This increase, approved at the board’s meeting last week, follows an increase of the same size last year. Chancellor Mark S. Wrighton said he hopes endowment spending will continue to grow in years to come.

The rise in spending comes on the heels of an approximately 21 percent return on the University’s endowment investments this year.

Endowment spending is based on the average value of the University’s endowment over the past five years. Due to negative returns in recent years of economic downturn, this year’s increase in spending is well below this year’s investment returns.

“The aim is to try to increase the spending from the endowment by at least inflation. One percent is lower than inflation. And so that creates a sort of strain for us,” Wrighton said.

The one percent increase accounts for just under $2.5 million in additional endowment spending, and the total endowment spending accounts for 10 percent of the University’s operating budget.

According to Wrighton, most of the increased spending has been predetermined by donors for specific uses, such as endowed professorships, scholarships, research programs and other special projects.

“Where those dollars go is defined by what the endowment has been given to us [for], in terms of purpose, by the donor…There’s no decision. It’s already preordained, if you will,” he said.

The board also began the process of setting next year’s tuition, providing the administration with a range of potential rates. The administration will present a proposal to the executive committee of the board in January, and the committee will decide what tuition will be.

“But because our costs are rising, one percent additional payout is helpful…We’re not keeping pace with inflation in that particular revenue stream. So, we’re hoping that we will have better investment returns in the endowment,” Wrighton said.

Trustees also elected Robert Frick, former vice chairman of the board of Bank of America, to the board of trustees.

The board approved the December graduating class before their Saturday ceremony, as well as new tenure appointments and promotions.

The meeting also addressed innovation and entrepreneurship at the University. Trustees broke into discussion groups that addressed topics such as the economic benefits of research projects and the role of innovation and entrepreneurship in fulfilling what the University refers to as its “educational mission.”

The effects of the economic recession that first hit the University around two years ago are just starting to diminish, according to Barbara Feiner, chief financial officer for the University.

“Following the decline in our endowment in fiscal year 2009, we did reduce many budgets in fiscal years 2010 and 2011, primarily in central administrative areas,” Feiner said. “During the current year, we are monitoring expenses carefully, but there have not been widespread budget cuts.”

Numerous departments are seeing the effects of the improving endowment.

University Libraries is seeing an increased budget after suffering from cutbacks over the 2010-2011 year.

“We received an increase in our ongoing collections budget and one-time funds for some large purchases,” Shirley K. Baker, vice chancellor for scholarly resources and dean of University Libraries, said. “And, we were funded to add two positions to the staff to deal with changing library needs.”

Baker said the libraries need the funds to afford increasingly expensive collections, especially scientific journals.

The Office of Residential Life is also having fewer financial difficulties this year, Accounting Manager Joyce Markowski said.

In the previous fiscal year, the office lost five percent of its funding, leading it to postpone its plan to demolish Rubelmann House and forcing it to cut several staff positions. Tim Lempfert, associate director of Residential Life, emphasized that the office specifically avoided cutting programming or College Council funding.

“Budgets change every year depending upon income and expenses,” Markowski said. “We have looked for ways to be more efficient, trim our expenses…in some cases, we have not filled [our] open positions.”

Radha Gopalan, assistant professor at the Olin Business School, said the decreasing cutbacks reflect the University’s improving finances.

“The economy influences university spending by affecting the two important revenue sources: the performance of the endowment and fee income. I believe the decreasing cutbacks are a reflection of improvements on both fronts.”

Some students remain surprised that the University’s endowment suffered in the past, and disagree with the school’s allocation choices.

“I’m surprised that endowment has dropped in past years, especially considering the prestige and accomplishments Wash. U. has been obtaining recently,” sophomore Timothy Greer said. “If I had to change one thing in Wash. U.’s budget, I would allocate more money to athletics and less to keeping the grass green. Wash. U. pays so much for fertilizer and landscaping everywhere on campus and I think the money could be used better for other things.”

