Everyone knows the legal maxim caveat emptor. That is, the buyer must be on guard against deception by the seller.
Today, buyers have much more legal protection under the law than they used to. The admonition to be on guard applies with far more force to people who want to give away property, especially gifts to colleges and universities. If they aren’t careful, their gifts are likely to be used by school officials for purposes they did not intend.
The Pope Center’s latest research paper explores the troubles that can beset donors. Games Universities Play by Martin Morse Wooster, a writer with great knowledge about field of philanthropy, explores the travails of donors who wanted their money or property used in particular ways.
What if, for example, you owned a farm and, since you’re getting on in years, wanted to donate it to a land-grant university with the understanding that the university would keep it intact, using the farm for teaching and research purposes? You would think that if university officials accepted the donation under those terms, they would honor them.
Not necessarily. In the case of the Kiley Powers farm, given to Iowa State, a few years after the death of the donor, the university sold the property and pocketed the money. When called on their legerdemain, university officials said, “Gee, we’re really sorry.”
As former Harvard president Derek Bok once said, “College presidents are like gambling addicts and exiled royalty in that there is never enough money.” Their insatiable desire to spend leads many of them to smile sweetly and promise donors that they will faithfully abide by their wishes. But once the ink is dry, they start trying to figure out how they can divert the money or property from the donor’s purposes to their own.
Wooster describes many of these cases in detail. Clearly the King Kong of them all was the battle between the Robertson family and Princeton. Charles Robertson had given Princeton a huge sum in the early 1960s, specifying that the money was to be used to train future federal foreign service workers in Princeton’s Woodrow Wilson School. That ought to have been seen as problematic by both parties, Wooster observes, since it was doubtful that so much money could really be devoted to that small academic niche.
Nevertheless, the deal was closed.
Years later, the descendants of Charles Robertson began to suspect that Princeton was siphoning away money that was supposed to go towards the Wilson School and its students and using it for other university expenditures. Princeton officials parried their arguments until the Robertsons finally brought a lawsuit that enabled them to get hold of university documents. Among the mountains of paper were numerous revealing memos, including one to the president saying, “If the Robertsons find out about this, there will be trouble.”
After years of costly legal wrangling, the case was settled in 2008. The Robertsons got some money back. Princeton did not exactly admit wrongdoing, but established an office to oversee the administration of donations to make sure that the donor’s intent would be respected in the future.
Donations of art have also led to controversies. It is understood, Wooster writes, that “you’re not supposed to sell art when you need money to fix the boiler.” In several instances, however, schools have done (or at least tried to do) exactly that.
Much of the paper is devoted to the problem faced by conservative and libertarian donors who would like to put some of their wealth toward improving the “balance” on college campuses by ensuring that there will be a voice for their economic and philosophical ideas. Wooster discusses the means by which donors have tried to accomplish that.
One is to create a center on campus devoted to scholarship in the principles you hold. The James Madison Program in American Ideals and Institutions at Princeton University is the leading example. The faculty at Princeton is overwhelmingly leftist in political orientation, but the Madison Program (the subject of this Pope Center piece) guarantees that the American tradition isn’t completely ignored (or vilified) on campus. It brings in scholars to speak and write about topics consistent with the American traditions of limited government and individual liberty.
Another is the “endowed chair” approach. Suppose that you have amassed a modest fortune in life and want to be sure that there will be at least one professor at a college or university (perhaps your alma mater, or an institution in the city where you live) who will teach and advocate the virtues of laissez-faire capitalism—a counter-weight to the prevalent anti-capitalist mentality. So you approach officials at the school and say that you will put up so many dollars if it will create the Murray Rothbard Chair in Economic Studies, named for your favorite economist.
Hungry for money, school officials will probably agree. Wooster shows, however, that this approach is far more perilous than is establishing a center.
The most obvious of the pitfalls is the problem of putting someone who shares your beliefs on the chair in the first place, and then ensuring that all successors will also share them. The nightmarish possibility that the professor holding the Rothbard Chair might at some future day be a Keynesian or a Marxist cannot be discounted. Keep in mind that those smiling administrators probably don’t care one bit about your economic philosophy and would be happy to get rid of a burr under the saddle at the first opportunity.
Third, there is what we might call “the BB&T approach.” John Allison, former president of BB&T Bank, wanted to establish programs that would emphasize the teaching of free-market economic principles and the philosophy of writer Ayn Rand. BB&T makes limited-term grants to colleges where they have identified solid faculty members who will teach those principles and philosophy. In the unlikely event that one or more of the faculty members working under the grant went “off track,” the grant wouldn’t be renewed. That eliminates the problem faced by people who want to endow chairs in perpetuity.
The available evidence indicates that the BB&T approach is making a difference by encouraging professors who teach students to think realistically about economic issues. That suggests a proven model other charitable foundations might take. BB&T has only reached into the Southeast. Maybe the paper will inspire “copycats” in other parts of the nation.
Wooster’s paper conveys this big message: individuals who want to contribute to colleges and universities must remember that the individuals who run them have agendas of their own. In that respect, the paper is an elaboration on what is called “public choice” theory in economics. Just as it is a mistake to assume that politicians and bureaucrats will always act for “the public good” (they often put their own interests first), it is a mistake to assume that college officials will use resources the way the donor wants them to be used.
Those officials have their own priorities and unless the donor is very careful, that’s how his contribution will be used.