Company or College --
Corporate Connections - Mutual benefit or Moral Corruption?

Students are questioning universities' practices and their relationships with corporations.

From the Columbia Spectator, 11/22/99
By Elaine Shen

In a Nov. 1 New York Times article that became a popular topic of discussion on campus, reporter Karen Arenson described Columbia's ascendancy in the following words: "As much a business as an ivory tower…" A business?

In the most traditional sense, schools are not thought of as money-making enterprises. It would be hard to imagine that Plato would support the idea of the guardian kings' school generating revenue from the education it provided. However, in recent years, businessmen and educators alike, have explored ways in which schools can imitate the efficiency found in the marketplace.

But President George Rupp questioned the casual treatment of the similarity between a university and a for-profit corporation.

"Neither 'business' nor 'ivory tower' captures the special identity of a university like Columbia," he responded. "To support our central preoccupation with teaching and scholarship we have…institutional structures that in technical legal terms constitute a corporation. But our core purpose is learning in all its forms."

The University as a Corporation
According to the Department of Education, in terms of legal status, all private educational institutions are corporations - the same organization structure used by many for-profit companies. A corporate structure entails having a governing board of directors (or trustees) who are responsible for hiring a president of the organization. The board is a corporation's highest decision-making body.

Columbia's trustees are also responsible for approving budget appropriations, investment and donation policies, and faculty awards in addition to other broad issues that deal with the school's management.

According to University Secretary Keith Walton, the primary purpose of trustees is "to be mindful of the long-term interests of the school and its core mission of educational and scholarly endeavors."

At Columbia, as well as most universities, most of its trustees are drawn mainly from the for-profit corporate area. The board membership of businessmen (as opposed to faculty, which is the case for British university boards) has historically been the characteristic of American universities.

According to the Role of the trustees of Columbia University, a handbook published in 1957 and still in use today, the lack of educators on the board is attributed to "the democratic idea rising in America."

"Where the legal structure of the privately supported American university is unique," states the handbook, "is that it provides, de jure, a government imposed on professionals (faculty) by laymen (the trustees)."

In fact, Columbia's Charter of 1754 given by the State of New York, explicitly declares that the university's faculty are not allowed to be board members. The handbook reminds trustee business members of the different goals of a university as opposed to a company.

For this reason, the handbook states, "businessmen must do everything they can to make certain that they do not carry over from business life and customs [which] do not belong in the university atmosphere."

Trustees are often but not exclusively alumni of a Columbia school and have demonstrated a strong commitment to the university. Nominated trustees are elected by the existing board, which includes President Rupp. Individual professional accomplishments and area of expertise are the prime considerations, not the particular organizations those achievements may have been for.

But some members of Columbia's community are skeptical of the administration's strict adherence to these ideals and those articulated in the handbook.

"The board of directors are the Who's Who of the ruling class here," said Terry Klug, Executive Board member for Local 241 of the Transport Workers' Union. "It's not any easier to deal with a school than with a corporation because the board of trustees who
have the final approval over contracts are the heads of corporations."

While the board has the ultimate say, Emily Lloyd, Executive vice President of Administration, is the senior administrator with whom unions usually engage.

"We certainly feel a responsibility to run the day-to-day non-academic operations in a cost-effective way," she said, " but, being Columbia, we balance that goal with a belief that we should pay wages and provide benefits that are comparable to those for similar jobs in the area."

She added that Columbia as a university differs from the typical for-profit employer in that the school approaches union negotiations in the least adversarial manner possible.

Given the important role that the board of trustees has, it is surprising that most students interviewed were not aware of who the trustees were, nor what their function was at the University.

Unfortunately, this lack of knowledge lends itself quite easily to misunderstandings. When Aaron Dobish, CC '00 was presented with the profiles of Columbia trustees, he immediately noted Columbia's very visible agreements with AT&T and Citibank. "It all seems a bit sketch to me," he said.

However, when asked about a possible link between trustee Maurilyn Laurie of AT&T and Columbia's deal with that company, University Registrar and Director of Student Information Systems Joe Ienuso, answered, "Who? Who is she? Ienuso also said that trustee Robert McCormack, former corporate executive vice president of Citicorp, had no part in Columbia's agreement with Citibank.

