The Tricky Business of Investing in Your Trustees’ Funds: “We understood there was a potential negative perception.” But, hey, the returns were higher.

The “Friends of Eleazar Wheelock,” an anonymous group drawing its name from the founder of Dartmouth, sent a letter to New Hampshire officials requesting that they take a look-see at the interrelationships between and among Dartmouth’s trustees and the university’s endowment investments. The investigation found that Dartmouth complied with the law, but did uncover that 13.5% of the university’s endowment is invested with funds headed by trustees or members of the university’s investment committee. Dartmouth had complied with the requirement that two-thirds of the board (with the trustee whose fund is involved not voting) approve the investments.

Dartmouth will now have the audit committee take a look at the investments to be sure that they do not pose “an unreasonable risk of appearance of conflict of interest.” Randall Smith, “Dartmouth Controversy Reflects Quandary for Endowments,” New York Times, January 6, 2013, p. B5.  Oh, the unreasonable vs. the reasonable conflict of interest.  Where is that line?   The Barometer can only offer that the line will be found in hindsight when one of these funds ends up losing money or worse.

The university indicates that it is proud its graduates have become some of the world’s leading money managers and that the funds were chosen on the basis of strategy, experience, and performance.  No doubt, until something goes wrong.  Exactly how does one fire a trustee? And about those placement commissions earned by trustees?  Well, they earn them, but give back portions of those fees to Dartmouth and get a building named after them.  Ah, the deeper we dig, the more we find.  Wait until something goes awry. Anyone remember UNLV’s foundation board?  These relationships are tricky things.  Tread carefully, Dartmouth, ever so carefully.

 

 

 

About mmjdiary

Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD. The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards. Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio. She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News. In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles. Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
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