Alumni Profiles

Michael Horvitz, W’72: The Business of Art

Right off the bat, there are several important things to know about the Cleveland Museum of Art. First, the museum is considered to have one of the most impressive comprehensive art collections in the country, in a league with the Philadelphia Museum of Art, the Museum of Fine Arts in Boston and the Art Institute of Chicago. Second, it is one of the few major art museums that doesn’t charge for admission. Third, terms of the museum’s $500 million endowment specify that half of the endowment’s annual income must be spent on art acquisitions.

“Our collection is about 35,000 pieces, small compared to the hundreds of thousands and even millions of pieces in some other collections,” says Michael Horvitz, an attorney who was appointed president of the 25-person museum board last December. “But the quality of each individual piece is superb. It’s like a diving competition, where you take the execution of the dive and multiply it by the degree of difficulty in order to arrive at the final score. If you take each piece of our collection and multiply it by the degree of quality, our institution ranks among the top.”

Horvitz’ goal is clearly to explore, debate and build on the 81-year-old museum’s tradition of excellence. “My primary role is to help set the tone and direction of the institution in the long term,” he says. “Museums face a number of issues today, ranging from the appropriate role of technology in helping to make collections accessible to the broadest possible audience, to the reduction or elimination of arts programs in many of our public schools.”

Not to mention the more immediate issues surrounding what is arguably any museum’s most precious commodity – space. Horvitz has set in motion an intensive one-year study of the museum’s facilities needs: space for storage, space for curators and others on the 240-person staff, public space for visitors and exhibition space. “We have a café now,” he notes. “Should we have a restaurant? More meeting rooms? Receptions for community organizations?”

The museum board is also, for the first time in its history, attempting to articulate an acquisitions philosophy. “Our view is that you don’t define major pieces just by the price tag,” says Horvitz, who describes himself as a “modest” art collector who tends to focus most heavily on 18th and 19th century European paintings. “It’s possible to buy a work of art that is the best example of that work in its field for a relatively reasonable price.” The museum’s most recent acquisition is a painting by American artist Chuck Close entitled “Paul III.”

Although the board has no immediate plans for a major capital campaign in the near future, Horvitz is well aware that ongoing fundraising is necessary to support new programs and exhibitions – such as this year’s very successful “Fabergé in America,” an assemblage of the famous Fabergé eggs and other works of decorative art from the Fabergé workshops. “Cultural philanthropies are very important,” he notes. “In many ways a community’s cultural life is the heart and soul of its civilization.”

Horvitz currently sits on four civic and/or cultural boards in Cleveland (down from a high of 10 two years ago). Because he is a lawyer – and “lawyers know how to keep track of time” – he can tell you that last year he spent about 15 percent of his time on civic activities vs. about 20 percent this year. “It’s important to have a balance between family and work and community,” notes Horvitz, who lives with his wife and two daughters, 13 and 9, in Shaker Heights.

The ‘work’ leg of that tripod involves Horvitz’ law practice at Jones Day Reavis & Pogue in downtown Cleveland which Horvitz joined after earning a JD from the University of Virginia and an LLM in taxation from New York University. He specializes in counseling members of privately held businesses, focusing specifically on the area of “business divorce – i.e. situations where partners are not getting along or where family members are experiencing significant tension. But I don’t do litigation,” he notes.

“When I get involved there is usually a transactional answer to the problem. Somebody is bought out, the company gets sold or goes public, etc. I enjoy my practice because I am always dealing with people who have a very personal stake in the outcome.”

Rosalind Copisarow, WG’88: Microlending in Poland

It was an article in the Financial Times on the Grameen bank in Bangladesh that was partly responsible for Rosalind Copisarow’s decision three years ago to leave her job at J.P. Morgan and start up Poland’s first micro fund.

The article noted how the Grameen bank, a pioneer institution in the field of microlending, had made approximately two million loans to low-income residents of Bangaldesh since its beginning in 1976.

Copisarow’s Fundusz Mikro, open for business since 1995, has to date processed more than 6,000 loans and created what Copisarow estimates is 4,000 new jobs. The fund’s repayment rate is 99.7 percent. “We are enabling people to become financially self-sufficient,” says Copisarow. “They are no longer disenfranchised.”

But back in July 1994, it wasn’t at all clear to Copisarow that her career switch was a good idea. She would be trading 15 years of experience in commercial and investment banking for a job where the average loan size is $1,500 and the clients are businesses that employ approximately five people and are considered “unbankable” – unable to get access to credit from formal financial institutions. In Poland, Copisarow says, there are more than one million such microbusinesses – what she calls “the bottom layer of economically active people in the country” – ranging from taxi drivers and street stall owners to carpenters, stone masons and hairdressers.