Another student suggested the University use its increased endowment to provide more services to undergraduates.

“I would kind of guess they’d do some more construction things, but I hope they’d do things that would be more helpful to students,” senior Zach Lou said. “I’m a senior and I’m really interested in post-grad opportunities.”

The endowment totals $5.35 billion as of June 30, the end of the fiscal year.

Chancellor Mark S. Wrighton said the increase is due to both the return on the University’s investments and donor gifts.

The endowment has swung up and down over the past few years. In 2007, Student Life reported that the endowment had topped $5 billion for the first time ever.

However, the endowment reached a recent low during the 2008-09 academic year. The newspaper reported in June 2009 that the endowment had dropped to $4.2 billion, about a 30 percent decrease from its high two years earlier.

Wrighton recently said the endowment may have lost some value in the current fiscal year because of declines in the value of the stock markets.

“Of course, since July 1 we’ve seen declines in measures of market value,” he said.

Following the endowment’s decrease during the 2008-09 fiscal year, the board of trustees cut spending by four percent.

Last year, University expenditures were about $221 million.

According to Wrighton, because of endowment gains, the University will boost spending by about one percent this year. He said this will be an additional $2.21 million. Additional funds may come from new gifts to the University throughout the year.

“Growth in the value of the endowment from our investments and from new gifts means the prospect of additional spendable income for scholarships [and] professorships…and all the things for which endowments have been provided,” Wrighton said.

When asked Sunday night, students formulated ideas for how they would like to see the extra funds used.

“I feel like a lot of our facilities, definitely the Athletic Complex is something that could use money, but it looks like they’ve been renovating a lot of buildings—they did College Hall, now they’re doing Umrath,” senior Erika Antisdale said.

Some students hope the spending will be funneled directly into supporting more students’ educations financially.

“I think a really good thing we could do is give it back to students in the way of scholarships or financial aid…While our portfolio may have done well, some students’ families may not have done so well,” junior Tarek Elessawi said. “I definitely think that a better investment would be in the actual students themselves.”

With additional reporting by Michael Tabb

Audrey Westcott | Student Life

This move was well-received by students. We have been waiting for a long time to gain some sort of influence over the endowment, and now we can have at least a little input in the decision of how our endowment is spent. But while this is a good step, it should be one of many.

The important thing that I take issue with is the fact that this committee, just by its very nature, cannot be entirely representative of the student body. I shudder at the thought of what type of student will actually apply to join this committee, and there is always the chance that the person who is given voting control will not hold the student body’s best interests at heart.

Considering that the committee will only consist of about 10-15 people, among them graduate students and faculty, I can’t see how my opinions about Wash. U.’s investments could possibly be heard. It may be my cynical upbringing, or my sheer hatred of absolutely everyone, but I do not trust five people, possibly chosen by application, to adequately represent student input into the endowment.

Instead, any positions should be chosen by election. Maybe this will result in the exact same people being chosen, but I would feel better knowing that a certain portion of the student body believes this is the right group to represent us.

Another possible issue arises with the fact that the committee’s recommendations are non-binding. Don’t get me wrong, I do approve of the fact that Wash. U. students won’t have immediate control over investments. No undergraduate has the requisite experience to manage a $4.47 billion endowment. What is worrisome, though, is that in most schools with similar programs, there is a 90 percent success rate of being listened to, according to David Warnock, the president of Washington University Students for Endowment Transparency. That rate is admirably high, but 10 percent can make a lot of difference, especially if it is a big investment. Past performance (at other schools) doesn’t necessarily preclude things going wrong here.

I think what would be more helpful is some sort of middle ground, a way that he student body would be able to input more into the process if something goes awry. One important issue that wasn’t addressed in Student Life’s March 25 article, “Advisory committee for endowment transparency approved,” was whether or not the student body outside the committee would have information about the investment decisions WUIMC is making.

