They now have to make an earnest commitment to the school." But it will come too late to keep a well-respected dean on campus.

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