Mays Impacts

Starting with the question “Why?” can help individuals and companies sharpen their course. “What?” and “How?” are next.

Don Knauss, Chairman & CEO, The Clorox Company

That is the path Don Knauss takes in leading The Clorox Company, where he has been chairman and chief executive officer since late 2006. He recently encouraged a group of Full-Time MBA students at Mays Business School to take a similar approach. “It’s the difference between leading with your head, where you do project leadership and envision the future, and leading with your heart, where you lead people and energize others in the future. It seems to drive better employee engagement.”

Knauss has overall responsibility for directing the company’s worldwide business, which produces products ranging from cleansers to cat litter, salad dressings to lip balm. It generated revenues of $5.5 billion in fiscal year 2012. “My guess is if you haven’t used one of his products in your lifetime, you are in sad, sad shape,” Mays Dean Jerry Strawser said when introducing Knauss. “They make just about everything you need in your everyday life.”

In fact, the company’s motto is “We make everyday life better, every day,” and its goal is to gain the strongest percentage of consumer lifetime loyalty, Knauss explains. That starts with pre-purchase marketing, he says, because at least 60 percent of shopping decisions are made in the store.

The company is celebrating its 100th anniversary, a feat Knauss says only ½ of 1 percent of companies ever reach. “We are a leader in mid-sized categories and in a sweet spot with the larger categories, but our company is small enough I can get my entire leadership team together within 10 minutes.”

Knauss is a former Marine officer who spent 12 years with The Coca-Cola Company before joining Clorox. He previously held a variety of positions in marketing and sales with the Frito-Lay and Tropicana divisions of PepsiCo, Inc. He began his business career as a brand manager in the paper products division at Procter & Gamble. He sits on the boards of directors for Kellogg Company and URS Corporation.

His long-standing commitment to promoting workplace equality and embracing diversity was rewarded in 2006 when he was given The Jackie Robinson Foundation’s ROBIE Award for industry achievement. It is the foundation’s highest tribute to an individual who has promoted and expanded opportunities for minorities in the corporate world.

A native of Highland, Ind., Knauss holds a bachelor’s degree in history from Indiana University. One of Knauss’ personal passions is promoting education, which includes serving on the Morehouse College (Atlanta) board of trustees and the Marine Corps University Foundation board of trustees. In addition, he and his wife Ellie launched in 2007, and continue to personally fund, the Knauss Scholars Program that provides 15 children of Clorox employees as much as $10,000 each toward higher education.

Knauss describes real leadership as “taking the people and the assets they are entrusted with and making them more productive and valuable than they were.” He encouraged the MBA students to exude integrity, curiosity, optimism and compassion. He also urged them to be humble and to focus on their employees. “Use authority, not power. Be approachable, and you’ll learn what’s really going on.”

About Mays Business School

Texas A&M University’s Mays Business School educates more than 5,000 undergraduate, master’s and doctoral students in accounting, finance, management, management information systems, marketing and supply chain management. Mays consistently ranks among the top public business schools in the country for its undergraduate and MBA programs, and for faculty research. The mission of Mays Business School is creating knowledge and developing ethical leaders for a global society.

Nathan Y. Sharp, Assistant Professor at Mays Business School

A new study of 365 sell-side financial analysts shows that private phone calls with managers remain an essential source of analysts’ earnings forecasts and stock recommendations — even in light of regulations limiting businesses’ selective disclosure of financial information.

More than half of the analysts surveyed by a team of accounting researchers said they make direct contact with executives of companies they cover five or more times per year. The direct contact with management is so important that one analyst said his company hired an FBI profiler to train analysts “to read management teams, to tell when they’re lying, to tell when they were uncomfortable with a question. That’s how serious this whole issue has become.”

