Chronicle of Higher Education March 31, 2014 College Trustees in Wall Street Club Clash With Campus Culture By Jack Stripling and Benjamin Mueller
When an elite Wall Street fraternity gathered for an induction ceremony at an upscale New York hotel two years ago, members dined on foie gras, dressed up in drag, and laughed at jokes about gay people. Among the members of this secret society were dozens of college trustees and influential donors to some of the nation’s most prestigious universities. The long-secret inner workings of the fraternity, Kappa Beta Phi, came into public view in February, when New York magazine recounted details from the group’s 2012 event. The story, as told by a journalist who sneaked into the members-only gathering, painted the group as an out-of-touch club for finance tycoons, who revel in bawdy humor that many outsiders find homophobic and sexist. More than one in five of the 423 Kappa Beta Phi members, as of 2012, had served on college governing boards, according to a Chronicle analysis of the membership list published with the New York article. Forty-two of them are current trustees. Many more of the fraternity's members serve on college foundations’ boards or are advisers to schools of business, among other disciplines. People of great wealth have long populated college boards. But the Kappa Beta Phi membership roster illustrates that people of a particular kind of wealth, those who made their fortunes on Wall Street, now set policy across higher education. The influence of the elite investment-banking class on college boards invites questions about whether Wall Street culture is compatible with that of academe. To the extent that the goings on of Kappa Beta Phi embody the ethos of Wall Street, concerns may be raised about the seriousness with which trustees from the finance sector would treat issues of diversity and discrimination. The breakneck pace of decision making in major finance firms is also at odds with the deliberative style of faculty governance, although some might argue that most colleges would be well-served by moving more quickly. The culture clash between Wall Street and higher education became evident in February at the University of Richmond. Some students and alumni have called for the resignation of Paul B. Queally, of Richmond, a major donor and trustee who is a member of Kappa Beta Phi. Mr. Queally, a private-equity executive, was secretly recorded at the fraternity’s 2012 ceremony, where he told a joke about the sexual orientation of Barney Frank, a former Democratic congressman from Massachusetts, who is one of the nation’s most-prominent gay political figures. Mr. Queally, who remains on the board, has apologized for his statements. Whether his comments reflect a broader culture of intolerance within his industry is a matter of debate. What is clear is that other financiers joined the Richmond trustee with humor in the same vein that night. Lauren A. Rivera, a cultural sociologist at Northwestern University’s Kellogg School of Management, said a "macho" culture on Wall Street creates fear among gay employees that they will be penalized for coming out. To the extent that women are represented in the industry, she added, they often share their male counterparts’ "stereotypically masculine" attitude and join them in making off-color jokes. Ms. Rivera’s dissertation focused on investment banks’ hiring practices. The job candidates she interviewed for her research "perceive an environment that’s hostile to someone who is gay," she said. In the context of a university, there is reason to question how executives steeped in Wall Street culture would respond to sensitive gender- and sex-related matters that might come before them as trustees, said Ms. Rivera, an associate professor of management and organizations: "I can imagine that someone who came from that male-dominated environment wouldn’t have as much empathy for issues of assault." But other faculty members who have worked with trustees from the investment-banking world have a different impression. Steven A. Cohen, executive director of Columbia University’s Earth Institute, said he has found his university’s board to be "acutely sensitive" to racism and homophobia. (Three of Columbia’s trustees, including two board vice chairs, are members of Kappa Beta Phi.) Professors are right to be concerned about corporate influence on academe, Mr. Cohen said, but financiers have valuable experience to offer. "Making villains out of people who are doing their job on Wall Street seems to miss the point," said Mr. Cohen, who teaches courses on public management and sustainability. "Corporations are about making money. Universities are about building knowledge and teaching knowledge. I hope there’s some overlap between teaching and research and making money, but it’s certainly not 100 percent." Business Influence There