Copisarow had two lucky breaks. First, shortly after reading the Financial Times piece in 1993, Copisarow, who at that time was J.P. Morgan’s country officer for Poland, happened to sit next to Poland’s finance minister at a dinner party. “He told me that Grameen Bank was exactly what Poland needed and stated that if I were willing to give up my whole career to establish a similar institution that he would give me every support he could.”

Second, $24 million in start-up money from the Polish American Enterprise Fund “landed in [her] pocket.” The fund had been established in 1990 by a special act of the U.S. Congress as part of George Bush’s initiative to help promote the development of private enterprise in formerly communist countries.

Polish officials already had successful loan programs for such areas as venture capital, small businesses, mortgages and housing development, says Copisarow. “They were willing to try one more experiment – the micro- market.”

Banks typically stay away from microlending because of the “riskiness of the clients and because the transaction costs of processing a loan are bigger than the income from the loan itself,” Copisarow says. But she takes exception to the idea that low-income people are inherently greater credit risks. “It’s a total myth. My belief is that the poorer people are, the more credit worthy they are. If you lend to people who are destitute, on trust, they make sure they pay you back.”

Her theory is reflected in the methodology that Fundusz Mikro adopted after a period of researching similar funds and then testing out different approaches. “We rely on psychological pressure between groups of friends or business partners who know each other. If any one person can’t pay back the loan, the others have to chip in. If they all pay back the loans, the next day they get bigger loans to develop their business even more.

“It works,” Copisarow says. “Not only does it make a tight repayment rate, but it reduces the transaction costs. We tell a person to find the best partners possible to work with. That means we end up loaning money to between four and seven people, which raises the income for us. Also, we can give the group a cheaper interest rate than would be possible for an individual. Approximately 80 percent of our clients are group clients.”

Fundusz Micro has branches in 20 cities in Poland and hopes to open another 10 to 15 in the next year, an expansion plan that would enable the fund to cover every place in Poland with a population of more than 150,000 people. One of the fund’s three directors is Jamshed Ghandhi, associate professor of finance at Wharton, who taught Copisarow a course in capital markets.

All the 60 plus employees of the fund are Polish, except Copisarow. She was born in France, grew up in England, earned her undergraduate degree from Oxford, and worked for Citicorp, Midland Bank, Samuel Montaqu and J.P. Morgan before starting Fundusz Mikro. At Wharton she was in the Joseph H. Lauder Institute of Management and International Studies program.

Alejandro Di Capua, WG’90: Turning Around A Utility

Alejandro Di Capua sees his goal in very clear terms: to transform Edesur, a $1 billion electricity distributor in the southern half of Buenos Aires, from an inefficient government agency to “the best public service company in Argentina.”

It’s been challenging, to say the least. Di Capua was hired in 1992, shortly after the company was privatized, as part of a four-person executive team charged with turning around what is Argentina’s largest utility. Over the past five years, the company has: cut the workforce from 8,500 to 3,000; converted $30 million per month in net losses to $100 million in annual net income after taxes; cut debt from about $400 million to $170 million, and instituted a host of new employee incentive systems and financial controls.

For example, one of Di Capua’s first moves was to set up a budget process whereby “all employees must get permission to make an expenditure before the expense is incurred, not after, as had been the case. Even many American companies don’t operate like this because it is considered impolite or because it limits an employee’s freedom. My system initially was considered radical; no one in a government-owned company had ever budgeted this way, and on a monthly basis.”

Di Capua, however, looks beyond the numbers to find measures of his success. “Graduates of some of the best schools in Argentina now want to work here,” he says. “We have shown the benefits of a turnaround that could not have been shared with 8,000 employees but that could in fact be shared with 3,000 … People are starting to feel proud that they are part of a company which offers job security, promotes people from within, distributes dividends to its shareholders, pays taxes and provides a better service.”

Edesur’s three biggest shareholders are Chilean-based Enersis, U.S.-based Entergy and a local group, Perez Companc. Employees own 10 percent of the company through an employee stock ownership plan.

Di Capua grew up in Buenos Aires, attended public schools, including the University of Buenos Aires, and worked for J.P. Morgan, Morgan Stanley and McKinsey & Co. before joining Edesur. He and his wife, a graduate of Harvard Business School and a vice president at Chase Manhattan, have one son, Nicholas.

Edesur’s biggest challenge over the past five years has been cutting down on electricity theft in poor neighborhoods. Total electricity losses today are 9.8 percent as opposed to 27.1 percent five years ago. Now, one of its main challenges looking ahead is to grow the business, primarily through acquisitions both inside Argentina and out. “The opportunities are there as electricity distributors in neighboring countries start to privatize,” says Di Capua. “We will expand in big steps.”

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