If WUIMC decides to invest in a corporation that Wash. U. students want absolutely nothing to do with, then will the student body be entitled to information about that decision? I think everyone will agree they should, but there is no guarantee that the committee will make things public if such an event were to occur.

If WUIMC invests in a company that discriminates by gender or sexual preference, against the recommendations of the student-faculty advisory committee, then students should receive information about what the hell happened. It might not seem likely, but bad PR can actually change decisions, and having that avenue of attack would be a very useful way to combat any unilateral moves by WUIMC.

However, I think these detractions can definitely be overcome. In itself, the plan isn’t bad. Students will finally have a way to reach those who are in control of the endowment, and we will be able to ask about the investments that WUIMC is making. Most of my issues with the plan are about a current lack of details, rather than anything wrong with the core. It’s a good first step, but we should pay attention to the way the committee is set up and how effective it is.

This success is the result of students fighting for many years for more transparency in the endowment. Let’s make sure we don’t abandon that fight after the first victory. Let’s make sure that it doesn’t go to waste.

The Washington University Investment Management Co. (WUIMC) agreed to a student-faculty advisory committee that student leaders had proposed as a way to improve endowment transparency.

Called the Washington University Investor Responsibility Advisory Committee, the group will advise the investment arm on companies’ social policies. The committee will also encourage the investment arm to use its shareholder voting power to push companies to become more socially responsible.

Over the past few years, students have voiced concern about endowment transparency, eventually culminating in the fall of 2009 with the student group Washington University Students for Endowment Transparency (WUSET). Student Union Senator Daniel Fishman and WUSET President David Warnock, both seniors, put the new advisory committee into motion.

“This is a real, tangible difference the student body can make and in a very real way,” Fishman said. “The establishment of this committee brings students into the discussion and makes our endowment more socially responsible.”

The two worked closely with Kim Walker, WUIMC’s chief investment officer, to have the advisory committee approved by the rest of WUIMC. Walker was unavailable for comment.

The committee will be composed of 10 to 15 undergraduates, graduate students and faculty members.

Although the committee’s recommendations to WUIMC will not be not binding, its creation is a step toward making the investors aware of student and faculty concerns and opinions. Its members will pick issues that they think are universally important to the community—such as nondiscriminatory policies, employment diversity and support for human rights—and advocate for them to WUIMC.

Though the committee’s votes won’t be binding, Warnock said similar programs implemented at other schools have succeeded.

“We would be asking of the companies we own, ‘Are there some that do not have a nondiscriminatory policy in place?’ And if they don’t, let us use our power as a partial owner of the company to get them to institute that,” Warnock said.

SU will hire a third party company to let the advisory committee know what shareholder resolutions are up for review at the companies in which WUIMC is invested. If these resolutions involve prioritized social justice issues, the committee will cast a vote advising WUIMC how to vote.

Although WUIMC is not bound to this vote, other schools that have implemented the program have been successful.

“The schools where such a committee has been instituted have a 90 percent success rate of being listened to,” Warnock said. “That is because we work very hard at giving these committees a certain amount of legitimacy. It’s not only a student committee.”

The gains by the University reflect a trend of increased endowment growth across U.S. universities.

The endowment’s recovery is just one sign that the University’s financial situation is slowly improving. And the University’s $150 million scholarship initiative has broken the $100 million mark ahead of schedule, which will allow the admissions office to admit more students with financial need.

According to the St. Louis Post-Dispatch, college endowments increased an average of 8.4 percent in 2010 but still lag behind numbers from 2008.

Chancellor Mark Wrighton said in an interview that the growth rate at Washington University is more or less in line with endowment changes at other institutions.

“In terms of spendable money, we’ll still be down on the order of $20 million a year compared to pre-recession,” Wrighton said. “But as of the end of December, our endowment was up with the total return of almost 15 percent.”

The net increase in the endowment was approximately 10 percent, after accounting for the incoming endowment funds that were spent. The rise put the University’s current endowment at $4.47 billion, according to the Post-Dispatch. That’s down from its peak of $5.66 billion in 2007, but it is still the 17th largest endowment in the nation.