are scant national data about the extent to which financiers populate college boards, but the influence of the business world in general is well documented. Fifty-three percent of trustees at private colleges and 41 percent of those at public colleges are employed in business, according to the most recent analysis by the Association of Governing Boards of Universities and Colleges. The association has more-specific information about college-related foundation boards: 23 percent of those board members work in banking and finance or investment management. Individual schools within colleges also rely on the Wall Street elite for counsel. Take Wilbur L. Ross Jr., a billionaire and turnaround investor who serves on the Yale School of Management’s Board of Advisors. He is sometimes described as the "king of bankruptcy" because of his success in building new companies from the assets of failed enterprises. For all of his financial wits, Mr. Ross played dumb when he took to the podium at the 2012 Kappa Beta Phi ceremony. The fraternity, he told a laughing crowd, was founded to be free of the sorts of intellectuals who had earned membership in Phi Beta Kappa, the esteemed national honors society. The logo of the Wall Street fraternity, he added, was "macho" compared with Phi Beta Kappa’s ruffled-sleeve emblem, which Mr. Ross described as a "tacit confession of homosexuality." In a recent interview, Mr. Ross said it would be a misimpression to suggest that the humor on display at Kappa Beta Phi events reflected any Wall Street animus toward gay people. "Let’s say we mocked 300 people, which is probably what we did," he said. "There were maybe two references to the gay community at all. The notion that this was some sort of gay bashing is just silly. A lot of us have contributed to gay and lesbian organizations, and will continue to do so." Mr. Ross said he had not heard any criticism from people at Yale, and he questioned whether an "anti-successful-people sentiment" was fueling the sorts of critiques Mr. Queally encountered at Richmond. "Is there anybody on any faculty who has never told an off-color joke?" he said. Mr. Ross did not express any regrets about his comments when he first spoke with The Chronicle, but he did so in a subsequent email. "In retrospect, since I had no intention to be a gay basher, I should have been more careful in my use of language," he wrote. "I am sorry to have created a wrong impression." Edward A. Snyder, dean of the Yale School of Management, said Mr. Ross’s comments seemed out of character for the "perfect gentlemen" he knew. Mr. Ross’s words were "clearly contradictory to our values," Mr. Snyder said. "But a lot of people in our community make mistakes, and I make mistakes. We go forward, and we certainly don’t write people off or exclude people." Mr. Snyder said universities benefit greatly from the knowledge that financiers contribute about investment, strategic thinking, and succession planning. They are big donors, too. In 2010, for example, Mr. Ross pledged $10-million for a library in the Yale School of Management’s new building. Perhaps because of their networks of wealthy friends, it is not uncommon for universities to tap people from Wall Street to lead fund-raising efforts. Warren A. Stephens, for example, is co-chair of Washington and Lee University’s $500-million capital campaign. Mr. Stephens, an investment-banking executive and Washington and Lee trustee, is also a member of Kappa Beta Phi. On the night of the fraternity’s induction ceremony two years ago, Mr. Stephens took to the stage wearing a Confederate-flag hat, New York magazine reported. He then launched into a parody of "Dixie," an anthem of the Old South that is often criticized as a nostalgic ode to the slavery era. "In Dixie land we’ll make our stand and try to stay in business," sang Mr. Stephens, who was secretly recorded. "You Yankee firms seem to come and go and to most we say good riddance. Adios. Adios. Adios to Wall Street land. Away, away, away down South in Dixie." Kenneth P. Ruscio, president of Washington and Lee, said in an email that Mr. Stephens’s musical act was not meant to offend anyone. "In our conversations with Mr. Stephens about this issue, he has emphasized that he was performing a satirical song," Mr. Ruscio wrote. "We are, of course, very mindful of the impact of the symbols in question. Given the apparent context of this event, Mr. Stephens had no intention to offend, and we’ve concluded our discussions with him on the matter." Mr. Stephens did not respond to numerous interview requests made through his office in Little Rock, Ark. Slow Pace of Change The influence of Wall Street power brokers on higher education was brought into sharp relief nearly two years ago, when the University of Virginia’s Board of Visitors abruptly ousted Teresa A. Sullivan from the presidency, only to rehire