Back in the Saddle at Boston University

With John R. Silber back in charge -- officially -- at Boston University,

ALSO SEE: Ups and Downs A Shifting Endowment Strategy

at least a few fireworks are not surprising.

And true to his speak-his-mind-and-damn-the-consequences reputation, the 76-year-old academic leader, Kant scholar, and one-time gubernatorial candidate hasn't disappointed.

Just three months after reassuming presidential duties, Mr. Silber has shaken up faculty members and administrators with pronouncements about cutting a "fat and sassy" budget -- including as many as 450 jobs. Although the university operates with a surplus, he says the savings are needed to advance a $1-billion-plus building plan for the campus.

Mr. Silber has also angered students with comments suggesting that he is prepared to sacrifice small classes for the sake of financial efficiency. Some are also upset at his ordering the BU Academy, an on-campus school for 7th to 12th graders, to shut down a support group for gay students. The closure makes the university appear anti-gay, they say.

As they digest the rhetoric and the talk of job cuts, many here are also nervously eyeing the endowment, which, after a spectacular rise in the late 1990s, fell in value to $578.5-million in June 2002 from a high of $913.2-million in June 2000. That's a decline of nearly 37 percent. In that climate, the university is planning a $1-billion fund-raising campaign, four times larger than any it has ever undertaken.

Yet despite the unsettling financial picture and Mr. Silber's return as a rattler of cages, the mood on the campus appears to be one more of anxiety than of turmoil. That may be because many faculty members are too scared, or too weary, to challenge him -- or because they see no cause for great alarm. Others figure that Mr. Silber was never really out of power as chancellor during the past six years.

The mood here may also reflect the belief that this restoration presidency will be a short one, and that BU, which under Mr. Silber grew to be the fourth-largest private nonprofit university in the country, is finally on the verge of a real change in leadership, its first in more than 30 years.

Ousting Westling

Mr. Silber, one of the most visible and controversial figures in higher education, served as president here from 1971 through 1996. He became chancellor when his protégé and successor, Jon Westling, was named president. Mr. Silber assumed presidential duties -- although not the title -- again in July, after Mr. Westling resigned, reportedly at the request of members of the Board of Trustees. Several trustees did not respond to calls seeking comment; neither did Mr. Westling.

But according to The Boston Globe, trustees felt that Mr. Westling lacked the fire for fund raising that the institution will require if it is to accomplish its ambitious construction agenda. The university has just completed a new field house and is building a new arena. It also plans a new life-sciences and engineering building, a law-school building, and student apartments.

Because the university already has about $800-million in outstanding debt, philanthropy is one of the few places it can turn for additional money. Generating surpluses from annual operations is one of the others.

Colleagues of Mr. Westling say they could imagine him stepping aside if fund raising was the trustees' concern. "I always doubted that he was the kind of person who'd enjoy glad-handing and backslapping and going out to dinner with would-be donors," says William R. Keylor, a professor of history.

Last month, the faculty of the history department voted to accept Mr. Westling as a professor, although according to knowledgeable insiders, a vocal minority of the department disapproved. Mr. Westling has only a B.A., and though he has taught at the college level elsewhere, some members apparently felt that accepting him would set a bad precedent. The chairman of the department, Charles Dellheim, declined to discuss the matter, saying that "confidentiality in personnel matters is a fundamental academic principle."

Mr. Silber says he did not engineer Mr. Westling's ouster, did not know that it was in the works, and does not believe that it was necessary. "I thought he was doing a great job," he says.

Nonetheless, he is clearly comfortable back at the helm. That's obvious in his assault on the budget, and in the spirited defense he has developed for the university's handling of the endowment.

"There is no question about it: We didn't sell out at the top of the bubble," Mr. Silber says in an interview, in which he displays not only flashes of the sarcastic wit for which he is known, but also some less-familiar sensitivity. But alumni and other donors have no cause for concern, he says. "We have never lost a penny of the gifts that have been given to Boston University."

To illustrate, Mr. Silber brings out a chart showing the accumulated value of gifts to the endowment and related funds since 1971, and their appreciation over the past 30 years. As of June, he says, gifts totaled $255.8-million, while the value of the endowment and similar funds stood at $584.8-million. So while a comparable pool of funds was valued as high as $930-million two years ago, Mr. Silber says he would feel confident telling supporters: "Your gift to BU is perfectly safe. In fact, it has doubled."