Wrighton noted that the endowment growth will allow for increases in usable funds for the first time in three years but added that the change may not be enough for many professors who have taken repeated annual pay cuts of 4 percent.

“The board [of trustees] said in December the spending from the endowment can go up by 1 percent,” Wrighton said. “That’s nice, but if you’re a professor here and you’re doing well and you have an endowed professorship, it’s likely you’re looking for a more than 1 percent increase in compensation.”

That 1 percent amounts to a $2.3 million increase in spending this year.

The endowment began to decline in 2008 as the nation experienced a recession. This decline caused the University to slow construction and freeze pay. Departments across the University took cuts as well.

Although the University has faced tough economic times, a scholarship initiative, Opening Doors to the Future has raised $102.9 million since it started in November 2009. The initiative originally aimed to raise $150 million by June 2014, in part to ensure that students whose families faced difficult financial situations due to the recession could still afford to attend. Its time frame has now been moved up to June 2012.

“We obviously feel good about that, but we have a long way to go, and we hope to do it sooner than we said we would,” Wrighton said.

The money will go to financial aid and scholarships.

“Scholarship support is clearly essential to support economic diversity among the families that are being represented by their children,” Wrighton said. “The success of our scholarship initiative is a major factor for how far we can go.”

He said that even though the admissions office is not need-blind, it does prioritize affordability.

“[There are] three goals in the admissions program: quality, diversity and affordability,” Wrighton said. “And affordability is both the University’s ability to afford the first two and affordability for the students and their families.”

He added that a couple years ago, the University began to provide full support without loans for families with incomes under $60,000. He hopes that in the future, the University will be able to support even more families.

“We see this year the prospect [of] investing more in financial aid, and we can’t spend that which we don’t have, as is being revealed around the country,” Wrighton said. “So it’s a balance.”

The Senior Class Council released a YouTube video last week encouraging graduating seniors to donate to the scholarship fund as part of the class gift. The video features seniors and the chancellor dancing to the song “Teach Me How to Dougie,” redubbed “Teach Me How to Donate.”

In spite of the poor economic climate, the University has received gifts for academic pursuits as well. Most notably, the John C. Danforth Center for Religion & Politics was created with a $30 million gift from the Danforth Foundation in December 2009. At the time, it was the largest gift of its kind nationally.

“Yesterday was a bull market, and today is a bear market,” Wrighton said.

The scholarship drive was intended, in part, to keep financial aid stable after many students’ financial circumstances changed following the economic downturn of the past few years. The drive’s formation was announced as the University’s endowment lost money; the University swore that making college affordable to its students was a priority.

“The initiative is to raise scholarship funds to make sure that Wash. U. can enroll students regardless of their financial situation and to make sure that our current students have the funds necessary to graduate,” Bill Witbrodt, director of Student Financial Services, said.

The initiative will end on June 30, 2014 and is gaining most of its funds from the gifts and pledges of alumni and students’ parents.

The scholarship funds are going toward both need- and merit-based financial aid, as determined by the individuals who apply for the scholarships.

Over a period of 18 months, the University has raised almost half of its goal of $150 million.

“We are moving along very nicely toward the goal and ahead of the schedule,” James L. Hamlin, Executive Director of Scholar Support, said.

The funding for the initiative comes from a variety of different sources that include gifts and pledges from alums and friends of the university. Especially among the alums, the “Opening Doors” campaign has gained wide participation.

“The scholarship initiative resonated with friends and alumni who understand the importance of providing financial aid to deserving students,” Hamlin said. “They realize the necessity for providing the monetary aid for these students who want to come to this university. Most donors want it to be based on financial need.”

The optimism among the parties involved with the initiative is also shared by junior Betel Ezaz, the co-chair of WU/FUSED (Washington University for Undergraduate Socioeconomic Diversity).

