At Brown, president's role on Goldman board sparks campus debate
Providence, RI – He has a laid back demeanor - with floppy black hair that hangs over his eyes. But Liebling opened the eyes of many on this campus to Simmons' membership on the board of Goldman Sachs, a company deeply implicated in the financial crisis.
"The funny thing about this is that it was publicly available information on the Internet and even though no one on campus seemed to know about it, it was right there for anyone to see who did a quick google search of her name," Liebling says, "which is ultimately what I did."
In a column for the student newspaper, the Brown Daily Herald, Liebling pointed out that Simmons received a salary of more than $300,000 last year from Goldman, and she served on the compensation committee, which approved billions of dollars in executive bonuses even after the company took federal bailout money to stay afloat.
"Brown's reputation really has taken a hit," says Liebling, who adds many students and alums were shocked to hear of the university's connection to Goldman Sachs.
"People were very disappointed that their university was so tied up in this company that was getting so much terrible press day in and day out," he says. "You couldn't open up the New York Times this winter without hearing about more terrible things that Goldman Sachs had done."
After Liebling's column and several articles in the student newspaper, President Simmons announced that she would not return to the Goldman Board. Simmons wouldn't comment for this story, but she has said she wanted to devote more time to Brown University, and the challenge of closing a $30-million deficit.
"I think it's a good thing that she left," says freshman Mark Langer, who was among hundreds of Brown students waiting for Simmons to deliver her State of Brown University address last month.
Simmons continues to enjoy a 77 percent approval rating from students, according to a recent poll by the student newspaper, and Langer is no exception. But he is troubled that Brown is so cozy with Wall Street.
"Money is a big issue for universities," he says. "Close ties to huge corporations like that can obviously sway their interest in where they're putting their money and why."
According to a university spokesperson, President Simmons' membership on the Goldman Sachs board did not represent a conflict of interest. In fact, Simmons still sits on one other corporate board, which is not unusual for university presidents. But the controversy has sparked a broader debate at Brown about the university's finances and investments - according to Michael Fitzpatrick, an opinions editor at the student newspaper.
"The sensibilities of the university tend to lean toward being honest and having full disclosure about investment practices," Fitzpatrick says. "The fact that Ruth Simmons was on the board of this corporation that people didn't really know about, it kind of struck a nerve for them."
Several student groups are now calling on Brown to open its books to more public scrutiny. Like most private universities, Brown does not disclose details of its investments. A recent review by the Chronicle of Higher Education found the university holds assets in three trustee-related firms. But Brown spokeswoman Marisa Quinn says Brown created an investment office created in 2000 - along with clear procedures to avoid conflicts of interest.
"Since the establishment of this larger more professional office in 2000, it's been the policy of the university to prohibit investing in funds managed by members of the investment committee," Quinn said. "All members of the investment committee have to recuse themselves and refrain from participation and consideration of any investment in which they may have an interest."
But Harvard Professor Richard Chait, who studies issues of university governance, says there's a better way to avoid potential conflict of interest.
"In my view trustees ought not do business with the institution," Chait says, who adds that would be the best way to avoid even the appearance of a conflict of interest.
"Far more often than not, the motivation of trustees is not to get business to be self enriched, its to provide the university either with a financial discount or to provide a quality of service," he said. "Given those, what I think are very benevolent motives, I think it's just a short step to say that's how I will serve the university and other people who don't have commercial ties to the university can govern the university."
Some students want Brown to go one step further and avoid investments they consider unethical - such as cigarette makers. There's a student group demanding the university pull its money out of companies that it claims are supporting the Israeli occupation of Palestine.
"We're dealing with increasing emphasis on social responsibility at the same time as we have an increasing emphasis on return," says Professor Louis Putterman, who chairs Brown's advisory committee on responsible investing.
Putterman says the financial crisis has left the university in a tough spot - on the one hand, it supports ethical investing, but on the other, it has to make up $800 million in losses from the last couple of years.
"Typically, the university endowment of Brown and other large universities have been able to secure better returns on their money than the typical small investor," he says. "And if the way that they do that involves some degree of privacy perhaps that's justified."
Brown gets 20 percent of its operating budget from the endowment, and in recent years it's been forced to make at least two rounds of layoffs to cut costs. Putterman says financial aid and other student services stand to suffer if the endowment continues to lose money.
University officials say the endowment appears to be stabilizing. The advisory committee is now researching the practices of other universities to see if Brown should be more transparent about its investments.