Shivaram Rajgopal, Schaefer Chaired Professor in Accounting
Who’s monitoring the monitors? That’s the question investigated by Shiva Rajgopal, Schaefer Chaired Professor of Accounting at Emory University’s Goizueta Business School, and Roger White, a doctoral student in accounting at Georgia State University.
Rajgopal and White filed a Freedom of Information request to investigate the trading strategies of employees of the Securities and Exchange Commission (SEC). “After reviewing the buying and selling pattern of more than 7,000 trades in a two-year period, we found that SEC employees earned abnormally high returns on their SALE portfolios,” says Rajgopal.
“We considered three reasons for this: luck, skill of the traders, or access to non-public information,” he says.
“Luck aside, if skills explained these results, we would expect to observe abnormal returns on both buys and sells,” Rajgopal explains.
“Instead, we find that at least some of these SEC employee trading profits are information based, as employees tend to divest in the run-up to six SEC enforcement actions, thus profiting from the sale of stock before news of their investigation affects the market.”
According to Rajgopal, “the SEC has responded that each of these trades was approved and that staff assigned to an inquiry are required to sell its holdings in the targeted firm. Because the very act of an inquiry can cause stock prices to fall, is this policy reasonable and should SEC employees even be allowed to hold individual stocks?”
Watch more from Professor Rajgopal on his findings and their consequences.
Delta Air Lines is headquartered in Atlanta, GA
This past week, Delta Air Lines announced changes to their frequent flyer program, Delta SkyMiles. The changes, which include rewarding travelers based on the amount of money they spend on tickets rather than simply on how far they fly, raised questions about the evolution of loyalty programs in the airlines industry. Goizueta marketing Professor Michael Lewis conducts extensive research on loyalty programs and consumer behavior. He spoke with us to offer his perspective on the shift in reward programs and who it ultimately benefits.
Goizueta: What are your initial thoughts on the program? How would you evaluate their changes?
Michael Lewis is an Associate Professor of Marketing at Emory University’s Goizueta Business School.
PHOTO: Allison Shirreffs
Lewis: If we think about the program based solely on consumer behavior principles, it is an elegant program. The consumer is constantly presented with incentives to invest in her relationship with Delta. Think of a new consultant living in a non-hub airport region. This program increases the dynamic incentives for her to go out of her way to fly Delta.
The Delta program is striking in how explicit they are making the connection between the economic value of a customer and customer treatment. Loyalty programs have always been intended as a mechanism for improving the experience (and thereby loyalty) of the firms most valuable assets but the means have always been less direct. Now there is no doubt. Spend more money and the customer gets more.
Goizueta: Do you see any drawbacks to the new format?
Lewis: One potential issue is the factor that the person taking the flight is often not the entity paying the bill. Often companies are the ones carrying some, if not all, of this expense. This new program actually has a structure whereby the employee booking the travel has an incentive to search for higher fares. This would probably only happen on the margins, but the consumer whose firm is paying the fare has an obvious incentive to switch from say the 8 am flight with a fare of $300 to the 9 am flight with a fare of $500. It will be interesting to see the reaction from businesses to this change.
Goizueta: How do you see this new format changing how current SkyMiles members view their relationships with Delta?
Lewis: Only time will tell, but loyalty/reward programs can often change the tenor of brand-consumer relationships. These programs can sometimes create an almost contractual-feeling relationship where the consumer believes they are owed the rewards they have earned. When this happens, the loyalty program creates what academics call “behavioral loyalty.”
Goizueta: What is “behavioral loyalty” and what would that mean in this situation for Delta?
Lewis: Behavioral loyalty is repeat purchasing without increased affinity or loyalty. In other words, the program operates more like a job to consumers, making it less effective in developing any real loyalty for the brand. If you consider the airline industry, you can see how little true preference exists between the major carriers. Contrast that to the deep attitudinal loyalty that exists for brands like The Coca-Cola Company, Nike or Apple. When you reward a consumer for using your service, there is always the risk that this will be the result of the nature of the relationship.
Thomas Smith, Assistant Professor in the Practice of Finance
Thomas Smith, Assistant Professor in the Practice of Finance at Emory University’s Goizueta Business School, discusses the 2014 economic outlook with WalletHub CEO Odysseas Papadimitriou in a recent article. Smith opines on the overall economic outlook, Federal Reserve policy, interest rates & real estate, and the stock market.
Read Thomas Smith’s thoughts on the 2014 economy.
Jagdish N. Sheth, Charles H. Kellstadt Professor of Marketing
The American Marketing Association Foundation (AMAF) has named Jagdish N. Sheth, Charles H. Kellstadt Professor of Marketing at Emory University’s Goizueta Business School, the recipient of the 2014 William L. Wilkie “Marketing for a Better World” Award.
Sheth accepted the award Saturday, Feb. 22 at the AMA Winter Educators’ Conference in Orlando, Fla.
The award honors marketing thinkers who have significantly contributed to the understanding and appreciation of marketing’s potential to improve the world. The award recognizes and honors the work of William (Bill) Wilkie, the Nathe Professor of Marketing at the Mendoza College of Business at the University of Notre Dame.