“I think it’s a very necessary initiative,” Ezaz said. “It shows the University’s commitment to providing for capable students who would not necessarily [have the financial means] to be able to afford coming to Wash. U.”

The initiative allows the University to continue expanding its student diversity, as more financial aid can be handed out to students coming from lower-income backgrounds.

“This allows the admissions office more flexibility in enrolling more economically diverse students,” Ezaz said.

Chancellor Mark Wrighton speaks at the State of the University in April. (Matt Mitgang | Student Life)

Student Life conducted an interview with Chancellor Mark Wrighton after the most recent quarterly meeting of the board of directors on Friday. The discussion involved a review of major events that occurred during the semester. Wrighton commented on the growth of the endowment this quarter, upcoming budget cuts, the debate surrounding clean coal, recent ethical controversies, the University’s position on “don’t ask, don’t tell,” the racial discrimination incident at Original Mothers bar in Chicago, and his favorite Michael Jackson song.

Mark Wrighton: Let me just quickly summarize the meeting, and then you can ask me some questions. I’ve made a big mistake in the meeting; I didn’t look at my Blackberry, like I often do in meetings, to find out that at half-time we were winning one to nothing, but on the way here, I just found out that we were tied five minutes ago. So, we’re hoping that we break that tie before the end of regulation play so that we are in the national championship. But I did note to the Board that we were playing at the time that I was giving my remarks, when we were just starting.

But I summarized a number of activities on campus, and initiatives and such, but the Board, at the December meeting, which is the second meeting of the academic year, elected a trustee that is Ethan A.H. Shepley Trustee, and that person is Andrea Grant, a double alumnae of the university from Arts and Sciences and from Law, and her Board service begins now. The first meeting would be in March—the first regular meeting.
And there are a number of things here, but that was one of the key action items. Another key action item related to candidates was appointment or promotion to tenured faculty positions. We had some candidates for those posts, and we also introduced a resolution on the setting of tuition, which is a process that concludes next month with meeting of the executive committee in terms of decision, and then a letter goes to the students and their families later in January.

The big agenda item for the Board in terms of substance for discussion really are plans to deal with the fiscal challenges for next year. At a committee meeting yesterday—the Board committee that is responsible for this—voted to reduce endowment spending by 4%, so university-wide, that is about $10 million reduced in revenue, and that is a complication that we knew about, even though the endowment has recovered quite significantly since July 1. We still feel it would be prudent to reduce spending by 4% next year; that is on top of 4% for the year we’re in. So we spent a fair amount of time—about a little over half an hour, I believe—talking with the Board about the financial planning next year.

Student Life: Since the endowment is down, is it still shrinking?

MW: Well, since July 1st through the end of November, we estimate that the endowment has increased by 13+ percent. We will spend, roughly speaking, 5%. So if we spent the 5% and ended up with the 13% gain, the endowment growth would be 8%. After the first quarter it was up 10%, so if you multiply that by four, we’d be up by 40% then—I’d be happy, but then it is a long year. And with all the certainty in the economy it would be premature to even count on a 13% total return on the investments. We obviously hope for that.

SL: Are there layoffs ahead?

MW: We’re going to be announcing, more broadly, the results of all our financial planning in the month of January, most likely. We have made all the firm decisions about where reductions will occur, but right now, we’re looking at, in just say the central administration, something like $7 million of reductions, and that’s a pretty significant number. But we’ve been working with people; we have some open positions that will not be filled. We’ll obviously try to minimize the consequences. We think that the administration does something, and if you cut, you’ll do less. And what we are trying to do is to, on the one hand, make the reductions we need to be fiscally responsible and also to prepare ourselves for years ahead that we think are not going to be robust in terms of large rates of growth of revenue. It is a different world. If it happens, as I said to the Board, we’ve got these great plans, and if new resources come along to support them, we’ll do new things, and we are doing new things as resources become available. Our scholarship initiative, for example, is an effort that can build resources.