“Our intent was to peer inside the “black box’ and provide new insights about the pressures and incentives analysts face. One key finding is that more than a decade after the passage of Regulation Fair Disclosure (FD), analysts report that private conversations with managers are among their most valuable sources of information,” said Nathan Y. Sharp, assistant professor at Texas A&M University’s Mays Business School, who conducted the study with professors at Temple University, The University of Georgia and The University of Texas at Austin.

The survey also finds that accurate earnings forecasts and profitable stock recommendations have relatively little direct impact on analysts’ compensation. These findings are derived from a study titled Inside the Black Box of Sell Side Financial Analysts, which presents results of a 23-question survey focused on analysts’ incentives, as well as 18 detailed follow-up interviews.

The study offers insights into an area that is understudied by researchers of the financial industry. While hundreds of articles have sought to predict financial analysts’ choices using models and statistics, few have peered into the “black box” of the organizational contexts and personal psychologies that drive analysts’ decision-making.

The study’s findings also serve as a potential commentary on the Securities and Exchange Commission’s Regulation Fair Disclosure (Reg FD), launched in 2000 to limit selective disclosure of market-moving information to analysts or other key stakeholders prior to the general public.

But respondents noted that companies’ public conference calls discussing quarterly earnings are often followed by one-on-one conversations between analysts and chief financial officers. According to one analyst: “We’re almost back to where we were pre-Reg FD, but not quite because that backroom chatter is shut down. It’s just now it’s not in the backroom; it’s everywhere.”

More insights from the survey include:

• Approximately one quarter of analysts feel pressured by supervisors to lower their earnings forecasts, presumably because outperforming forecasts pleases investors.
• Approximately one quarter of analysts feel pressured by supervisors to raise their recommendations, presumably because it is easier to get their clients to buy rather than to sell the stocks they recommend.
• While only 35 percent of analysts said the profitability of their stock recommendations were a very important determinant of their compensation, 67 percent cited “standing in analyst rankings or broker votes” as central to their compensation.
• Only half of analysts considered primary research “very useful” in forecasting earnings or recommending stocks.

The study was conducted by Nathan Y. Sharp, Assistant Professor at Texas A&M University’s Mays Business School; Lawrence D. Brown, Seymour Wolfbein Distinguished Professor of Accounting at Temple University’s Fox School of Business; Andrew C. Call, Assistant Professor at University of Georgia’s Terry College of Business; and Michael B. Clement, Professor at the University of Texas at Austin’s McCombs School of Business. The full text is available on Social Science Research Network at http://ssrn.com/abstract=2228373.

About Mays Business School

Texas A&M University’s Mays Business School educates more than 5,000 undergraduate, master’s and doctoral students in accounting, finance, management, management information systems, marketing and supply chain management. Mays consistently ranks among the top public business schools in the country for its undergraduate and MBA programs, and for faculty research. The mission of Mays Business School is creating knowledge and developing ethical leaders for a global society.

Scott Lovett ’13 with Mr. and Mrs. Donald Zale
at the 2013 Kupfer Distinguished Scholar Award

Senior finance major and Corps of Cadets member Scott Lovett ’13 received the 2013 Kupfer Distinguished Scholar Award. The award, founded by Gerald Ray ’54 and Donald Zale ’55, was created to recognize students who show outstanding academic achievement and exemplary leadership skills in the Texas A&M Corps of Cadets. Ray and Zale established the award to honor their friend Harold L. Kupfer, who made lasting contributions to the Texas business community.

Lovett serves as the Commanding Officer of 1st Regiment in the Corps of Cadets and as a Squad Leader in the Tree Platoon, Ross Volunteer Company. He is also a member of the Banking Program at Mays Business School, the Senior Operations Chair for this year’s Nichol’s Rising Leaders Conference, and was recently selected to serve as a Texas A&M Foundation Maroon Coat. Lovett plans to pursue a master’s degree at Texas A&M before starting a career in commercial real estate development.

