The IRS mailed 400 questionnaires to nonprofit colleges and universities in October 2008, seeking data on endowments, compensation and income from businesses unrelated to their missions of teaching and research. It picked more than 30 institutions to audit on the basis of answers and is reviewing an additional 13 that failed to respond, the agency said.

This is all about Senator Charles Grassley’s complaint (he’s the ranking Republican on the Finance Committee) that many extremely wealthy universities, holding billions of dollars, hoard their endowments. Since non-profits get all that money in large part because they get amazing tax breaks, they’re obliged to use it… To spend it, reasonable amounts of it, so that, for instance, students aren’t priced out of an education, or made to take on outrageous debt.

The IRS survey found that 344 institutions had an average spending target of 4.7 percent to 5 percent of their endowments each year on operations.

… Grassley, the ranking Republican on the Senate Finance Committee, said he’s concerned that 5 percent has become a “ceiling” for colleges and that wealthier institutions should be spending more. The finance committee held hearings in 2007 on rising tuition costs and growing endowments at colleges including Harvard University in Cambridge, Massachusetts, and Yale University in New Haven, Connecticut, prompting the institutions to provide more financial aid.

… Forcing universities to spend more of their endowments would discourage diversified investing and push them toward more conservative portfolios, said James K. Hasson Jr., a lawyer at Sutherland Asbill & Brennan in Atlanta, who represents tax- exempt institutions.

“A mandate would remove flexibility and creativity from the tools available to colleges,” Hasson said. “There doesn’t seem to be a crying need for a legal mandate.”…

Right. With a mandate, Larry Summers, when he was president of Harvard, wouldn’t have been able to put together those clever credit default swaps.

From an interview with Zadie Smith a few years ago:

… [T]here were many things about academic life that I found unbearably oppressive and absurd. There’s so much of one’s real lived experiences that you have to leave at the gates. There’s something about English departments in particular—a kind of desperate need to be serious, to be professional, to police this very ambiguous and necessarily amorphous act, reading—that I find hard to deal with.

English, as a subject, never really got over its upstart nature. It tries to bulk itself up with hopeless jargon and specious complexity, tries to imitate subjects it can never be. I always feel a disappointment coming out of English departments, as if all these brilliant people are gathered and poised to study something and all they have to study is . . . these things? Novels? But they’re so . . . smooshy. It’s as if, at some fundamental level, they consider the novel beneath them. They want something more macho, harder, with a more rigorous structure. It depresses me, how embarrassed some people seem to be about novels, how much they want them to be something else.

The flip side of that experience is finding a professor here, a professor there, who is absolutely willing to engage with everything a novel is and face up to its strengths and failures as a human product and allow students to express their most intimate intellectual and emotional experiences of reading. When that happens, there’s no better place to be in a university than in an English department. But when someone is spending a semester explaining to you why Adam Bede is an example of the nineteenth-century pastoral fallacy, that’s a little demoralizing. To me, a university is one of the most precious of human institutions; that’s why when they fall short of their own ideals, you feel so cheated.

How did I get onto this page, this particular Zadie Smith interview?

Via Roger Deakin, via Iris Murdoch, via scribbling in my journal while I was coming home on the train from the university this afternoon, even via the burqa…

Well, I’ll try to straighten it all out. But it’s got something to do with this quotation from Murdoch. Smith cites it in her interview:

The chief enemy of excellence in morality (and also in art) is personal fantasy, the tissue of self-aggrandising and consoling wishes and dreams which prevents one from seeing what there is outside one. . . . This is not easy, and requires, in art or morals, a discipline. One might say here that art is an excellent analogy of morals or indeed that it is in this respect a case of morals.

Real lived experiences… intimate intellectual and emotional experiences… Smith is after these, and she rightly identifies the university as a bastion of actuality, a much-evolved, much-elaborated truth-seeker. The university embodies, ideally, Murdoch’s discipline of seeing what there is outside one, tearing the tissue of self-centered fantasy in order to attain what Murdoch elsewhere calls the “merciful objectivity” at the core of morality.

Deakin? In the few days since I discovered this British environmentalist and nature writer (he died five years ago), I’ve experienced the same excitement I felt first reading James Agee’s Let Us Now Praise Famous Men, and Albert Camus’ Lyrical Essays, and George Orwell’s “Down and Out in Paris and London,” and Jan Morris’ essay “La Paz,” and quite a few other great works of descriptive prose. Like these writers, Deakin has the gift of writing outside of himself, the gift of merciful objectivity, which he trains on the natural world.