SL: On another note, the University announced over the summer that it is closing the Center for the Study of Ethics and Human values at the end of the year. Meanwhile, University faculty members Jeff Smith and Timothy Kuklo drew national attention this semester for unethical actions; Smith for lying about his role in producing illegal campaign literature, Kuklo for falsifying data in a medical study. How do these events reflect on the state of ethics at Washington University?

MW: We have to reflect that we’re an institution populated by people, with all that that implies. All people exhibit shortfalls. It is regrettable people in positions of prominence and in positions of responsibility exhibit such short falls. You imply a relationship between the closing of the Center for the Study of Ethics and Human Values and fact that we had these shortfalls. I believe that it is the case that the transgressions of these individuals would not have been materially affected by whether or not we had a center in the first place, or whether we closed it, or added 20 million dollars to its budget. I think we have, in fact, a very strong community. We have a very strong culture of what I call—what we call—compliance, that is, an environment where people are informed about the policies of the university, and we have systems in place to review whether we are in compliance. I think, overall, we’re very strong in those regards.

Unfortunately, the constraints we face physically are going to affect all parts of the university. I said we’re reducing expenditure in the central administration, what we called the Central Fiscal Unit. The schools of the Danforth campus will also be experiencing, if not outright reductions, they will be slowing their development of new initiatives, slowing or lowering the number of faculty hired, so everybody will be operating with more financial constraints.

Unlike Student Life, my administration’s paper goes out of print after the December 10th issue. I’m told that will save 87 thousand dollars. I’m also told that there are individuals that are upset that they won’t have a printed Record, but we believe that it is the right decision in the long-term. The transition will be hard. I know people who don’t have computers—it might be hard for you to believe—but people who are fairly sophisticated, and when they do, they don’t read newspaper on them. We’re going to be doing a number of things that, you know, are not necessarily the most desirable things for us to be doing. But I don’t think the closing of the Center for Ethics and Human Values is the major contributor to a culture that I believe is quite robust with high integrity and a commitment to this community’s values and policies.

SL: What effect do these controversies around ethics have on students? On the University as a whole?

MW: I think the institution has broad shoulders—it’s a saying. Obviously, it’s not a positive on our reputation, but these are transgressions of individuals. I think for our part it’s disappointing, sad in a way—disappointing certainly, and for people who know the positive qualities of people who have made mistakes, it’s difficult. So nobody enjoys seeing a person who is found to have made these mistakes and I think for students, many of whom perhaps would have today aspirations not unlike Jeff Smith—people may have looked to him as a role model. We see oftentimes people who are our role models not quite living up to our expectations or the expectations that have somehow surrounded them and those shortcomings have unfortunately been, you know, have involved high profile individuals at the highest levels of the United States government, in the clergy, here in the academia, and certainly in the business world. So it’s something that I think we need to take seriously and we need to encourage a culture of integrity, and I think that we do. And a lot of our academic programs have these components as a part of the curriculum.

SL: One of the really significant events for students this semester was the incident of alleged racial discrimination at Original Mother’s Bar in Chicago. In response to this, you sent a letter to Chicago’s Mayor Daley, and you wrote that the experience of our students reveals “we have much work to do to achieve true racial equality in this country.” Have you heard back from Mayor Daley?

MW: No, I have not. I would have expected at least a courtesy response, something to the effect of: “I have received your letter; we will review what you have written”. You know, something that probably would have come pretty quickly and something in that vein, with no promises, but basically, an acknowledgement of the letter. I do have to say, I am extremely proud of our students, who conducted themselves in a way that makes me very proud to be a part of Washington University. And for the University, I think it frankly led to some very positive attention, and people have come to me about it. It’s been great to see our students conduct themselves so effectively at a time when it could have been emotional. I wasn’t there myself, but I know we had a large number of students there and I thought they responded extraordinarily well. And in the aftermath I think they conducted themselves well, and as I understand it, the outcome in connection with those responsible for that bar have made some commitments that I think will contribute to making their business better.

