The Leadership of an Elite American University - Brought to You by the People Who Brought You the Global Financial Collapse

In which we revisit some questions about the leadership and governance of Dartmouth College, a leading US university....

Last year, we posted several times, most recently here, about the leadership and governance of Dartmouth College, which is, despite its name, one of the elite American universities, and home to a prestigious medical school. Dartmouth is unusual in that it allows some of its board of trustees to be elected by alumni. Furthermore, it allows candidates to be nominated by petition of the alumni. Many US colleges and universities' boards are entirely self-appointed. Those that allow elections usually restrict these to a few seats, and usually only permit candidates chosen by the board, university administration, or their agents. Therefore, the top leadership of most US higher educational institutions is mostly self-appointed. Dartmouth is a partial exception to this pattern, and seems to have a governance structure that is more representative (at least of one key constituency, alumni) and more transparent than most US institutions of higher education.

However, the unelected members of the Dartmouth board felt uncomfortable with the proportion of elected board members, once nearly half of the board. They proposed to increase the number of self-appointed trustees. The board chairman, Charles E Haldeman, Jr, justified this change as a way to make sure that the board "has the broad range of backgrounds, skills, expertise, and fundraising capabilities needed to steward an institution of Dartmouth's scope and complexity." He also asserted that the enlarged board would be "representing even more diverse backgrounds [which] will help us enhance board engagement with key areas of the college."

At the time, it was not clear to me whether these supposed advantages would compensate for the possibility that the new board, more enriched with self-appointed members, would be less representative and transparent.

Although there was considerable opposition to this plan, it was eventually put into action in 2007. The board has now been enlarged. I thought it would make sense, one year later, to see what the enlarged board looks like, and especially to see how broad its "backgrounds, skills, and expertise" are, and whether its members have "even more diverse backgrounds."

Dartmouth at least makes the biographies of its trustees easily available (link here), so here is a brief summary of the current roster of self-appointed trustees, first those whose appointments came before 2007:

- Leon D Black - "Leon Black founded Apollo Management, L.P. a global alternative asset manager, with a proven track record of successful private equity, distressed debt and mezzanine investing."
- Russell L Carson - "Mr. Carson has been a General Partner of Welsh, Carson, Anderson & Stowe (WCAS), one of the country's largest private investment firms, which he co-founded."
- R Bradford Evans - "Brad Evans is a Managing Director of Morgan Stanley and a Vice Chairman of the Firm's Investment Banking Department. "
- Karen C Francis - "Currently Ms. Francis is consulting with venture capital firms and Silicon Valley companies...."
- Charles E Haldeman Jr (Chair) - "Ed Haldeman is Chairman of Putnam Investment Management, LLC. He has been a Trustee of the Putnam Funds since 2004 and President of the Funds since 2007."
- Pamela J Joyner - "Pamela J. Joyner has more than 25 years of experience in the investment industry. She is the Managing Partner and Founder of Avid Partners, LLC. Ms. Joyner's expertise is advising investment managers and private investment groups in developing and implementing investment strategies in the alternative investment arena."
- Albert G Mulley Jr - "Albert Mulley is Chief of the General Medicine Division and Director of the Medical Practices Evaluation Center at Massachusetts General Hospital and Associate Professor of Medicine and Associate Professor of Health Policy at Harvard Medical School."

So, six of seven "charter" trustees appointed before their numbers were expanded are leaders of finance, and one is an academic physician. The six in finance are "diverse" to the extent that two appear to be in asset and investment management, one in private equity, one in what used to be investment banking, one in venture capital, and one in mutual funds.

Now, consider the new appointees:

- Jeffrey R Immelt - "Mr. Immelt was appointed as CEO in 2001 to lead GE...."
- Stephen F Mandel Jr - "Steve Mandel is the founder of Lone Pine Capital (LPC), a long/short and long-only equity money manager which he started in 1997."
- Sherri C Oberg - "Ms. Oberg is president, chief executive officer and director of Acusphere, Inc., a specialty pharmaceutical company."
- John A Rich - "Chair, Department of Health Management and Policy and Director, Center for Academic Public Health Practice, Drexel University School of Public Health."
- Steven Roth - "Chairman and Chief Executive Officer, Vornado Realty Trust"
- Diana L Taylor - "Ms. Taylor joined Wolfensohn & Company, a strategic consulting and investment firm, in 2007...."

So with the addition of this new group, nine of 13 "charter" trustees are leaders in finance, now including three in asset management, two in private equity, one in the field formerly known as investment banking, one in venture capital, one in mutual funds, and one in strategic consulting and investment. Of the remaining four, one is the CEO of a large diversified corporation that has a major finance subsidiary. The remaining three are two physicians and a pharmaceutical corporate CEO.

This is a diverse board? Chairman Haldeman had to be joking, or maybe his idea of diversity means including private equity along with investment banking and mutual funds, etc...

So the ostensible changes made to make Dartmouth leadership more diverse and broadening their array of talents seems instead to have maintained a leadership dominated by people in only one small sector of the economy, finance.

Maybe this could be justified if we knew that leaders of finance were particularly brilliant, and had skills and values particularly useful to the supervision of academic institutions.

Up to this year, there were those who did believe that people in finance were particularly brilliant. That, of course, was before the global economic meltdown, or financial collapse of 2008, or whatever it will be called. There is considerable consensus about the causes of this collapse, so I think it would be apt to quote the Conference Declaration from the recently concluded 13th International Anti-Corruption Conference:

In the final months of 2008, the world has faced a financial and economic crisis unprecedented in recent history. Illuminating a new level of interconnectedness; market failure has moved outwards from the mortgage sector to engulf credit and stock markets, and the global economy more broadly.

Facing a prolonged and painful recession, the gains of emerging economies are already being erased and the economies of the lowest-income countries are being put under further strain. We recognised the central role of transparency and accountability in mitigating the crisis and preventing future failures. And we underscored that the poor are not able to bear the cost of the greed and mismanagement of financial professionals half a world away and that better development - to which the fight against corruption is central - must remain at the top of the global agenda.

There is considerable consensus that globally the leaders of finance exhibited stunning "greed and mismanagement," and many have also charged they have exhibited arrogance, stupidity, and in some instances corruption. At the moment, and in retrospect of course, it would be hard to identify a group of people less appropriate to lead an elite academic institution than members of the group once dubbed "the masters of the universe."

Yet leaders of the now mostly discredited finance sector had managed to take over the leadership of a storied academic institution, home to a renowned medical school. It is quite possible that further investigation will show that the former "masters of the universe" took over the leadership of quite a few revered academic institutions, including academic medical institutions. Perhaps this will turn out to explain some of many problems that have afflicted academia, and academic medicine in the last 20 years.

In any case, all who care about education, and about academic health care, need to start thinking about how to re-engineer the leadership and governance of our formerly admired institutions.