This is from his book Waterlog:

Natural water has always held the magical power to cure. Somehow or other, it transmits its own self-regenerating powers to the swimmer. I can dive in with a long face and what feels like a terminal case of depression, and come out a whistling idiot. There is a feeling of absolute freedom and wildness that comes with the sheer liberation of nakedness as well as weightlessness in natural water, and it leads to a deep bond with the bathing-place.

Most of us live in a world where more and more places and things are signposted, labelled, and officially ‘interpreted’. There is something about all this that is turning the reality of things into virtual reality. It is the reason why walking, cycling and swimming will always be subversive activities. They allow us to regain a sense of what is old and wild in these islands, by getting off the beaten track and breaking free of the official version of things. A swimming journey would give me access to that part of our world which, like darkness, mist, woods or high mountains, still retains most mystery. It would afford me a different perspective on the rest of landlocked humanity.

One writer, remembering Deakin, singled out his “enormous exuberance and anarchic life.” He said of Deakin that “The poems of Keats, Shelley, Wordsworth and Coleridge were as immediate to him as today’s newspapers.”

Deakin was Zadie Smith’s ideal English department. He had what Murdoch calls the discipline of art as well as the amorphous smooshy exuberance of real experience. Because he wasn’t landlocked in his own dreams, or in the virtual dreams of technolife, he was able to see the world of nature and people with great clarity, and this clarity compelled his morality, his environmental work which continues after his death to change the world:

“The writer needs a strong passion to change things, not just to reflect or report them as they are.”

Steven Harper, in AM Law Daily, wonders why an ethics-minded business school dean thinks so highly of lawyers.

Last Tuesday, Nitin Nohria was named the new dean of Harvard Business School.

In leading the school, Professor Nohria will focus “on business ethics, a cause he has long championed, particularly during the financial crisis,” as The Wall Street Journal reported on Wednesday. Nohria also has been, as the Journal describes him, “vocal critic of management education and the leaders it produces.”

… As the great recession deepened, Nohria and a colleague, Rakesh Khurana, argued in the October 2008 Harvard Business Review that management should become a profession: “Managers have lost legitimacy over the past decade in the face of a widespread institutional breakdown of trust and self-policing in business. To regain society’s trust, we believe that business leaders must embrace a way of looking at their role that goes beyond their responsibility to the shareholder to include a civic and personal commitment to their duty as institutional custodians. In other words, it is time that management finally became a profession.”

It might surprise many attorneys that Nohria singled out lawyers as offering a better model. He did so largely because the legal profession abides by a code of ethics. Is he searching for nobility in the business world? If so, maybe Nohria has a fictional character in mind–Atticus Finch. Unfortunately, it’s too late for the most lucrative and influential segment of the legal profession to guide business schools to better places.

For 20 years now, large law firms have been moving in the direction Nohria seeks to reverse in the business world. Following the example of their corporate clients, law firm leaders have adopted an MBA-centric mentality. In recent years, a large percentage of law firm managers have earned MBAs. And increasingly, they have come to rely on business-school metrics — billable hours, leverage ratios, and profits-per-partner–to dictate decisions that shape the culture of their legal businesses.

… If Dean Nohria is looking for a new model of something that is truly a profession, rather than a collection of bottom-line businesses where MBA-type metrics set the tone, he’ll have to look elsewhere.

In 2005, the year of its founding, UD took their Trump Success Test (all links have expired) and did very poorly, especially on Money Motivation. Still, when she read this article by Alex Beam, she felt nostalgic for her brief time as a student there… And now you’re telling me the whole thing was some sort of real estate scam?

A Stanford student describes an early morning eco-walk around that university’s vast holdings. A well-written account of hidden Stanford.

… This ambitious annual event, now in its fourth year, takes a select group of undergraduates, biologists, professors and others on a 21-mile walk around the perimeter of Stanford land… By exploring the outer reaches of campus, Walk the Farm aims to use Stanford as a microcosm of the American West to display the changes climate change has wrought on the environment.

… The first thing I learned from the Walk – Stanford supports a heck of a lot of cows. More cows than any university should know what to do with…

From Bloomberg Businessweek:

… The American Federation of State, County and Municipal Employees, the largest U.S. union for public employees and health-care workers, [has] advised its members to withhold their votes to re-elect Blankfein and President Gary Cohn, 49, to the board.