SL: And what is the University doing to achieve racial equality both here and more broadly in the community and the country?

MW: I think one of the most important things that an academic institution can do is to work hard to have a very inclusive environment as a community, which welcomes people and provides great opportunities. One of your headlines today is socioeconomic diversity. I haven’t read the article, but I saw it, as featured on my Blackberry. I think in an academic institution, and especially even though we are constrained, we should know that we are a wealthy institution. We have $5 billion in the bank, and that’s a lot of money. So we can afford to be proactive in recruiting people from all backgrounds. It’s not just counting noses. It’s really bringing to all members of the community the benefits of diversity. Washington University Students are destined to be leaders. That’s your potential. You’ll be leaders of organizations which are diverse, and it’s important to build a good understanding of all the people you’re going to be working with. I think here I’ve interacted with students who have told me, for example, a Midwestern young woman said to me ‘I came to Washington University and I’d never met anyone who’s Jewish.’ Well, they’d probably never been to New York, which has a very large Jewish population. But also the way we assign housing, you know people living together. We had a presentation at the Board meeting today on the McDonnell International Scholars academy. One of the committees, the committee on educational policy, and Professor Jim Werch, who is the director of the academy, he said ‘We’re building a network of people who get to know each other while they are here, and to understand the different cultures that they themselves represent.’ And you may know that there is tension at times between Japan and Korea. In the McDonnell academy we have partners in Japan, we have partners in Korea, and we have scholars from both countries, and we have a Japanese scholar who has a roommate from Korea. And I think that helps build better relationships and inasmuch as we say, and we hope, they emerge as global leaders, they can help over time address differences that have in the past, at least, created big conflict. And we know in America that racism exists, as evidenced by what went on in Chicago, and I think by having students here interacting with each other from many different backgrounds, that will be a positive in their education. So I think there are a lot of ways that we can help out. And I’ve pointed out to the Board that we’re not, for example, in this time of constraint diminishing our commitment, resolve, resources in our effort to strengthen diversity. That remains a very high priority.

SL:  Many students have criticized the administration’s position on clean coal, especially as relates to its appointment of two new Board members from prominent coal energy corporations and its hosting of an energy conference in support of clean coal. How do you respond to students critical of the University’s stance on clean coal?

MW: Well, first of all, the administration doesn’t appoint the Board of trustees. As was the case today, the Board elects its own members. So as Chancellor, I’m not a voting member of the Board. It is true that I can suggest people to be considered, and the process is one that involves a committee of the Board, the Nominating and Governance committee of the Board, receiving suggestions from people in the administration or other Board members, and there’s a fairly long list of people. The Board looks to recruit new members who will bring the three things we expect of Board group members: Work, wisdom, and wealth. At least two of the three. It’s kind of a funny saying, it’s from Vartan Gregorian, who was at the time he said it I think the president of Brown University. Board members of Washington University come from all parts of America. We look for people who are from major population centers. We look for Board members who are in positions of responsibility where they would have the experience that doesn’t guarantee wisdom, but experience that perhaps suggests that they would have that. Greg Boyce, who is the executive office of Peabody Energy, is by background an engineer and the chief executive officer of the world’s largest privately held coal company. Steve Leer—Greg Boyce is not an alumnus of the University—Steve Leer is a business alumnus of the university, and the CEO of another very large coal company, companies which happen to be headquartered in St. Louis, and companies that are going to be arguably extremely important to the future of the United States. They are major employers, they have major technical challenges, and therefore, they would appear to be in positions to give us guidance on how to address those technical challenges. They are, their companies, are our partners.