About Mays Business School

Texas A&M University’s Mays Business School educates more than 5,000 undergraduate, master’s and doctoral students in accounting, finance, management, management information systems, marketing and supply chain management. Mays consistently ranks among the top public business schools in the country for its undergraduate and MBA programs, and for faculty research. The mission of Mays Business School is creating knowledge and developing ethical leaders for a global society.

Henry Musoma, a lecturer in the Undergraduate Special Programs Office at Mays, almost didn’t attend the Regents’ Scholars spring banquet because it was his son’s 2nd birthday, but he went to support his students.

By the end of the night, the event was imprinted in his memory. He was given the Dr. Robert M. Gates Inspiration Award, nominated by his students, who spoke highly of his support and dedication.

When Musoma’s students heard the presenter use their teacher’s catch phrase, “Your network is your net worth,” they erupted in loud cheers and laughter. Afterward, they crowded around him. “No one could even hear a word after that,” Musoma said.

Henry Musoma and Mays Business School Regents’ Scholars

Another emotional aspect of the program for Musoma was that he was honored in the presence of the keynote speaker, Wynn Rosser — the first person he met at Texas A&M and his undergraduate advisor.

Among his many student-oriented activities since his arrival at Mays in Fall 2013, Musoma has worked with a group of about 60 Mays Business School Regents Scholars. Regents Scholars are required to participate in learning communities, and Musoma led his students in a one-hour class that included discussions, field trips and samples at the international food festival. He also asked them to research a world leader.

“I want to open their eyes and increase their awareness of the world around them,” he says. “I have seen a big change in these students’ confidence since I first met them. I am so proud of them.”

Musoma was born and raised in the Southern African nation of Zambia. He completed his high school education in Zambia and Mozambique, respectively. In 1996, Dr. Musoma relocated to the United States to attend college, receiving both his master’s and undergraduate degrees from Texas A&M with a concentration in International Agricultural Development.

He is a recent graduate of the Educational Leadership and Administration Program at TCU. He and his wife of 10 years, Tyra, have three children, Kezia, Joshua and Olivia. Prior to joining TCU, he served on the Texas A&M faculty as lecturer and academic advisor in the College of Agriculture. He also held the lectureship for Texas A&M’s premier multi-disciplinary leadership program, the Academy for Future International Leaders.

Musoma has traveled extensively in Southern Africa, where his parents were posted in the diplomatic corps. His travels have taken him to Great Britain, France, Italy, Germany, Zimbabwe, Mozambique, South Africa, Botswana and most recently Tunisia, where he and his wife led eight Aggies on a five-week multidisciplinary study abroad sponsored by the Norman Borlaug Institute for International Agriculture.

The Gates Inspiration Award was established in 2007 to honor Gates’ legacy and tenure at Texas A&M. It is given through The Division of Scholarships & Financial Aid at Texas A&M University. Gates, who served as president of the university from 2002 to 2006, routinely challenged the faculty and staff to provide support for Regents’ Scholars through mentoring and advising.

The Regents’ Scholarship is designed to assist first-generation college students in achieving their educational goals at Texas A&M University. Up to 600 recipients receive $5,000 per year for up to four years, with the ability to add other scholarships. Each recipient must be a first-generation college student — meaning neither parent has earned a bachelor’s degree — with a family’s adjusted gross income of less than $40,000 per year.

The Regents’ Scholars Organization provides an opportunity for the scholars to form a close-knit community at Texas A&M. It hosts monthly meetings and participates in community service projects, fund-raising events and social events.

Regents’ Scholars must attend an orientation, participate in an Academic Success Program as designated by their college, live on-campus during their first year and attend the spring banquet at the conclusion of the first year.

About Mays Business School

Texas A&M University’s Mays Business School educates more than 5,000 undergraduate, master’s and doctoral students in accounting, finance, management, management information systems, marketing and supply chain management. Mays consistently ranks among the top public business schools in the country for its undergraduate and MBA programs, and for faculty research. The mission of Mays Business School is creating knowledge and developing ethical leaders for a global society.