Sussman steps down as Economics chair


By Heather Travis
Friday, April 3, 2009
Nathan Sussman, chair of the Department of Economics at The University of Western Ontario, has resigned from his post, citing the university's financial investment methods and personal ethical principles as his reasoning.
Sussman resigned from his position as chair effective Wednesday, April 1, however he remains a professor in the department. He says he doesn’t want to decide who may lose their job, and what research cutbacks need to be made.
Associate Dean of the Faculty of Social Sciences Julie McMullin has taken over as interim head of the department until the collective agreement process for appointing an acting chair has been completed. The selection process for a new full-time chair will follow.
In explaining his decision, Sussman said he felt a need to express his position.  “I think there is another way,” he says. “You also have a responsibility as a leader to say, ‘I don’t think this is the right thing.
“I wouldn’t be able to sleep well knowing that something else could have been done,” he adds. “It’s just my own personal, conscientious objection.”
Faculty of Social Science Dean Brian Timney says he is “disappointed” by Sussman’s decision.
“Right now the university needs strong leaders who can help guide us through the current financial problems across the university,” he says. “I rely on the support and advice of my chairs to ensure that we can make the decisions that will be best for all members of the faculty and that has included extensive discussions as to where we might find funds to minimize layoffs.
“While I recognize Professor Sussman’s views concerning the origin of the university’s financial difficulties, in Social Science, budget cuts were inevitable, even without the downturn.”
He says the abolition of mandatory retirement has created challenges for the faculty because funds that were expected to have come available due to faculty retirements will be postponed to sometime in the future.
“It is very difficult for anyone who is faced with terminating the employment of an individual with whom you’ve worked, so I understand the concern that Professor Sussman has.  Nevertheless, if we do reach a point where we have to implement layoffs, those in leadership positions have to take on that responsibility.”
He also notes in order to reach targeted budget reductions, cuts that are not made in one unit have to be made in another.
As chair, Sussman says he often works more closely with staff than faculty and feels morally obligated to support them. Sussman says he is unable to discuss the number of staff members that will be affected by layoffs.
The university is projecting a $41-million operating revenue shortfall between 2008-09 and 2010-11, a result of expected investment revenue decline in endowed and non-endowed funds. Sussman is particularly concerned about the investment of non-endowed funds that are used to fund the operating budget.
Sussman says the university and the Board of Governors approved a “very risky” investment strategy.
“If you want to take risks, even if it is operating funds, on the investments side, then if you lose on the portfolio you should be willing to take risks like borrowing money in the short run to finance the university. If you don’t like to take risks and you don’t like to borrow, then don’t invest short-term funds in a risky portfolio.”
Although the investment strategy has served the university well for many years, Sussman doesn’t believe this makes it a good strategy.
“The fact that a bad strategy worked for a while, they were just lucky that we were not hit by this crisis before or something similar.”
Gitta Kulczycki, Vice-President (Resources & Operations), disagrees with Sussman’s characterization of the investments.
For more than 20 years up until Dec. 31, 2008, the university’s investment strategy has generated an average return of 7.8 per cent, she says. The funds are invested in a broadly diversified portfolio which includes an asset mix of 35 per cent bonds, five per cent hedge funds and 60 per cent equities.
“The strategy of investing endowed funds, and that portion of non-endowed funds not required for short term purposes, has been in place since 1984,” she says, adding the recent equity market downturn reinforces the caution that “investment returns generated through the non-endowed funds should be concentrated on one-time expenditures versus ongoing operations.”
It is not the university's intention to address operating budget shortfalls by borrowing funds, she says.
Revenue growth and expenditure growth need to be balanced over the longer term and short-term borrowing does not address this. “It postpones to tomorrow difficult decisions which need to be made.”
Sussman also feels the cutbacks will have a detrimental effect on the department’s research, and ability to recruit and retain people.
Two or three faculty members are expected to leave the department next year, however Sussman says there is no money in the budget to replace them. He says budget constraints will make it difficult for the department to find supervisors for its increased PhD enrolments.
“We had plans to recruit and expand on the research side and those were frozen,” he says. “We are not the only ones facing this situation.”
For the Economics department, Sussman fears the faculty attrition and any reputational damage will make the department fall off the radar of graduate students as a viable place to study, especially if other universities continue to recruit faculty through these difficult economic times.
Sussman thinks the university should consider short-term borrowing. He also suggested the faculty leaders sit down together to discuss all possible solutions to the financial shortfalls. “It’s not too late to do that,” he says.
If the university feels there is a structural problem, he says the university should not restructure in the middle of a recession.
“If you can hang on for a year and not lay off these people, do the restructuring later and send them out on the market when the job market is better, I would accept that,” he says.
Fred Longstaffe, Provost & Vice President (Academic), says he regrets that Sussman felt it necessary to step down from his position as chair. He says layoffs are “extraordinarily difficult” for anyone put in the position to notify staff.
“It is important to get our operating expenses and revenues back into balance within the reality presented by the current difficult economic situation.  I do not see the overall economy improving substantially over the short or mid-term, and so we will need to reduce our operating expenses.  
“Our goal is to minimize the need for layoffs as a means of achieving the necessary expenditure reductions, but some layoffs almost certainly will be necessary,” he adds.
Kulczycki acknowledges current economic times are challenging for everyone; “for leaders it is particularly so, casting them in the position of having to take very difficult decisions. 
“Western is fortunate with the calibre of leadership we have in our faculties and support units and working together we will surmount our current challenges,” she says.

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