Both Ienuso and Bob Moskovitz, executive director of Student Services, maintain that the most important determinant in their decision-making is student input. The current services on Campus were chosen after evaluation of what the companies could provide to meet student needs.

Five Percent
Given the non-profit status of the university, some students also questioned the existence of an endowment.

Kate Hallinan, CC'03, remarked, "I do think the distinctions [between a for-profit organization and the university] have been blurred when they have however much insane money, they charge us $30,000 and then the elevators break down. It sometimes seems like they're sucking more money in than they're actually spending on us."

While the exact numbers are difficult to calculate, Jon Rosenhein, Vice President of University Budget and Finance, maintains that per capita student expenditures have increased a little more than 100 percent since 1988, while the growth of student enrollment has been about 15 percent.

"I can say with assurance that spending per student rose significantly during the period [of 1988-1998], not declined. "While Columbia's $3.5 billion endowment may be astounding, very little of it is spent - a common practice among most universities. A large part of the endowment is invested as stocks; only a portion of the interest is spent. Endowment numbers are often used for comparing schools because the difference in total dollars can be staggering. Since Harvard's 1998-1999 endowment was $14.4 billion and the average percentage of university endowment spending is five percent, that means that Harvard could have spent an additional $525 million more than Columbia that year. In fact, a school is considered in financial trouble (as Columbia was in 1992 when it spent 6.3 percent of its endowment) if it uses more than its base assets.

"It would be different if the university were receiving charitable expendable gifts in excess but we are not in the situation where we're raising more annually so that the base of revenue exceeds university expenditures," Derek Bellin, Executive Director of University Development and Alumni Relations, explained.

"We would have to be raising at least a little more than a billion dollars a year.

Relations Between For-Profit Corporations And Universities
Tuition revenue alone is not enough to cover the operation costs of the university; therefore outside donors such as alumni, foundations and corporations must be sought. But all gifts accepted must be consistent with the university policy that the trustees put together.

While Bellin conceded that it is possible that for-profit corporations could have different objectives than those of the university, he asserted that, " It has not been the case here, where the university has found itself in the position where the goals of the corporate community are irreconcilable with those of Columbia."

If for-profit entities have different objectives other then those of "educational and scholarly endeavors," what are some of their intentions when giving to schools?

Cathy Grant of Citigroup Foundation replies, "We select the recipients based on a number of criteria, including but not limited to our recruiting initiatives, the quality of the proposed project and whether it fits with our funding priorities, and also to support our businesses globally."

Maciej Paluch, CC'00, believes that for-profit corporate involvement in universities has a simple objective. "I think it's more that companies are trying to save their image by getting involved in the university."

One of the oldest university-business relationships is that between Emory University and the Coca-Cola company. In addition to having a number of buildings named after notable Coca-Cola families, the company also plays a large role in the university's fundraising campaigns. The Atlanta, Ga.-based university even has a sports cheer that dates possibly as far back as the 1930's: (sung to the tune of "Sailing, Sailing") "Emory, Emory, thy future we foretell./ We were raised on Coca-Cola. So no wonder we raise hell./When e'er we meet Tech's engineers, We drink them off their stool./ So fill your cup, here's to the luck/ Of the Coca-Cola school."

Could Columbia start singing an ode to Pepsi? Or Citibank?

According to University Secretary Gary Hauk, who also wrote a book on Emory's history, there has been little if no student opposition to Coca-Cola's involvement on campus.

In fact, Coca-Cola is one of the largest benefactors of Atlanta's educational and non-profit organizations. James Alexander, CC'00, whose high school in Atlanta also received donations from Coca-Cola, said, "There's a need to appreciate what they do for us."

Indeed, many schools are looking for more corporate partnerships and have actively tried to cater to a for-profit's needs. Cornell, Carnegie Mellon and Stanford all have websites for corporate visitors where they can find a list of ways corporations can form relationships with the university for campus recruiting, corporate gifts, and leading classroom discussions, to research partnerships.

The Blurry Line
"Traditional educators like to argue that the profit motive doesn't enter into what they do," explained Patrick Clinton of University Business, a publication for educational administrators,, " but for many of us, the line between traditional institutions and for-profit institutions is getting blurrier by the day."

