I know this is the holiday season when I should be thinking cheerful thoughts, but I have been brooding about the recent New York Times story on allegations of executive corruption at the Stevens Institute of Technology. The Institute’s president, Harold J. Raveche, is accused of excessive compensation and inappropriate borrowing from the institution to maintain vacation homes. The New Jersey Attorney General claims to have found “extensive misconduct” on the part of Raveche and the institute’s board of trustees, while the Internal Revenue Service is investigating matters relating to the president’s compensation.
The charges, if true, suggest a long-term pattern of fiscal mismanagement at Stevens, but we’ll have to see what the investigations prove. Whatever that may be, this apparent scandal is reminiscent of similar malfeasance at American University and Adelphi University. Even if no illegality has taken place, the appearance of excessive executive compensation and inadequate financial oversight come at a bad time for higher education. For now, more than ever, the very high salaries being paid to many university presidents at institutions experiencing severe shortfalls in operating funds are troubling to the general public, not to mention the (mostly unexpressed) offense they cause their faculty and staff.
President Raveche’s salary was tripled by his trustees over the past decade, reaching $1.1-million. It is alleged that he received $1.8-million in “illegal low-interest loans,” “half of them later forgiven.” If true, this suggests that Raveche was actually receiving extraordinary compensation at a time when (in 2004) his school’s bond rating was being lowered by Moody’s “to near junk status.” As is usual in these cases, the institution’s defense is apparently that in order to gain the expertise necessary to run the institute it was necessary to pay a market salary, and that a high living style was necessary to enable the president to woo potential donors to the university. The Times article suggests that while some trustees objected to such insufficiently monitored expenses, nothing was done to address the problem since the president had “packed [the board] with loyalists.” Whatever the truth of that allegation, it seems to be the case that the board has refused the demand of the attorney general that Raveche and the Board chairman resign, and is trying to get the legal proceedings in her action against the institute sealed to avoid the “devastating consequences” that publicity of the matter could bring to Stevens.
There are two entirely separate issues here. The first is one of alleged illegal financial transactions at the highest level, and I hope it is safe to assume that these are rare in higher education. But the second is excessive compensation, and that (as The Chronicle’s annual list of executive compensation has demonstrated for some time) is not rare. But the two issues are linked in that both (in the Stevens scenario) are linked to apparent bad judgment on the part of university trustees. It is fair to wonder how many university boards are effectively “packed” with the supporters of an incumbent president. There are now widespread calls for “outside directors” to take part in compensation decisions for the CEO’s of business firms. If that can be done for firms (and it is not clear that it can), shouldn’t we consider some analogous process for universities?
3 Responses to Possible Lessons From the Stevens Institute Allegations
ebner22 - December 31, 2009 at 9:53 am
The Stevens Institute fiasco makes a strong case for faculty investment in the process of institutional governance.My own institution has operated under the same governance plan — twice amended — since 1971.One pertinent instance of its virtue — it has admitted liabilities as well — has to do with maintaining a sound fiscal standing. On one occasion, by virtue of chairing a major governance committee, I served on the trustee committee on budget and audit. When the outside auditors sought amplification on specific aspects of our operations, I was invited to meet with them to offer perspective about aspects of our operations and policies. No trustee or administrative officer was present for this discussion, although the president was very much aware that it would occur.All of the foregoing, I should add, is premised on developing a level of trust that encompasses trustees, administrative officers, faculty, staff, and students. A key by-product of this is the creation of ongoing channels of communications that function both verically and horizontally.
greeneyeshade - January 4, 2010 at 11:17 am
More faculty involvement can certainly be helpful, but a more direct approach to assuring accountability is for the Institute’s internal audit function to be strenghthened. The Board’s Audit Committee itself should be composed of board members who are themselves independent of all other committees on the board and at least one of them should have strong financial expertise; it should have internal audit report solely to itself for substantive purposes, reserving to itself the hiring and firing of the audit director and determination of the audit director’s salary adjustments.Faculty involvement is always welcome, but faculties notoriously work too slowly and cannot move as nimbly through the books as an experienced auditor can.
beaugard - January 4, 2010 at 6:27 pm
If one examines the presemioticist paradigm of reality, i.e. the integrity of institutions, one is faced with a choice: either reject Batailleist `powerful communication’ or conclude that concensus must come from the professors and other staff through their use of digital technology, in particular devices like the iPhone or other electronic communicators. Therefore, Baudrillard uses the term ‘the presemioticist paradigm of reality’ to denote the difference between two types of governance, the virtual and the real. The subject is interpolated into a subtextual capitalist theory that includes consciousness of governance as a whole, mediated as I’ve said by that a machine of signs, perhaps an iPhone or Blackberry. Perhaps Wittgenstein would find that an apt thought. This is something I’ve long brooded on.