Gold Rush In The Ivory Tower

Business schools are offering unprecedented salaries to attract top PhDs to the faculty

A young man in a jacket and tie tore out of the Quadrangle Club and began sprinting past movie cameras toward the center of the University of Chicago's campus. Coatless on a bone-chilling January day, he turned heads among students gathered underneath the spires on University Avenue to watch the filming. There seemed to be only one explanation: He had to be a star.

And he was--just not the type they assumed. On the same day Keanu Reeves arrived on campus to film Chain Reaction, graduate student Ming Huang landed at Chicago's B-school to interview for a teaching job. Jittery and late for his first appointment, Huang had bolted from his room at the faculty's Quad Club, barely noticing the film crew.

As it turned out, he had no reason to be anxious. Huang so impressed his interviewers that Chicago offered him a job as an assistant professor less than 24 hours after his frigid run. A few weeks later, Harvard weighed in. Then came Wharton, MIT, Michigan, and Northwestern. In all, 13 of the country's top B-schools bid for him, making Huang the hottest newly minted PhD in the country--and the best example of a faculty market that turned wild in the past year. "Ming was No.1," says Kerry E. Back, associate dean at Washington University's Olin School of Business, who also made Huang an offer. "But No.2 wasn't far behind."

The frenzy may be just beginning. As top-tier B-schools expand internationally and technology lets them beam lectures around the world, they will increasingly use star professors as marketing tools. These profs can reel in students from other continents and attract senior managers who sign up for lucrative executive-education seminars.

Salaries for top new academics in finance, Huang's field, jumped by almost 15% this year, topping $100,000 for the first time. "I wouldn't be surprised if we ended up with an overall 10% to 15% shift" in pay for finance faculty at top schools across the country, says A. Michael Spence, dean of Stanford's business school. Indeed, George Daly, dean of the Stern business school at New York University, had to ask President L. Jay Oliva for special permission to raise salaries of current finance professors so they weren't earning less than the newcomers. "In my experience, this is an extremely unusual event," Daly told Oliva, "and we want to make an extraordinary adjustment." The bill: $400,000. That didn't include the big pay boost Daly gave international business professor David Backus after Columbia offered him a 70% raise.

But salaries tell only part of the story. Chicago's B-school persuaded the government to proclaim one grad student an official "genius" so he would be eligible for a special visa that would let him stay in the U.S. and join its faculty. Carnegie Mellon University scrambled for a donor to create an endowed chair to keep a finance professor who was being courted by Northwestern University, according to sources close to the gift-giver. (The university denies a connection between Northwestern's offer and the chair.) And Columbia Business School, working with the university's schools of arts and sciences and international public affairs, put together a big annual package to land finance professors Robert J. Hodrick and his wife, Laurie Simon Hodrick--and her ex-husband, Kyle Bagwell, an expert in industrial organization. The three had to move together because of child-custody arrangements. "It was a long, drawn-out negotiation," concedes Columbia Dean Meyer Feldberg. "But it was a big play for us."

This year's real stars, though, were the number-crunching whizzes coming out of a handful of top PhD programs in finance. In the past, their path was obvious: Head to one of the best research universities, such as Chicago or Harvard, and climb toward tenure. But today, they're also likely to field offers from ambitious second-tier B-schools as well as from Wall Street firms that are showing new interest in the mathematical area of derivatives. "Finance people have to be much more sophisticated today than they were five years ago," says Glenn L. Urban, dean of the Massachusetts Institute of Technology's Sloan School of Management.

Each year, in almost every field, about a half-dozen red-hot professorial candidates emerge, their praises sung by doctoral advisers who themselves must be respected researchers. "It's almost like the pro-football draft," says Robert S. Hamada, Chicago's dean. "By the time offers are made, everyone knows who is No.1, 2, and 3."

To be sure, the salary bonanza isn't reaching all, or even most, newly minted faculty members. As in many areas of the economy, the gap between the top and bottom has grown. Overall, pay for assistant professors rose just 3.8% over the past year--less than for any other B-school faculty level, according to the American Assembly of Collegiate Schools of Business. It's a simple case of declining demand. In 1995, 1,115 doctoral grads were seeking about 1,000 new openings. That's an astonishing change from a decade ago, when 995 PhDs had their choice of some 3,200 open slots. The reasons: Funding cuts, a smaller number of twentysomethings to teach, and corporate downsizing have hurt all but the very best schools.

So what separated Huang, 32, from the pack? Even for an academic, he's unusually curious, with interests extending well beyond a narrow subfield of finance. Whenever he starts to think about a problem, he becomes almost consumed by it. Recognizing that, he refused to learn the rules of bridge until he was a college senior and had time to waste.

Huang was born in Wuhan, China, where his three older sisters and one younger brother still work in factories. He went to Beijing University, where he met his future wife, studied physics, and won a scholarship to Cornell University. There, he earned a PhD in physics. While he was in Ithaca researching condensed-matter theory, the Chinese government cracked down on student demonstrators in Tiananmen Square. The U.S. allowed all Chinese nationals on student visas to stay permanently. That was the end of Huang's physics career.

He had chosen science in China, Huang says, because it largely kept him away from politics. "I always wanted to do something that has more to do with the real world," he says. "Also, to be frank, physics didn't pay enough for me to support my family." So he ended up going for a second doctorate, this one in finance, at Stanford University.

There, he refused to confine himself to one subject, co-authoring papers with professors who study both corporate finance and asset pricing. "To be that tooled-up in both areas in really unusual," says Milton Y. Harris, a finance professor at Chicago. Says the carefully modest Huang: "It's almost a little bit indulgent."

Still, Huang has virtually no teaching experience. He graded papers at Stanford and last worked as a teaching assistant in 1987 at Cornell. That the man who was the most-sought-after B-school teacher in the country has, essentially, never taught speaks volumes about the dominant position research still occupies within universities.

In the end, Huang was left weighing more than a dozen offers from the very professors he had idolized as a student. Financially, the packages were close--all in the neighborhood of $100,000 for the academic year plus $25,000 as a summer stipend. The difference came down to who his colleagues would be. Chicago's faculty boasts four Nobel prize-winners and an intellectually challenging yet friendly research atmosphere. When Huang heard that three other top PhDs were leaning toward the school, that sealed it. When they, in turn, heard that he had signed, they joined up. It was their version of Chain Reaction, the movie Huang had run past. But the silver-screen edition turned out to be a flop. The question now is whether Huang and his cohorts can live up to their star billing better than Keanu Reeves lived up to his.

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