Professors Profiting From Practicing What They Teach

Business professor Alex De Noble teaches three classes a semester at San Diego State University, but outside of the sprawling campus he is an advisor and part-owner of eight fledgling companies.

Mohanbir Sawhney of Northwestern University’s business school presides over an Internet marketing course. But in a workweek of nearly 100 hours split between ivory tower and corporate boardroom, he keeps an eye on 19 companies as a director or advisor.

Throughout the nation, professors such as De Noble and Sawhney are increasingly seeking business opportunities in the turbocharged economy, enriching some of them beyond their dreams while providing real-life experiences to share in the classroom.

But the race to grab a piece of the “new-economy” riches has stirred a host of concerns at campuses, producing enough case studies to fill a textbook on academic ethics.

To be sure, faculty in business, engineering and other academic fields have long done consulting work or research for large and small companies. But instead of just advising firms, ambitious academics are now creating them or becoming part-owners, which often requires more time away from the classroom and lab, said David BenDaniel, a professor of entrepreneurship at Cornell University.

Critics say a growing number of academics are shortchanging students and universities by taking on an overload of outside interests. In addition, they say, some professors are going on leaves of absence to pursue financial ventures, sometimes even taking students with them in a joint pursuit of profits.

At UCLA, for example, about 20% of the business professors are involved in start-ups, up from 5% five years ago. At Carnegie Mellon University in Pittsburgh, an estimated 25% of computer science professors have interests in outside ventures, up from 5% to 10% five years ago.

At UC Irvine, faculty members are involved with start-ups, “doing everything from advising on a gratis basis to consulting to serving on boards for equity,” said David H. Blake, dean of the UC Irvine Graduate School of Business.

In April, Blake himself became an advisor to an Internet upstart in Santa Ana. In his 2 1/2 years as dean, he said, seven entrepreneurs have asked him to serve as an advisor or director. But none of the requests came from students, and he said he frowns on such business arrangements.

Jim Morris, dean of the school of computer science at Carnegie Mellon, is an ardent supporter of professors’ rights to pursue outside business ventures. But he said he and others have occasionally had to rein in colleagues who had become too consumed by outside activities.

Morris said he urged one professor to take a leave of absence after his teaching and research deteriorated because of his involvement with a number of start-up companies. Students complained that the harried professor’s lectures were unfocused and that he took weeks to grade exams.

The professor denied there was a problem but took a leave 2 1/2 years ago and has yet to return, Morris said.

But academics continue to hook up with the business world, driven by tales of business successes that create instant millionaires, in some cases billionaires, of professors who on average earn $56,000 a year.

At Stanford University, for example, 10 of the 45 computer science professors were on leave during the last school year to pursue entrepreneurial ventures, a much higher departure rate than usual, said chairman Jean-Claude Latombe.

The university scrambled to fill the void, hiring lecturers and asking professors to teach more classes.

Ethicist Jeff Seglin frowns on wholesale faculty departures. “Kids aren’t getting the best faculty members to teach them when adjunct professors and lecturers are standing in for senior faculty,” said Seglin of Emerson College in Boston.

Raising even more hackles at some institutions, professors are developing business relationships with students, sometimes taking students with them into ventures.

At the Massachusetts Institute of Technology, several computer science students have abandoned their PhD programs to join their professors’ businesses, said John Guttag, head of MIT’s department of electrical engineering and computer science. In other instances, undergraduates’ classroom work suffered after they began working part-time at professors’ businesses, he said.

The situation became so dire that Guttag questioned these relationships last year in a letter to the faculty.

“My perception is that an increasing number of our students are being hired to work at companies in which MIT faculty members play a significant role,” he wrote. That creates “some serious issues with respect to potential conflicts of interest, and has already put some of our students in difficult situations.”

Guttag disavows stronger measures, arguing that students should not be shut out of professors’ ventures completely.

“Let’s say some faculty member is starting a company and needs bright kids and is willing to offer them a wonderful opportunity,” he said. “We’re not in the business of limiting our students’ opportunities.”

He also said businesses started by students would be less likely to succeed if faculty members can’t be involved.

Indeed, Inktomi Corp., a successful Internet software maker in Silicon Valley, was launched four years ago by a computer science professor at UC Berkeley and one of his graduate students.

The professor, Eric Brewer, now divides his time between the campus and Inktomi in Foster City. His former student, Paul Gauthier, is chief technology officer and holds stock worth nearly $800 million.

Brewer seems largely unruffled by Gauthier’s failure to complete his PhD. “He’s welcome back [at UC Berkeley], but I think he’s learning more on the job,” said Brewer, whose Inktomi stock is worth nearly $600 million.

Some universities have clamped down on professor-student ventures, however.

Boston University prohibits professors from taking paid positions with student-run businesses, although the school is trying to cash in on successful businesses that are launched through its new incubator.

The university offers personal coaching by a faculty member for students who want to start businesses, then alerts a group of venture capitalists to promising business proposals. If a student company gets funding and eventually goes public or is sold, the university receives a 10% cut of what the venture capitalists make.

John Freeman, entrepreneurship professor at UC Berkeley’s Haas School of Business, is troubled by that approach, arguing that universities should educate students, not profit from them. Freeman oversees a university incubator program that gives selected student teams free access to computers, telephones, office space and faculty advice. The university holds no stake in any of the student companies and receives no windfall if the ventures later succeed, he said.

De Noble, the San Diego State professor, said he sees nothing wrong with getting involved with such ventures--after students have graduated. He serves as an advisor and has equity stakes in two companies headed by a former student.

He acknowledged, however, that juggling corporate and academic duties has taken a toll, creating hectic 19-hour workdays that have occasionally affected his classroom performance. De Noble, who is 46 and earns $75,000 a year at San Diego State, says he’s now “stretched to the limit.” Rings beneath his eyes reflect the stresses and strains of teaching, doing research, devoting up to 10 hours a week on outside ventures, running the university’s business plan competition, and carving out time for his wife and three children.

For the most part, however, San Diego State and other institutions give professors latitude in deciding how they spend their time outside the classroom.

“We trust our professors to balance their commitment to the university and their commitment to their outside interests,” said Michael Hergert, dean of the university’s business school.

In fact, Hergert argues, De Noble’s business activities have made him a better professor by giving him hands-on experience to complement his theoretical knowledge.

Even if universities were so inclined, they might find it difficult to place too many restrictions on faculty stars.

Sawhney, the Northwestern professor, spends about half of his 90-to-100-hour workweeks on outside projects but says the university still is getting more than its money’s worth from him.