her two weeks later. Virginia’s board members, several of whom worked in finance, had expressed impatience with the pace of change at the university, particularly in the area of online education The board’s action, which came less than three years after Ms. Sullivan’s hiring, provoked threats of donor disengagement and alumni outrage. Two notable exceptions were Paul Tudor Jones II and Peter D. Kiernan, both hedge-fund managers and Virginia graduates. Mr. Jones and Mr. Kiernan celebrated what they described as the board’s bold action. Mr. Jones, a member of Kappa Beta Phi, applauded the ouster as a "revolution" that would please Thomas Jefferson, the university’s founder. Mr. Kiernan called the move a win for "strategic dynamism," which is Wall Street-speak for frequent and radical organizational changes that have the potential for big rewards or serious losses. Karen Z. Ho, author of Liquidated: An Ethnography of Wall Street, said the tumultuous turn of events at Virginia mirrors the sort of frenzied decision making that is common in high-stakes investment-banking firms. Wall Street traders, who live in constant fear of losing their jobs, are encouraged to make big bets, she said. Many of them have Ivy League degrees, she added, and they tend to believe that they have answers that have eluded everyone else. Ms. Ho, an associate professor of anthropology at the University of Minnesota-Twin Cities, drew her conclusions after working in the mid-1990s at Bankers Trust, which is now Deutsche Bank. For her research, she later interviewed more than 100 employees at top investment-banking firms. The cultural differences between higher education and Wall Street are stark, Ms. Ho said. College leaders say they are in the business of building sustainable institutions, but hedge-fund managers have been known to joke about how little it matters whether a particular merger or acquisition ultimately creates a better company. On Wall Street, "IBG-YBG" is shorthand for a deal that will benefit traders even if it cripples a business. The acronym stands for "I’ll be gone, you’ll be gone." That ethos is "crisis inducing," Ms. Ho said, and "we don’t want that to happen in universities." Cultural concerns aside, successful financiers will surely continue to be asked to serve on college boards. That is as it should be, said John Paul Rollert, who teaches business ethics at the University of Chicago’s Booth School of Business. It is imperative, though, that colleges round out their boards with people from different industries, he said. Mr. Rollert, an adjunct assistant professor of behavioral science, said that it may be tempting to pack a board with wealthy people who can give money, but that "class diversity" is particularly important for colleges that seek to serve people from different socioeconomic backgrounds. "If you draw disproportionately from people of a certain class," he said, "you’re going to have considerable blind spots." Members of Underground Fraternity With Prominent Roles at Colleges Dozens of members of Kappa Beta Phi, a club for elite Wall Street financiers, have ties to higher education. Here are some of them: Paul Tudor Jones II, a hedge-fund manager and influential University of Virginia donor, was among few people to publicly endorse the controversial ouster, in 2012, of Teresa A. Sullivan, Virginia's president. He argued that Ms. Sullivan, who had been president for less than three years, had let the university slide, failing to keep up with the rapid pace of change in the world. Amid public outcry, the university's board reversed its decision. (Photo by Amanda Gordon Bloomberg via Getty Images) Wilbur L. Ross, a billionaire investor, is a member of the Yale School of Management‘s Board of Advisors. In a joke-filled speech before a Kappa Beta Phi crowd, he contrasted the group’s "macho" logo with Phi Beta Kappa’s ruffled-sleeve emblem, which he described as a "tacit confession of homosexuality." Mr. Ross said later that the jokes were all in good fun, but that he regretted leaving the "wrong impression." (Photo by Rick Bowmer, AP Images) Warren A. Stephens, an investment-banking executive and Washington and Lee University trustee, took to the stage at a Kappa Beta Phi event wearing a Confederate-flag hat and singing a parody about failed Wall Street firms to the tune of "Dixie." (Photo by Jennifer S. Altman, Landow) Paul B. Queally: Mr. Queally, a private-equity executive and University of Richmond trustee, has come under fire for making jokes at the expense of gay people and women during Kappa Beta Phi's 2012 induction ceremony. Mr. Queally, who remains on the board, apologized amid student and alumni calls for his resignation. - See more at: http://chronicle.com.ezproxy.cul.columbia.edu/article/College-Trustees-in-Wall/145621/#sthash.kcAsqGX1.dpuf _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
