Professors from Yale School of Management Delivered Speeches at BiMBA
Apr 18-2013
By James WU
On the afternoon of July 12th, China Center for Economic Research (CCER) was honored to receive Professor Shyam Sunder and Dr. Manjula Shyam from Yale School of Management (SOM) to deliver two speeches at Wanzhonglou Auditorium in Langrunyuan, Peking University. The Yale couple took Peking University as the first stop of their China tour.
Professor John Yang, the US dean of BiMBA was present as the host and delivered his welcome address before the speeches. Among the audience were PKU scholars, visiting professors and BiMBA students of CCER, who regarded it as a golden opportunity to touch the essence of Yale SOM. The Yale professors recalled their last visit to CCER and regarded the meeting as a reunion of old friends.
Professor Shyam Sunder is a world-renowned experimental economist and accounting theorist. His research contributions include financial reporting, dissemination of information in security markets, statistical theory of valuation, and design of electronic markets. Mr. Sunder joined Yale SOM in 1999. He is the President of American Accounting Association, 2006-2007.
Professor Shyam Sunder’s speech, which titled “Norms, Standards and Failures in Accounting and Auditing: Rethinking Practice, Research and Education”, won great interest and attention from the CCER audience. During his two-hour speech, Professor Shyam Sunder illustrated the development of accounting and auditing in the US, the legislation background and several influential events and their possible causes.
Mr. Sunder first gave a brief review of the policy-making in accounting and auditing. He pointed out that the changes in policies have always leaded to changes in the quality and even the education of accounting and auditing. He concluded the short-term, medium-term and long-term failures of accounting and auditing and attributed them to the dramatic shifts in policy-making, and deduced basic problems of the auditing industry.
From the short-term perspective, he linked the immediate causes of failures to the beliefs of executives, auditors, lawyers, investment and commercial bankers, and corporate directors that they could default on their duties without bearing the consequences. All of this, compounded by the failure of government to discipline the individual failure resulted in the failures of the audit industry.
As to the medium-term perspective, he pointed out that the US government’s decision to push forward competition in the audit industry in 1979 lead to a big rise in performance-contingent compensation for senior corporate executives. The general theory (competition promotes economic efficiency) applied to audit industry created a textbook example of a Market for Lemon. Thus, price and quality of audit services declined in the early eighties.
As to the long-term perspective, since the enactment of the securities laws in the early 1930s, the U.S. has seen a steady shift in financial reporting: from business and professional norms towards legislated written standards enforced by threats of explicit punishment for violators. This shift altered virtually all aspects of accounting and is regarded as the logical consequence of the recent collapse decisions of the past seven decades in the audit industry.
Professor Shyam Sunder also elaborated on the difference of the audit service and other professionals. In the case of lawyers and doctors, at least the patient and client know the quality, which contributes to the professional reputation. But in the audit industry, since the customers are more often than not small share holders who never really know the quality of accounting and auditing services, inadequate information and seemingly low failure rate in auditing not only give rise to the Market for Lemon in the accounting and auditing industry, where quality and price of service would both decline, but also predict causes for future failures. Government’s efforts to promote competition turned out to be a bad move going against their original will.
Mr. Sunder elaborated on several policies including the 1977’s legislation and illustrated their impact on the development of US auditing. He also gave his own explanation on several big events in accounting and auditing including the collapse of Enron.
To conclude his speech, Mr. Sunder found some alternative solutions such as: the competition for accounting standards, the reduction of competition in audit market or bundle with insurance, minority directors with real elections and better information for shareholders about directors and scaling back on performance-contingent managerial compensation.
Finally Mr. Sunder kindly gave his own replies to several questions from BiMBA students concerning the essence of accounting and auditing, the monopoly in the US accounting and auditing industry.
Dr. Manjula Shyam is the Director of International Programs in Yale School of Management. After her husband's presentation, she addressed the audience with a speech titled “American Business Culture and Communication”. The practical theme and content made her speech greatly welcomed by the CCER audience.
Dr. Manjula Shyam first made a comparison between the US culture and other cultures in the rest of the world, saying that the American is a nation on the move while the old European is rather stable and reserved. Difference in the mobility has lead to difference in life attitude, cultural values, and social manners, to which every MBA students ought to pay great attention.
The core part of Mrs. Shyam’s speech lay in the mobility of the American people, which as she stated, is the cause for American culture. She believed that it is the vast land and the relative scarcity of population that result in the American mobility. And the American icon of Cowboy on the other hand shows the American spirit of independence. So we should make a balance between individualism and team-work during our association with the US people.
For the last part of Mrs. Sunder’s speech, she kindly offered her solutions on daily behaviors and achievement ethic in a background of US culture. She elaborated on workplace etiquette and gave her own advice on Email etiquette. During the Q&A section, Mrs. Sunder, according to the question from BiMBA students, explained some of the causes for confusion during contact with the US people and gave her tips to help better solve the problem.
The hosting CCER presented gifts and souvenirs to the distinguished Yale guests from afar for their excellent speeches. The cheers and applause from BiMBA students ended the whole exchange with a successful ending.
