September 18, 2008
AIG Bailout And Eli Broad
The billionaire Eli Broad is under fire for what one blog writer sees as an inconsistency in how he approaches business versus philanthropy.
Mr. Broad has given millions of dollars to improve American public education, in part pushing schools to be run more business-like.
But Michael Klonsky, an education consultant in Chicago, attacks Mr. Broad’s views on education given his role at the insurance giant American International Group, or AIG, which was taken over by the U.S. government yesterday with an $85-billion buyout.
According to BusinessWeek, Mr. Broad, a former director of AIG, helped install Robert Willumstad as the company’s chief executive. Mr. Willumstad was forced to step down as part of the deal with the government.
On. his blog, Small Talk, Mr. Klonsky writes that Mr. Broad should “stick to golf” before telling schools how to operate.
To be sure, according to an interview on CNBC from this summer, Mr. Broad has been vocal in trying to get AIG to jettison some of the financial services that have caused it so much trouble.
What do you think? Does the current financial crisis raise other questions about philanthropy?
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Mr. Klonsky is right. Eli Broad has been pushing his so-called “business reforms” on public schools for the past decade. Who’s going to reform the reformer?
— Gordon LeVant Sep 18, 01:25 PM #
The current financial crisis should remind us that CEOs have no business diluting shareholder value by making corporate gifts to anyone. If they want to give from their own pockets, that’s their business. If they want to give from the public’s pockets, that’s your business. Corporate charitable giving is not “good citizenship,” it is an abuse of power.
— The Untied Way Sep 18, 02:23 PM #
Check out the background of the blogger – William Klonsky – and you’ll understand the radical political biases he brings to his reasoning about private support for public education reform. Surely The Chronicle could have found more relevant blogs to promote legitimate issues of nonprofit interest.
— BenJah Sep 18, 03:02 PM #
What difference does the background of the blogger make? Klonsky wasn’t referring to “private support for public education reform.” He says Broad has tried to impose top-down reform and a business model that hasn’t even worked for businesses, let alone for public schools!
— Francine Sep 18, 04:35 PM #
How about a background check on Ben Jah?
— Bernard Sep 18, 04:48 PM #
“…a business model that hasn’t even worked for businesses…”
Isn’t that sort of like driving past a horrible accident and concluding that this whole automobile thing has been a total failure? Or maybe like Mr. Klonsky saying “If merit pay is so great, why didn’t it begin with AIG?” In other words, merit pay didn’t work for one company, so it must not work for any – or for schools, or any other organization.
Mr. Klonsky gets plenty more wrong – AIG is an insurance company, not an investment bank. Most of the company’s units, including those providing pension services, will be just fine – especially once they get sold off and decoupled from the business units that are dragging the rest of the company down. He also talks about Eli Broad “making billions more” by serving on the board – does he know that most directors don’t get paid much for their services, and to the extent that they can make more from stockholdings, they could just as easily make more (or lose a lot) by doing nothing? And if Mr. Broad had that in mind, his AIG holdings are now worth 10% of what they were before – not exactly billions more. But then I suppose that in Mr. Klonsky’s world, Mr. Broad is a grasping, greedy plutocrat if he succeeds, and a miserable failure and cautionary example if he fails. In my world, Mr. Broad is one of the most philanthropic Americans of our generation. Mr. Klonsky should take his own advice and stick to what he knows.
If Eli Broad wants to offer money to reform education, he is more than welcome to do so. If Mr. Klonsky and those that are of a similar mind don’t want to take that money and adopt Mr. Broad’s ideas, they are also free to do so.
— Bif Sep 19, 11:42 AM #
One obscure radical blogger can cause all this attention, can have this much credibility? Please report only ‘real’ news. Mr. Broad’s reputation as a philanthropist is impeccable, by the way. Which one of you hasn’t taken philip morris money or a milken prize for education?
— Stefanie Davis Sep 19, 01:50 PM #
Yes, a business failed spectacularly. So that means that business model doesn’t work? Or that similar models wouldn’t work in public education? Glad that Mr. Klonsky’s ideas aren’t getting traction anywhere (but the Chronicle)and that real radical reform for public schools – outrageous concepts like competition, pay for performance, accountability, and sound business practices – represent the true hope for the future of public ed.
— BenJah Sep 19, 03:05 PM #
He wants schools to be run more like businesses?? What’s next, will people be pushing for families to operate like businesses too? Does everything under the sun have to work like a business? Considering the fact that most of these business executives don’t have an ethical bone in their bodies, I’d say this is all getting ridiculous.
— Tracy Kaufman Sep 19, 04:17 PM #
Klonsky seems to have touched a nerve. Look at all the Broad toadies run to his defense. First of all, Klonsky is right on the facts—AIG, the investment bank, bought SunAmerica. If you’re going to rush to defend Broad and AIG, get your facts straight. AIG is so much more than the largest insurer in the world. (See AIG Bank at http://www.alico-measa.com)/AIGLiquidityFundUSD.pdf)
Secondly, to equate the failure of AIG with a car breaking down on the side of the road, with the collapse of the entire U.S. BANKING system, is pretty idiotic.
Third, Klonsky isn’t saying that just because AIG failed, the business model won’t work on public education. It’s actually Broad who argues dogmatically that the business model does necessarily work to fix public education. Klonsky just punched a hole in his dogmatism and hypocrisy. He raises a good question. If merit pay is so good, why not use it in business? Why does the CEO of failed AIG walk away with a $68 million severance package?
Klonsky and others, like myself have been arguing for years that public schools aren’t the same as businesses. Teachers aren’t clerks and kids aren’t widgets. Thanks Chronicle for sparking some debate.
— Broad watcher Sep 19, 05:47 PM #
Talk about getting your facts right. There’s no such person as WILLIAM KLONSKY. If you are going to make personal attacks, at least get the same of the person you are going after. He name is MICHAEL KLONSKY. He’s a Ph.D., a well-established professor of education and author of a new book on public education in the ownership society. Worth reading even if you disagree with its conclusions.
— Educator Sep 19, 05:54 PM #
Wow!
As to “Public Schools” in the American sense of the word. They should be non profit quasi government. It was a good system when they first started after the Civil War and has only gone down hill since the 80’s really when they lost their authority be being too politically correct. Part of the loss of power comes from growing too dependent on federal funding as opposed to locale and state funding. Part comes from looking for quick fixes from experts often times from the business world-which is not concerned with the main function of servicing the local population with viable useful education.
— Doug McKay Sep 20, 10:12 AM #
The “free hand” or “invisible hand” of the market has gotten much play in the last 30 years or so as a panacea for all operational inefficiencies in all fields. It is only a generalized theory of economics; there are many examples where such concepts simply don’t work. Look to some of the industries that have indicated greater ability to achieve their goals by consolidating rather than having greater competition. Other fields, such as education, are not simply a commerical activity that steps to the same drum as commodity sales. Supply and Demand curves make sense only when most of the complexities of a market are stripped away. It is a common mistake to first assume that business theories are a solution in a field that is so distinct from a standard business model. To be sure, it may be that merit pay and other concepts might have a place in education, but the first step is to agree what the goals are (an educated, healthy, motivated, civic minded youth, for example), and then determine strategies to get there. These might include some competition and free market ideas, but even these don’t guarantee on their own that young people will be educated, etc.
— FMischler Sep 24, 10:28 AM #
Let AIG and their robber baron liar executives go down now!
No more help to AIG or other greed houses filled with liars
— DS Oct 8, 07:23 PM #