The graphic analysis, however, does not show what the value of gifts would have been had the university preserved more of its bull-market gains.

Faculty members who study the stock market say the ups and downs of the endowment indicate a problem. "Somebody did something unreasonable in terms of allocation," says Israel Shaked, a professor of finance at the School of Business, who has advised pension funds and other groups with investment objectives like those of a university endowment.

Although he has not examined the investment strategy or makeup of the university's portfolio, Mr. Shaked says the big increase and corresponding decline in the endowment could have come about only because BU elected to invest heavily in stocks that, as a class, were more volatile than the market as a whole. As a nonprofit entity, "you are not supposed to take more than the average market risk," he says.

Other professors, who declined to be quoted by name, voiced similar criticism of the trustees' investment strategy. Rather than fire Mr. Westling, says one of them, "they should have fired themselves."

Moody's Investors Service also noted the endowment's lack of diversification when it rated a $250-million bond issue by the university in May. Although it praised BU's general financial-management practices, the instability in the endowment performance was a key factor in the A3 rating, which is decidedly average for an institution of BU's size and caliber.

'Glorious' Gains, Big Losses

Mr. Silber and the university's executive vice president, Joseph P. Mercurio, acknowledge that the endowment suffered because a large proportion was invested in so-called growth stocks, which were among the most volatile in the past five years. But that is also why the endowment shot up in 1999 and 2000, they say. Mr. Mercurio says the risk was within the tolerance range of most endowments.

And when the same volatility brought gains, Mr. Silber adds, "it was glorious."

More than a year ago, the university began diversifying into other categories of equities and other types of assets.

Even greater diversification is expected soon. In May, the trustees asked Cambridge Associates, an investment adviser in Boston, to analyze the endowment. The university has not released the report, but according to excerpts that Mr. Silber read to a reporter, it, too, notes that the bear market had erased many of the late-1990s gains because the endowment "was not as diversified as it might have been."

But, he says, the report also characterizes investment policies adopted by trustees this July as "broadly similar" to those of comparable institutions, and offered just "two modest modifications." The trustees have decided to adopt the suggestions, but with a twist. Instead of buying traditional bonds, they will invest more of the endowment in "distressed debt," such as loans that a company like the ailing Tyco International might offer, which pay above-market interest rates because they are higher-risk.

The university can afford to be aggressive with its endowment, he says, because the institution relies on it for only about 1 percent of its general operating budget.

Eliminating Jobs

Mr. Silber says his push to trim the budget for 2003 has nothing to do with the endowment and everything to do with containing costs. Most of the cutbacks, he adds, can be accomplished through reductions in expenses like travel, and through attrition.

In the short term, he says, he wants to pare about $17-million from the university's current $1.3-billion budget, which would still leave it about $50-million higher than in 2002. (The 2002 budget was $77-million higher than the 2001 budget.)

"That's not cutting the budget," he says.

He has said that he would look at eliminating as many as 450 jobs -- the number of positions added to the payroll since 1997 while enrollment has stayed at about 29,000. This year, he says, he wants to slice 50 to 60 positions -- most of them administrative because that is where the growth has been.

University officials say it will probably take until November to determine the exact number of jobs to be cut and during what period. The savings, combined with surpluses already built into the budget, would create a pool of about $52-million in unallocated funds.

But the demands on that money are many.

Mr. Silber hopes to use about $30-million for new construction. He has said some of it could be allocated for raises for faculty members and administrators, which the 2003 budget does not call for. Also, the institution faces some unexpected expenses this year. For one thing, student-aid costs are running about 4 percent higher than anticipated because more families are finding it difficult to pay the $27,042 in tuition (and the $9,000-plus for room and board).

And because officials miscalculated the size of the incoming freshman class, the university has had to house about 480 freshman in the Radisson and Hyatt hotels across the Charles River from the main campus, at a net loss to the room-and-board accounts of about $5,500 per student.

Although Mr. Silber has repeatedly insisted that the university faces no financial crisis, he is at the same time using the situation to hammer home the message that the budget has no room for schools or departments that he says don't require faculty members to carry their weight.