Two other Goldman Sachs board members have also been in the spotlight. Rajat Gupta, the former McKinsey & Co. senior partner who isn’t running for re-election, is suspected by U.S. investigators of tipping off Galleon Group LLC founder Raj Rajaratnam ahead of Buffett’s investment in the company, a person with direct knowledge of the inquiry said last month…

Stephen Friedman, a former senior partner of Goldman Sachs who has served on the board since 2005, resigned as chairman of the Federal Reserve Bank of New York last year to avoid the appearance of a conflict of interest because Goldman Sachs is regulated by the Fed. The House Oversight and Government Reform Committee said it plans hearings about why Friedman was allowed to buy Goldman Sachs stock even when he was playing a role in regulating it…

Blankfein’s flippant remark to a British journalist last year that he was doing “God’s work” may backfire at this year’s meeting as three of the seven shareholder proposals came from religious organizations such as the Maryknoll Sisters of St. Dominic, a Catholic missionary order based in Maryknoll, New York. Goldman Sachs’s board has opposed all of the proposals…

Our interest here at University Diaries is in the two Goldman Sachs directors with university positions: Ruth Simmons of Brown, and Bill George of Harvard. But it never hurts to get the bigger picture.

Why do companies like Goldman Sachs put academics like the president of Brown University on their boards?

Consider a set of comments about GS in the Washington Post.

Alan Webber, Fast Company magazine, writes:

… The reaction to Goldman today in the press is one of the things that happens when Americans see too clearly their reflection in a mirror.

Are we really that aggressive? Do we really play the game with that degree of cutthroat, win-at-all-costs raw power? Is that really the face of capitalism?

… What kind of capitalism do Americans want?

Casino capitalism? Wild West capitalism? Winner-take-all capitalism? Or are we looking for something that moderates raw, unfettered, ruthless cowboy capitalism with values that include social equity, the public good, the common cause?

It’s not simply a matter of more or less government regulation. It’s a matter of national values, national purpose and social philosophy.

When we look in the mirror after the dust settles over financial regulation, which face of capitalism do we want to see?

Because what we are is what we get.

We are all Goldman Sachs.

No, no, no. We are not all Goldman Sachs.

UD‘s colleague in GW’s business school whose main activity is making money by hastening the disappearance of the professoriate and with it the university — yes, sure, he’s Goldman Sachs. But not all of us are Goldman Sachs. UD, for instance, is not Goldman Sachs.

Nor is it the whole story to say, as Webber does, that we have casino capitalism, etc.

We have casinos masking themselves as social service agencies. We have cowboys masking themselves as Renaissance humanists.

Because it goes both ways. Cowboys want to get themselves on university boards. Cowboy corporations want university people on their boards.

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Why did a cowboy like Bernard Madoff give a shit about getting himself on the board of trustees of Yeshiva University?

University, baby! University! What does the word say to you? What does it make you think of? The wild west? Winner take all? Raw unfettered ruthless? Nah… Placid, peace-loving. Gently blanketed ivy walls. Springtime gatherings of robed figures thinking higher thoughts. The tamed west! Loser take all! Cooked, fettered, ruth!

The university is cover. It’s what you join, or what you invite, to give yourself or your corporation the look of respectability.

Archana Ramesh, a graduate student at Columbia University, contributes this to the Post discussion:

In his book “Leading Change,” James O’Toole argues for values-based leadership and a consistent display of respect for followers. This paradigm of leadership is not one stressed in business schools, which train our future investment bankers and traders. So while we can look at how leaders at a particular institution have behaved as symptoms of a marketplace without values, we have to wonder about the root causes of these behaviors.

What are the gaps in our educational and social curriculum that make it acceptable for some of our most influential business leaders to forget their duty to followers? Where is the business case made for leading based on respect and trust? Have we as a society become so short-term and bottom-line-focused that making values-based decisions becomes a liability?

Of course you can find many interviews and speeches and articles by another Goldman Sachs director, Harvard professor Bill George, in which he gasses on about values.

George is notorious for defending GS executive compensation.

So it’s not that you’ve got on one side evil ruthless capitalists and on the other side good values-based people. You’ve got cowboys, dressed up, for public consumption, in academic gowns. Every business ethics course at universities pumping out Goldman Sachs traders is dress-up.

… was on the Compensation Committee.

… Shareholders suing Goldman Sachs over executive pay packages are seizing on investigations of the Wall Street bank by the Senate and Securities and Exchange Commission.

A shareholder pay complaint filed earlier this year in Delaware was amended this week to take into account the Senate’s findings and the SEC’s civil fraud case alleging that Goldman misled investors about securities tied to home loans.