The Wilkie Award is a broadly based, major academic recognition for the field, recognizing marketing thought leaders whose conceptual developments, substantive applications, or empirical studies have served to provide significant bases for improvements in the world.
“I’m extremely pleased that Jagdish Sheth was selected to receive this award,” Wilkie says. “He is a remarkably talented thinker who is interested in both theory and practice. The sense of the Wilkie Award is that Marketing has huge potential to improve daily lives if done well, and Professor Sheth has been advocating this theme for nearly 50 years, writing over 400 articles and 40 books. He is, as Philip Kotler puts it, ‘a Renaissance Thinker.’”
Wilkie also cited:
- Sheth’s early book with John Howard, “The Theory of Buyer Behavior,” which Wilkie said “proved a key for developing the whole field of consumer behavior”;
- his seminal work on relationship marketing, “moving our field toward delivering higher value”;
- his significant support of the academic infrastructure through the Sheth Foundation; and
- his recent work on the judicious use of resources and “mindful consumption,” which will be the topic of Sheth’s talk at the upcoming Winter Educator’s Conference in Orlando.
Sheth is a sought-after advisor and has worked in a variety of industries throughout the world. His work has been honored at the highest levels, including the top three awards from The American Marketing Association.
Sheth is a respected academic and prolific author. His book, “The Rule of Three” (Free Press), coauthored with Rajendra Sisodia, altered the current notions of competition in business. The book, published in 2002, has been translated into German, Italian, Polish, Russian, Portuguese, Korean, Japanese and Chinese. It also was the subject of a seven-part television series on CNBC (India).
His 2007 book, “Firms of Endearment” (Wharton School Publishing), coauthored with Rajendra Sisodia and David Wolfe, was selected as one of the top 10 business books on leadership. Later that year, Sheth also authored “The Self-Destructive Habits of Good Companies … And How to Break Them” (Wharton School Press). Both books have been translated into more than 10 languages.
More recently, Sheth published “Chindia Rising: How China and India Will Benefit Your Business” (Tata McGraw Hill, India) and “4 A’s of Marketing,” co-authored with Rajendra Sisodia (Routledge).
Hard Rock Café founder Isaac Tigrett illustrates a point during the keynote address at Goizueta’s annual UBSLC. Photo: Tony Benner
In conjunction with the 15th Annual Undergraduate Business School Leadership Conference (UBSLC), Goizueta Business School welcomed keynote speaker Isaac Tigrett, co-founder of The Hard Rock Café and creator of The House of Blues, to campus on Thursday, February 6.
The student run UBSLC, previously hosted by corporations such as GMAC, Goldman Sachs, Deloitte and The Home Depot, provides a forum for undergraduate BBA students from top business schools around the world to gain valuable leadership skills. Through distinguished speakers, mutual academic collaboration, development workshops, case competitions, networking, and exposure to prominent business leaders, attendees develop new leadership skills and build a social network among some of the world’s most promising future business professionals.
This dynamic conference attracts well-known speakers such as Joey Reiman, founder and CEO of BrightHouse and iconic recording artist and performer Usher Raymond. This year, Isaac Tigrett proved to be an unparalleled fit considering the Conference’s theme “Culture and Leadership.” A renowned builder of brands, Tigrett created over a billion dollars in equity for his investors, and took the Hard Rock Cafe through three successful public offerings in the United States and Europe. His keen insights into trends and social movements, together with his expansive creative capabilities, fuel his visionary approach.
Tigrett’s opening words, “I’m a weird cat. I’m going to say a lot of things that you are not going to like,” set an unconventional, funky tone for the rest of his address. After a brief description of his early life, during which he accrued $250,000 by 18 years of age by selling cars, Tigrett turned off the lights in the auditorium for a communal listening of “It’s Alright Ma” by Bob Dylan, offering sensory insight into his youth.
He then turned his lecture to the evolution of The Hard Rock Café, which he deemed not only the first American restaurant in Europe, but also the first “classless” restaurant in London – where both banker and a baker could gather. Tigrett defended his challenge to this status quo and shed light on a tenet of his branding philosophy by saying, “You do not exploit culture, you have to represent it.”
Lastly, Tigrett spoke directly to the young, professional audience offering his opinion on today’s culture. “Social media, as beautiful as it can be, can also be very dangerous if taken too seriously,” he said. To illustrate he held up two recent conflicting editions of Time Magazine. The first bore the headline “The Me Me Me Generation: Millennials are lazy, entitled narcissists who still live with their parents.” The second displayed the headline “Mindful Revolution: The science of finding focus in a stressed out, multitasking culture.” He then begged the question, “So what is your culture going to do that mine didn’t? I don’t know, but let me tell you, you gotta fight for your right to party!”
For Patrick McBride 14BBA, BBA Council president and UBSLC 2013 Chairman, this year’s conference was a winner. “Jonathan Robeny 15BBA [UBSLC 2014 Chairman] and his team did an amazing job of securing great speakers and workshops for the participants,” notes McBride. “From the more ‘out there’ style of Isaac Tigrett and his companies, to traditional cultures found within investment banking and consulting firms, this year’s conference really featured something for everyone, which is why I think the 15th annual UBSLC was one of the best ever.”
For more on Tigrett’s visit, see the Emory News Center.