The New York Times (via University Diaries) ran story today on the increasing number of university presidents who sit on multiple corporate boards. As you may recall, Graham sits on at least three separate boards.
Amongst the reasons that corporations like university presidents on their boards
There are other reasons that corporations like to have university presidents on their boards.
And these scandals and corresponding damage to the reputations of universities are not hypothetical, "Ruth J. Simmons, the president of Brown University and the first African-American woman to lead an Ivy League university, sat on the Goldman Sachs board until she stepped down this year."
Technorati Tags: Academia, Corporate Boards, New York Times, confilit of interst, Spanier
Then there are the corporate boards that Graham sits on. In 2008, he made $270,9800 in compensat[ion] as a director of US Steel and last year he pulled in another $170,000 from the gig. ...He has also sat on the board of Citizens Bank of Pennsylvania for a number of years and it was announced this summer that he was appointed as a director of FM Global,an insurance company, which according to the press release announcing Graham's appointment does business with Penn State. Unfortunately, these are not publicly traded companies, hence the compensation of a director is not disclosed by either...The Times article discusses what's in it for the corporations, whats in it for the presidents-hint: hundred of thousands of dollars annually is big part of it- and what could go wrong for the universities.
Amongst the reasons that corporations like university presidents on their boards
...according to James H. Finkelstein, a professor in the George Mason School of Public Policy, probably the biggest reason companies have sought out academics is the prestige they bring. Universities are among the few institutions trusted by the public, he says, and companies believe they can associate themselves with this quality by installing an academic on the board.So a president on the board helps to burnish the image of the corporation. Amongst the problems that board service can cause a university is a
“Corporations think this is a way of enhancing their prestige and legitimacy, especially in the case of Ivy League presidents,” he says. “I suspect that’s the principal motivation. It’s probably not for their business sense.”
... chance of reputational risk if a company runs into difficulties.So the downside includes damage to the university's reputation. Think of it as The Law of Conservation of Total Reputation.
“Woe to the university president who would sit on BP’s board,” says Richard P. Chait, a professor at the Harvard Graduate School of Education.
There are other reasons that corporations like to have university presidents on their boards.
John Gillespie, who has written a book on corporate boards, “Money for Nothing,” says academics are often selected for another reason — because they are less likely to rock the boat than directors from the business world.Put another way, university presidents are pushovers. Pushovers on a board increase the likelihood of a scandal and a scandal will hurt the reputation of the university run by the pushover. It's a nonlinear phenomena.
Academics may be trained to ask tough questions in their own fields, but when confronted with tricky business issues far above their level of expertise they “often become as meek as church mice,” he says.
And these scandals and corresponding damage to the reputations of universities are not hypothetical, "Ruth J. Simmons, the president of Brown University and the first African-American woman to lead an Ivy League university, sat on the Goldman Sachs board until she stepped down this year."
The risk of a damaged reputation seemed to be an issue when Dr. Simmons announced in February that she was stepping down from the Goldman board.And then there was this.
At the time, Goldman was being battered by questions about its involvement in the financial crisis and the lucrative pay it doled out to executives and employees even after the firm had received a huge taxpayer bailout. As a director, Dr. Simmons was partly responsible for approving Goldman’s bonuses during the boom years — including the $68 million pay package awarded to its chairman, Lloyd C. Blankfein, in 2007, the largest ever on Wall Street.
Erroll B. Davis Jr., chancellor of the University System of Georgia, was on the BP board for 12 years, though he stepped down in April, just days before the Deepwater Horizon rig exploded, causing the massive oil spill in the Gulf of Mexico. His retirement, however, wasn’t enough to protect him from being named, along with other directors, in a small number of lawsuits filed against BP over the disaster.Keep in mind that these presidents wouldn't be on these boards if it weren't for their position as presidents of universities. and they are gambling the reputations of their institutions for personal financial gain. I'm looking at you, Graham.
“There is a big risk to academics when they serve on boards. They especially attract criticism when a company gets into trouble,” said James Kristie, editor of Director & Boards, a trade publication. “They are more harshly criticized because they are supposed to be the smartest guys in the room.”
Technorati Tags: Academia, Corporate Boards, New York Times, confilit of interst, Spanier
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