In addition to claiming that Goldman directors breached their fiduciary duties by allowing excessive pay for employees, the shareholders now say Goldman officials failed in their fiduciary duty to properly oversee the company…

The civil case was brought against the firm and a single named banker — Fabrice Tourre. Who might the [Department of Justice] choose to prosecute [in a criminal case]? According to Chicago Law School Professor and securities law expert M. Todd Henderson, the sky is the limit.

The Atlantic

… for Ruth Simmons to start thinking about her decade-long directorship of Goldman Sachs.

At one point during the hearings, Sen. Carl Levin played the Jimmy Stewart good-banker role from “It’s a Wonderful Life” by describing capitalism as it’s supposed to be. Levin noted that Wall Street “has been seen as an engine of growth, betting on America’s successes and not its failures.”

Well, that’s what Wall Street proclaims in its advertisements for itself. But when defending themselves against legal charges, Wall Streeters retreat to honesty by saying that everybody knows they are really there to make money and that it’s naive to hold them accountable for the social impact of what they do.

Does she think that her firm should be held accountable for the social impact of what it does?

… both sit on the board of directors of a company probably about to face criminal charges.

Federal prosecutors are conducting a criminal investigation into whether Goldman Sachs Group Inc. or its employees committed securities fraud in connection with its mortgage trading, people familiar with the probe say.

… [I]n the more than two-century history of the U.S. financial markets, no major financial firm has survived criminal charges. Securities firms E.F. Hutton & Co. and Drexel Burnham Lambert Inc. crumbled after being indicted in the 1980s. In 2002 Arthur Andersen LLP went bankrupt after it was convicted of obstruction of justice for its role in covering up an investigation into Enron Corp…

From the Yeshiva College student newspaper.

Across numerous departments, this year witnessed many disappointing faculty losses. Some of YC’s most famously beloved professors, for reasons largely unclear to students and, in many cases, even faculty, were fired or denied tenure. Why? Students find themselves frustrated and re-frustrated, in each instance unaware why professors whose courses they immensely enjoy, professors renowned for their knowledge, dedication, and skills, are consistently pushed to leave.

With such a high rate of faculty attrition, it seems YC has something against the good ones. What is it about professionalism and dynamism that seems incompatible with a job at YC? With abounding complaints about many professors who’ve been here for a long time, it’s particularly aggravating when YC finds a gem, then lets him or her go.

… Dr. Hrnjez’s molecular drawings are famous for the clarity they lend to organic chemistry. Dr. Pimpare’s commitment to advisement has allayed many students’ frustrations, and attracted many students to the political science major. Dr. Hogan, with his vast knowledge and devotion to his students, seemed to be the legitimating presence of the Art History Department. Why them? …

A comment in response to the article, from Hogan:

What creates an environment where good and dedicated teachers cannot succeed at Yeshiva is the management style of the Dean’s Office and a number of the administrative officers of the school. While it seems as if I was asked to leave, or perhaps the Commentator article wishes to convey that impression, I decided not to return in early February after my very carefully documented problems with the Payroll department (I was overpaid by about 300% per month for two months) were not fixed.

I appealed to the Dean’s Office, which …failed to solve the problem for six weeks, then to Payroll, which responded by writing one check for $0.00 and another that Chase Bank would not cash, and then finally to the head of HR Yvonne Ramirez, who said on 7 January she would look into the four months of payroll errors and get back to me. She never did. On about 9 April she apologized (in writing) but then never followed through.

The administration of Yeshiva College in particular is, in Ms. Ramirez’s words, not capable of addressing complicated administrative matters. So people like me, who work hard and try to do a good job, just give up.

MinnPost.com discusses a recent study of American universities which concludes, among other things, that

Universities [don’t] tap their endowments for more cash in tough times, even though their rules [allow] bigger withdrawals.

“One reason to have an endowment is to smooth over the shocks,” [one of the authors] said. “It’s a rainy-day fund so that when things go bad, they can dip into those reserves. What we found is they deviate from their own policy.”

Among the reasons for this behavior: Endowment managers who are more concerned about the “prestige” of building the endowment’s value and “implicit contracts” with donors to maintain the size of the endowment.

“What our paper shows is that universities are behaving in a way to grow the endowment rather than using it to support the activities of the university,” [he] said. “The point is that if you think endowments exist to smooth over the shocks in bad times, they’re not doing that. … They’re maintaining the value of the endowment for its own sake.”

UD wrote about endowment hoarding here. She featured this Peter Conti-Brown paper and wrote:

UD is particularly intrigued by Conti-Brown’s suggestion that the awesome, anally hoarded university endowment [of some universities] has finally transmogrified and hardened into a physical object, like a fantastic yacht, or Ezra Merkin’s Rothko room….

