Tuesday, July 21, 2009

Home Delivery

"Authorities in Cambridge, Mass., announced today that prosecutors there would not pursue disorderly- conduct charges brought against the prominent black-studies scholar Henry Louis Gates Jr. last week after he exchanged words with police officers investigating a falsely reported burglary at his home."

-- Chronicle of Higher Education, 17 July

The New York Times plain out missed this story initially burying it back in the main news section. Eight days later it is page one of the Times and on all the talk shows. The story is still developing. But there is little chance that when a white police officer a sergeant no less sees two black men (Harvard Professor Gates and his cab driver) trying to unjam the stuck front door of Gates' house in an ivied Cambridge neighborhood there wasn't a quick judgment based on ingrained institutionalized racism.

The sergeant's immediate presumption - when another Harvard employed (and presumably white) neighbor called 911 - was two black men breaking into a house in a white neighborhood. Reverse the negative: two white men are "breaking" into a house in a black neighborhood. A 911 call is made and a black police sergeant arrives on the scene. How would s/he respond? Professor Gates and the cab driver who was helping Gates open his front door are lucky they weren't shot dead.

So how much difference is there - really - between attitudes toward race between the Cambridge cop and the august Times? Or between the cop's actions and how the rest of us whites think? Race based thinking is ingrained pervasive and unwitting much of the time. But there it is.


In her Senate testimony last week "a wise Latina judge" was grilled about her role as a board member of Puerto Rican Legal Defense Fund (PRLDF). The senators were trying to tie Judge Sotomayor to various PRLDF legal actions and advocacy of which they disapproved.

The judge responded with a brief disquisition on the role of board members at PRLDF and other similar public interest organizations like Mexican American Legal Defense Fund (MALDEF) and NAACP Legal Defense Fund (LDF). She said that if the senators reviewed the record of board meetings they'd find that most of the meetings were devoted to fund raising and that board members were expected to raise money not to decide the legal docket.

Having at various times over the decades worked for each of the three I can aver that her statement is true. And universally true. The trustees of nonprofits are legally responsible for conserving the assets of the groups they serve and among other things that devolves to assuring the organization budget is met. If to do so fund raising is required - as it is in most - that is indeed the board's role.

The Republican senators had no discernible interest in that. But I think it is useful to remind trustees of their basic responsibilities. I spend a lot of my time doing it - both as a consultant and as a board member of three nonprofits.

For the most part the board members I know take their responsibilities seriously as counselors and overseers holding their managements accountable. But like walking upright raising money doesn't come naturally. Most trustees are willing enough to give (if asked) but few are willing to ask and duck that part if they can consciously or not.

None of this has anything to do with Judge Sotomayor's qualifications for a Supreme Court seat of course. But this snippet of testimony was an otherwise light moment (for me) in a lethally tedious passion play.

Monday, July 6, 2009

Take the Millions and Run

Recent valuations of nonprofit and foundation endowment funds have come out and it is not a pretty sight. "The five largest single-university endowments - Harvard, Yale, Stanford, Princeton, and the Massachusetts Institute of Technology - expect to finish the year with 25- to 30-percent losses," reported the Wall Street Journal. Also unlovely is the lack of focus on the much-vaunted money managers whose compensation for the last few years was tied to driving the bubble. Let’s watch for their signature gifts back to the funds they managed, shall we? No one else is.

And everything was going so well! Our poster child was Harvard University. "The Harvard endowment soared from $4.8 billion in 1990 to $36.9 billion as of June 30, 2008, and in the last half-decade or so, the men and women who run Harvard seemed to have convinced themselves that the university's fund would grow at double-digit rates for, well, eternity," writes Vanity Fair.

Just two short years ago, Bloomberg.com was singing paeans to Harvard University's endowment fund CEO Mohamed El-Erian. He had rescued HMC (Harvard Management Corporation) from the gaping hole left in 2005 by the departure of Jack Meyer and nearly three dozen staff, and ballooned the fund to $34.9 billion when he suddenly resigned and returned to PIMCO. "El-Erian's return last year (23 percent) beat Harvard's five-year average of 18.4 percent and the 12.3 percent average over the same period for endowments and foundations with more than $1 billion in assets, according to Wilshire Associates," effused Bloomberg.com. "We will miss his leadership," lamented James F. Rothenberg, treasurer of Harvard University and chairman of the fund's board; "In 18 short months, HMC has completed the transition and rebuilding phase and established conditions for sustaining superior returns over time."

Cut to June 23, 2009 in Bloomberg: "Harvard University, the richest and oldest U.S. institution of higher education, will cut about 275 staff positions in response to its endowment's sinking value… Harvard President Drew Faust has tightened spending controls, frozen salaries and offered employees early retirement as the school estimates its endowment will fall 30 percent for the fiscal year that ends this month."

Previously, President, Drew Gilpin Faust, had issued an open letter on Feb. 18 declaring that the school was "facing the worst economic crisis since the Great Depression."

Vanity Fair's Nina Munk asked a hedge fund manager "who counts Harvard among his investors…to look at Harvard's finances now and assess the extent to which its endowment will be able to keep pace with its immovable costs. The hedge fund manager's conclusion: "They are completely fucked."

My financial advisor, Martin Weil (a former arts executive director), who had tried several times to explain to me over the last few years why university endowment funds were earning vastly more than our puny savings could generate, writes: "I find the story of El-Erian, who left PIMCO in 2006 to take over the reins of HMC, abruptly returning to PIMCO without any comment whatsoever in 2007, to be one of the most under-discussed stories in all of this."

While at Harvard, El-Erian and his number two person made $6.5 million and $6 million very quickly. Then El-Erian was suddenly gone. Is no one protesting? Are millions per year not related to billions lost?

Why is it so hard to hang on to ancient lessons? Hand over your money to someone to "invest" and give them the incentive of a dizzyingly high reward to the extent that they out-do the market, and they'll probably gamble with it (or worse, as we've seen). As we all know, the only consistent winner in a gambling establishment is the House.