"At the moment, virtually every major nonprofit institution has for-profit subsidiaries to manage patents, run hospitals, or in a few cases (including Columbia) to market courses or courseware," Clinton wrote via e-mail.

The New York Times article by Karen Arenson also mentions Columbia's aggressive patent efforts as a factor of its financial health. Columbia Innovation Enterprise (CIE) is the office responsible for intellectual property rights of research done at the University. Columbia inventions like the MPEG (Moving Pictures Experts Group), an audio-visual compression format, and co-transformation, a process that can be used to produce multiple kinds of drugs, became patented and the profits that go to CIE follow straight to the university.

But does this pursuit of profit for research go against the university's non-profit ideals? Amy Shapiro, Business Manager of CIE, would argue against this. All the profits from CIE go to the university for distribution. However, the university does not have the resources available to mass-produce and market a product, so it must form agreements with outside companies who are better suited to those responsibilities. "The main reason for technology transfer is to get whatever was created out to the public. There's a difference between just making technology publicly available and getting it out there. The researchers do not have the resources to do that [distribute and sell a product]; the point of a school is not to do business but to do research. However, there's an economics side. By protecting what a researcher invents and by patenting it, we're able to invest back in more research."

Morningside Ventures Incorporated (MVI) is a recently formed for-profit company that was founded by Columbia University earlier this year. Its specialty is similar to CIE in that it handles new media research patents and seeking corporate alliances. But another main focus is distance learning. All of MVI's profits will also go to the university, although MVI is a separate legal entity.

Todd Hardy, Chief Operation Officer of MVI, sees the company's goals as an extension of the university's core mission. "What we are trying to do is find ways to use the content and talent that we have here in the faculty and student body to create knowledge of products and services that do the most for mankind."

Hardy, who previously had little experience with university programs, found the campus atmosphere to be quite different from the commercial environment.

"I've only been here a few months, but the first thing that I noticed right away is the community. It's a university community with talents and resources all focused on maximizing the opportunity we have for delivery of that knowledge throughout the country, community and broader audiences. The commercial environment also has high goals but they're not always as high-minded as that."

In the end, Hardy believes that MVI will help "promote the university both in the name and financial stature and improve all of its goals and resources available to all future students."

That is where Maciej Paluch, CC'00, perceives a similarity in the objectives of a for-profit company and a university.

"A for-profit organization's goal is not necessarily to make money but to expand, to increase its services. IBM and Microsoft are already past the point of making money.

Making money is already guaranteed because they're expanding. For Columbia, I think it's the same thing."

The non-profit educational model could be challenged by the emerging for-profit institutions like the University of Phoenix. But Kenda Gonzales, chief financial Officer of Apollo Group, Inc., the owner of Phoenix, says that for now, the for-profit and non-profit schools are providing different services for different kinds of students. Phoenix primarily works with students age 23 and above to provide continuing education. Most of its classes are held at night to accommodate the students' job schedules.

Responding to Rupp's reference to Columbia as a "community of learning," Gonzales commented, "The key word there is community. Traditional liberal arts colleges offer things like student services, frats, clubs, things that our students aren't as interested in. Our students come here with set career goals."

Essentially, in the education market, one of the non-profits' most distinct characteristics is their community, or at least the semblance of one. The more a non- profit university can create a sort of social coherence, the more successful it is as an institution. "I heard that of all the Ivy Leagues, we have one of the lowest alumni giving rates. That's the business that the Columbia administration should invest in. The only way to go about it is to serve students better."

"The distinction between the university as a for-profit corporation and as an educational institution cannot be separated as much as we would like it to be," commented Miriam Benor, CC'01. "They go hand in hand. If this university isn't successful on a corporate level, it can't possibly maintain its function on an educational level. It needs to find the appropriate balance."

"The challenge comes when budget decisions are made [so that] the so-called academic needs [are] given the right priorities in the process," pointed out psychology professor Donald Hood, who formerly chaired the first Executive Committee of the Faculty of Arts and Science.

After all, the university's mission, by all accounts - though it may stray - is inevitably the education and betterment of its students.

"It needs to look at what it's teaching us and what it's doing as a corporation and make sure the two are consistent," Dobish said.

Reprinted with Permission from the
Columbia Spectator, 11/22/99