Many of the schools under review have already haughtily dismissed the entire report.

Some of the largest colleges of education in Texas offer poorly designed programs that leave prospective teachers unprepared for the job, according to a new report that suggests more rigorous and meaningful coursework.

The two-year study from the National Council on Teacher Quality, a research and advocacy nonprofit based in Washington, D.C., slams eight of the largest education schools, including the University of Houston’s, for seriously shortchanging aspiring teachers, particularly with inadequate math and reading instruction.

“The most consistent feature of teacher education in Texas is a lack of consistency,” according to the 500-page report, which is being officially released today. “Rather than consensus there is inter-institutional confusion as to what it means to fully prepare a teacher for the classroom.”

Some programs, for example, require aspiring middle school science teachers to take one biology course while others mandate as many as nine, according the report. At the same time, the report said, some classes and assignments don’t seem relevant or tough enough.

Texas Wesleyan University, for example, allows students to take a class called Local Spring Flora to satisfy a science requirement…

[There is] a horrifying mismatch between Wall Street’s vast power over the economy and its utter lack of conscience. Although Goldman [Sachs] has long been the most prestigious firm on the Street and therefore nominally the heir to the [J.P.] Morgan lineage [of social responsibility], it has never matured into that older role. It couldn’t really afford any sense of noblesse oblige about the American economy. On the contrary: Goldman’s corporate ethos is clearly more that of a predator than a protector. Indeed, Goldman became known as the savviest and most prestigious firm on the street in part because it had no scruples about simultaneously betting against products it was selling. One reason for Goldman’s success was that as a firm it developed a sharper and more pervasive hedge-fund mentality before the other investment banks did.

Utter lack of conscience. No scruples. Predator.

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… The broader public and political resentment, as one crisis manager put it, grows out of the sense that Goldman Sachs not only hasn’t “shared the pain” experienced by the rest of America, but has “profited from it.”

… The White House chief of staff, Rahm Emanuel, the guest of honor at a private Park Avenue cocktail soiree for wealthy Obama supporters this month, surely wasn’t pleased when it was reported that a Goldman Sachs partner was present…

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Update: Other people – academics and non-academics – with Goldman Sachs problems:

Republican frontrunner Meg Whitman tried again to put her previous relationship with the bank behind her, telling the Associated Press she regrets taking part in a now-banned stock sale practice involving the company and that she left its board after 15 months because she “wasn’t a good fit.”

But her remarks only provided ammunition to political foes seeking to remind voters that Whitman, a former Goldman Sachs board member, has a past with the investment firm now under scrutiny for its role in the national financial crisis.

… She sat on Goldman’s board from October 2001 to December 2002, a job that paid the equivalent of $475,000 in cash and stock options.

… Whitman told the Associated Press Tuesday that she stepped down from the board position because it “wasn’t a good fit.” …

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A top prospect for the Supreme Court was a paid member of an advisory panel for the embattled investment firm Goldman Sachs, federal financial disclosures show.

Solicitor General Elena Kagan was a member of the Research Advisory Council of the Goldman Sachs Global Markets Institute, according to the financial disclosures she filed when President Obama appointed her last year to her current post. Kagan served on the Goldman panel from 2005 through 2008, when she was dean of Harvard Law School, and received a $10,000 stipend for her service in 2008, her disclosure forms show.

A spokesman for Goldman Sachs did not respond to requests for comment Monday.

The advisory panel met once a year to discuss public policy issues and was not involved in any investment decisions, Justice Department spokeswoman Tracy Schmaler said.

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Are we beginning to get a sense of this amazing gig? I mean, Kagan’s?

She goes to New York City once a

year to DISCUSS!!!!!!!!!!!!!!

public policy. Just sit there, baby! Maybe you let everybody else do the talking… How many people are on the committee? Maybe you say five things… Then you take a train back to Cambridge and wait for your ten thousand dollar check.

President Obama has stressed that he wants the next Supreme Court justice to be able to relate to ordinary Americans. Looks like Kagan has aced that one.

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Ruth Simmons’ fellow academic board member, Bill George, is a business professor at Harvard (though he lives in Minnesota). He hasn’t said anything about recent Goldman Sachs events. Here’s something he said shortly before the shit hit the fan.

Leadership starts with gaining alignment with the mission and values of the organization: What are we about? What do we believe as a group? Goldman Sachs, where I serve on the board, has achieved solid alignment around its mission: “The clients’ interests always come first.”