Freep article attempting to show UM endowment conflicts of interest

Submitted by Arb lover on August 3rd, 2018 at 9:28 AM

A Freep article came out this morning alleging conflict of interest by the UM endowment fund.

While I am 100% in favor of open dialogue, when an article makes obviously misleading statements, we should hold them responsible to this same level of journalistic responsibility that they are attempting to hold the university to. 

The article heading and first paragraph (what most people read and remember) indicates that:

University of Michigan alumnus Donald C. Graham helped pay for the university's football team trip to France. His contribution came after U-M invested $102 million in his son's private equity funds.

Ok, that definitely sounds like quid pro quo and that the University is likely making poor choices. 

However if you read further it becomes less clear:

Graham and his family foundation have donated more than $60 million to Michigan, including paying for half of the estimated $800,000 cost of the Wolverines' trip to France last spring, organized by coach Jim Harbaugh.

While it may be true that the endowment fund has invested $102 million in either Inverness Graham or Graham Partners, this article does not appear to have asked, or care, frankly, whether the endowment fund actually did any due diligence. These are by all accounts solid investment vehicles and is the university really supposed to overlook a dedicated and generous donor because of the appearance of conflict of interest?  This author clearly has no understanding of business. You actually assess a value to partnerships, working with people and groups that you trust and that have a vested interest in you and yours. It is much less likely that Graham, a donor of $60 million to the university, is out to swindle the university, than some OSU alumni who likewise runs a private equity firm.

If you think Graham got the better end of this stick in giving $60 million to be able to invest $102 million, that's sad. 

Comments

Bando Calrissian

August 3rd, 2018 at 11:21 AM ^

I agree. I'm not saying the university should be socking the cash away in a sock drawer. What I'm pointing out is the fact that the modern American university looks far more like a corporation than an educational institution. It needs to sustain itself, but I'm not fully convinced stories like these reflect a university administration making decisions centered on its academic mission.

GoBlueTal

August 3rd, 2018 at 12:42 PM ^

you'd prefer an entity as large as UM not employ anyone who spends time figuring out how to pay for itself, just willy-nilly spends money, regardless whether they have any or not?  

I really don't understand what you're trying to suggest.  The modern university IS more like a corporation than an educational institution, if your vision of an educational institution is your local elementary school.  In comparison with say every university forever?  Well, they have to pay to keep the doors open, and someone on staff has to do the accounting.  That doesn't mean the University doesn't focus on education, it means the accountants focus on keeping the doors open so that the university can focus on education.  If the doors close, there's no more learning.  

While yes, I'm very confident I can slash UM's budget by at least 20% and improve the school academically (by my own subjective standards, and no, not touching athletics) - I can't do so without a team of people focusing on how to maintain and build the school's budget for the future.  

Vasav

August 3rd, 2018 at 12:52 PM ^

I get where you're coming from. I'm a capitalist who's proud to work in corporate America, and I believe in the value of good finances. And far too many of our institutions, including public ones, are held to a standard on how much revenue they bring in. It's a useful and convenient metric but we've abused it and over-valued its importance. The stated core mission of most (all?) universities is to extend knowledge, learning and understanding - not to generate revenue for research. Both sides of that hyphen are related, but they are not the same thing.

Yo_Blue

August 3rd, 2018 at 9:57 AM ^

Not talking fairness or ethics here, but if they get 80,000 applications for 15,000 slots, why would they lower the tuition?  My numbers aren't accurate but are meant to show that supply and demand would obviously prevent them from lowering tuition.  Their free school for qualifying fulfills the ethics side of the equation.

Bando Calrissian

August 3rd, 2018 at 11:10 AM ^

The switch to the common app is 100% behind the sharp increase in applications. The common app is certainly more advantageous for competitive students applying to large numbers of peer institutions, but the downside are dismal acceptance rates that can leave behind otherwise promising students who see your institution as more than another box to check next to Harvard and Chicago.

The case for lower tuition is the fact that it's a public university that keeps an 11-figure endowment, yet somehow keeps raising tuition and replacing full-time faculty with low-paid lecturers at a fraction of the price. I understand the need for endowments, but all UM has to do is look elsewhere around the Big Ten/former CIC to see peer institutions who have faced significant financial crises by following the same model (Northwestern for one). Piling up cash while pinching students and faculty, and getting dinged for poor or badly-placed investments is a bad look.

For more, see UM history professor Heather Ann Thompson's op-ed on this very topic:

https://www.freep.com/story/opinion/contributors/2018/03/19/lecturers-salary-university-michigan/428749002/

taistreetsmyhero

August 3rd, 2018 at 12:17 PM ^

I meeaaaannnn...the undergraduate school needs more teachers who are fully committed to teaching, and not research, ie lecturers. If I'm taking an undergraduate course at just about any level, I'd rather have a dedicated lecturer who is putting in the time to prepare lecture slides, be engaged during office hours, and write reasonable exams than a top researcher in the field who obviously has no interest in teaching.

And as to that op-ed piece, it loses credibility when the author can't have the self-reflection to realize that the credentials of the average lecturer are not the same as those of a tenure-track professor. 

Bando Calrissian

August 3rd, 2018 at 1:10 PM ^

In the current academic job market, your last point is demonstrably false. These days, many lecturers are newly-minted (though often even experienced) PhDs trying to remain in the academy until they can land a tenure-track job. Across the board, many job vacancies that 10 years ago would have been filled with a tenure-track job hire are now being filled with lecturer/adjunct positions. That's her point, and it's spot on.