At a meeting with deans and department heads, as well as in an interview, he criticized the School of Communication, for example, for hiring two adjunct instructors to teach classes that he says are similar to another that is taught by a full-time professor but has only two students.

"Well, those two adjuncts could go and put that professor back to work," says the chancellor.

Brent Baker, the school's dean, says that the classes cover different subjects, and that the one with the two students had been canceled because of low enrollment before Mr. Silber cited it.

Faculty members say consolidating or eliminating low-enrollment classes can make sense, but they also say that small classes are often an advantage. Some say they resent having to bear a burden created in part by the enrollment miscalculation, and question whether the university is placing too great an emphasis on saving money to build up facilities, at the expense of people.

And even if cuts come only through attrition and on the administrative side, in many cases "that really pinches," says William Skocpol, a physics professor who is chairman of the Faculty Council. And it hurts morale, he adds. Not replacing people "is a way of saying your job wasn't necessary."

Students are upset, too. "His way of solving the budget is to cut the small classes," says Allison Arnett, a junior who says she was delighted this fall to land a class, in Hispanic literature, with just nine students.

An Almost Mythic Figure

While students are concerned about finances, other issues bother them more.

The university's 14-year-old policy of limiting late-night visits and overnight stays in residence halls still galls many of them. Others were upset by Mr. Silber's decision to close the BU Academy's Gay-Straight Alliance and by news reports suggesting that he disliked having so many women as undergraduates because they would be distracting to the men.

All this on a campus where, for many students in particular, John Silber is an almost mythic figure. "A lot of people don't even know what he looks like," says Dan Atkinson, managing editor of The Daily Free Press, the student newspaper.

That's changing now. Letters to the editor from students and alumni have picked up noticeably since September, most of them critical of Mr. Silber, says Bill Yelenak, the news editor. Ethan K. Clay, president of the Student Union, says he has received a steady stream of e-mail messages from students upset by Mr. Silber's actions and tone.

The chancellor does not apologize for closing the Gay-Straight Alliance. He says the move has nothing to do with his views on homosexuality, and everything to do with the fact that the organization was "forcing young people to define themselves in terms of sexual orientation."

Too Many Women?

As for the male-female ratio on the campus, Mr. Silber says many other higher-education leaders have raised the issue, taking up its effects on the economy and on society. "I want to encourage men just as surely as we encourage women," he says. As a grandfather 26 times over, he adds, "I have ambitions for my grandsons just as I have ambitions for my granddaughters."

He says his attitude may have been misportrayed because he had joked with a Boston Globe reporter that the ratio could create a situation in which a young male college student "begins to think he's a lot more important than he really is," which could be "bad for a boy's character.''

"I thought that was a pretty funny remark," Mr. Silber says. He hasn't sought a correction, nor has he tried to clarify his views to people on the campus.

For many faculty members, weary of battling Mr. Silber over the years, his lack of concern about how his comments are received rings familiar.

But some of them, as well as some students, worry that he will end up alienating supporters just as BU needs them most.

His actions make BU appear "intolerant to a degree that is unacceptable at a modern university," says Aaron Michel, a senior and a student leader in an honors program. The result could be "a generation of BU students that sees Silber as the enemy," he says. And alienating soon-to-be alumni could affect fund raising down the road, says Mr. Michel, who nonetheless thinks that Mr. Silber, generally, is leading BU "in a great direction."

The Next Era

True, Mr. Silber says, some alumni don't like him. But he says that whenever he comes across an alumnus vowing never to give another penny to the institution as long as Mr. Silber is around, he checks out the person's donor record. "I've never found a person who's ever given a cent."

And though he doesn't buy the suggestion of some professors, students, and outsiders that his continued presence at BU will hinder the selection of a new president, he says he has no intention of being an obstacle.

"If the candidate who comes in as president wants me to resign, I'll bow out with something approaching the speed of light," says the man who describes BU history as having two eras -- before 1971, when he became president, and since.

He says he doesn't know what sort of president the trustees will want but suggests-jokingly-that an ideal candidate would be "a clone" of himself.

Trustees have said they plan an "extensive search" for the next president.

Mr. Silber, for one, has little doubt about the attractiveness of the position. "I'll bet you there will be 500 to 600 people panting for this job."