So more often than not, your lecturer is going to be someone with the exact same qualifications as an assistant or associate professor (PhD, publications, teaching experience, etc.), but with no benefits, less pay, and no job security. It's not a knock on their intelligence or qualifications, but rather the nature of American higher education in 2018. The tenure-track jobs simply do not exist. Contingent jobs do.

BlueinKyiv

August 3rd, 2018 at 11:44 AM ^

First, I think that most alumni/donors support a balance between lowering student costs and building the university.  Donations fuel growth of the university's research and also provide opportunity for students who could not be here otherwise.  The problem is that this balance gets skewed in practice.  The main fault, in my opinion, is that university administrators (and the faculty they come from) are awarded for building new programs/ facilities. Nobody gets their next job as Provost because they cut tuition by 25%, they get it because they built a new $1 billion biological sciences building.  In the end, they always feel comfortable with a balance on the use of donor funds that I don NOT believe is in line with the views of most alumnae.  

UMForLife

August 3rd, 2018 at 9:38 AM ^

I am conflicted on this. On one hand what you are saying would be ideal if there is another vehicle for money. There is a lot done at universities that help medical and scientific communities. Money has to come from some where. I am glad they are not putting out Lottery as an option to take money from poor suckers. I have no problem taking money from wealthy.

Shop Smart Sho…

August 3rd, 2018 at 10:06 AM ^

And if the university were fully funded by public monies, you would have a point. 
I think the university should actually use their endowment to lower tuition costs and raise pay for instructors instead of focusing on just making it bigger, but it's naive to think a flagship institution like Michigan shouldn't be investing money.

East German Judge

August 3rd, 2018 at 11:44 AM ^

Apparently not much!  The large endowment comes from donors' gifts and goes to support the various causes that they maybe interested in supporting at the University - or some maybe unrestricted gifts. 

Then in turn, these investment earnings then fund academic scholarships, academic programs, and academic research, facilities maintenance, faculty salaries, just to name a few uses.

Yo_Blue

August 3rd, 2018 at 10:15 AM ^

Dolan is a graduate of Cornell and previously covered the automotive industry for the Wall St Journal.  Jesse attended Cornerstone and has covered Michigan's higher education beat for the Freep for 7 years.

Their article has no obvious un-truths, but it tries to connect dots that really aren't there.  If a university has 10,000 individual investments, wouldn't it be likely that some of the fund managers attended UM?  If these guys are donating more than they ever receive in commissions and fees, where is the corruption in that equation?  This is just more click-bait material which is becoming the norm for what passes as "journalism" these days.

Arb lover

August 3rd, 2018 at 10:39 AM ^

It's an equivocation to state in the header that Graham donated ($400,000) after his  son received $102,000,000 to invest, when his son received $102,000,000 to invest after Graham had already donated $60,000,000 to the school. 

It's a flagrant equivocation since they do briefly mention later in the article that $60m was donated prior to the university endowment move.

 

UMForLife

August 3rd, 2018 at 9:35 AM ^

There is a reason not many like freep around here. I am sure freep is on top of everything going on at MSU and will be investigating/publishing solid articles to show how the public dollars are wasted. Any day now....

ijohnb

August 3rd, 2018 at 9:39 AM ^

The other day I had to wait at a diner for my son to be done with his day camp and my phone was dead.  Somebody had left a Freep so I grabbed it and took a look.  All anti-Freep bias aside, what an awful, awful publication that is.  There were misspellings and grammatical problems throughout, the headlines were completely convoluted and the writing was terrible.  Sorry if there is anybody out there employed by the Free Press that I am offending, but wow that was bad. 

Pepto Bismol

August 3rd, 2018 at 10:17 AM ^

I have no problem with the Detroit Free Press. And I really don't have a problem with this article. I get the OP's point. It seems misleading, or at least not up to speed on the financial concepts.

Bigger problem is the state of newspapers and journalism. Look at Brett McMurphy. An unemployed sports writer whose only way back into the game was to make a name with a big story. He finally found it in Meyer. I doubt he hates Ohio State. But for his career, he wants Urban Meyer to burn and his reporting to be the catalyst.

I can imagine it's the same for whomever wrote this Freep article. Same for the dildos who blew up the RichRod stretching saga. Their industry is dying and their best shot to make a life out of it is to find dirt, dig up a unique story and get noticed. That's their job. The more sensational, the better.

Don't take it personally. If there's nothing there, nothing will come of it.

MBaseball06

August 3rd, 2018 at 10:31 AM ^

Well, I think Urban basically called out Mcmurphy too... when he stated at B10 Media Day "Don't know who makes up these stories" I think that was the catalyst for Mcmurphy absolutely taking this full steam ahead in the days following Urban's comment.  Not saying he wouldn't have pressed forward anyways, but Mcmurphy stated on ESPN that his reporting ethics was questioned by Urban. 

Blarvey

August 3rd, 2018 at 10:11 AM ^

I know this may not be popular but this is not typical, at least for public institutions in Michigan. I know some on the WMU board who are asset managers and they aren't allowed to receive any endowment money to manage. Same at CMU, GVSU, and SVSU. Combine this with the questionable values of some of Ross' gifts to the university and it can certainly look unusual.

Obviously not as serious as covering up domestic violence or sexual assault but I think the university should be more transparent and have some rules that make such arrangements less sketchy looking and protects the university from schemers that can game the system.