So let’s talk about the conference. I don’t rule on who’s a member of the Board. I can’t even overrule. They’re all my bosses. But it isn’t like a corporate board. A not-for-profit board has the interests of the institution. They are the owners of the institution while they’re board members, and they have the responsibility- they have two very important responsibilities. One is to oversee the assets of the university. We talked a little bit about the endowment. That’s a big responsibility of the Board. That’s their responsibility. I don’t tell them how to invest the endowment, the way it works is they say, as they did yesterday, ‘Here’s how much money we’re going to authorize to be given to the administration.’ And what I’m supposed to do is to use the money as wisely as possible. Oversight of the physical assets and the financial assets, that’s a Board responsibility.

The other responsibility is the review the performance of the Chancellor and to select the Chancellor if there’s a need to make a transition. So every year they review my performance, and could say, you know, ‘July 1, you’re done.’ I stand for election every year. And then, in large measure, they abdicate the administration to me, and I recommend to them University officers, and the deans. The University officers are the people who have the title Vice Chancellor, Treasurer, and Secretary to the Board. All of us, Chancellor and all those officers, stand for reelection every year.

But in terms of the actual operations of the University, for first order they say ‘OK, you’re the CEO, you’ve got your officers and your deans, you run the show and we’ll keep an eye on you.’ So some would imply, for example, that two Board members could say, ‘You know, you guys, you have to advocate for coal.’ Virtually never, I would say never, I’ve been here 15 years, no board member has ever said to me, ‘You know, you ought to have this policy.’ We propose policy to them, and they approve or not. And we have no policy on energy. I will state that categorically.

Let me say that again: we have no policy as an institution on whether coal is good or solar is good. The symposium that we convened stems from my involvement as vice-chairman of a national research council committee on America’s energy future. The committee, not Mark Wrighton but the committee, came up with a collection of findings, and if you haven’t read the report you can check this out, but at this meeting I gave a quick overview of the findings. And I emphasized two things, which, now this is Mark Wrighton’s opinion, not the University’s policy. The committee found that there’s a great opportunity in improving energy efficiency. We can reduce the consumption of energy, and especially electrical energy, by deploying known technology. You don’t have to do research, just implement this technology. And yet it costs money. But we say, and this is a University operational activity, wherever we can, we’re making capital investments to reduce the amount of energy we consume. If you’re familiar, we’ve renovated Busch hall here on the quadrangle. We redid the building so that, at least by our reckoning, we should get LEED certification at the silver level. And we deployed capital to reduce energy and we think it’s good because we’re going to save money. That is, our operating expenses on an ongoing basis will be lower. Let’s say for the sake of argument we spent a million dollars to improve the energy efficiency. We believe that in four years, we’ll be saving $250,000 a year in operations. Now that’s 10 average scholarship awards. And it isn’t over in 4 years, that’s going on into the future and we believe – no proof – energy prices will go up. I happen to believe that prices will go up over the long term. So that’s one thing I said.

The second thing I said at the symposium—I said a lot of things. But I emphasized the other big finding and again, my own opinion. The big finding is that coal is a very large resource the United States and many parts of the world. And our committee observed that carbon dioxide is a problem that we have to address. And if coal is to be a part of the future—today it’s 50% of US electricity, 85% of Missouri’s electricity—but if this is to continue to be a part of the future, and you’re worried about CO2, as many people are, than you have to be able to demonstrate at utility plant scale that there’s a technology that you can afford to capture and store carbon dioxide.

So I advocated for that demonstration project. I didn’t tell you I think coal is what we should be using. I believe in fact it was a mistake, if you listen to other things I say, it was a mistake for Missouri to not do something proactive that would have encouraged Ameren to build another nuclear power plant here. By basically making it difficult for Ameren to build the nuclear power plant, we have no option other than the combustion of coal, so we have to learn to work with it in a way that will not add to the detrimental consequences from CO2, and that’s to develop technology to deal with it. I’m a scientist. I’ve actually done a fair amount of work in energy conversion—fuel cells, solar energy conversion, catalysis—so I’m familiar with the language at least, I haven’t done anything important in at least 15 years in the actual science. But my own favorite, frankly, is solar and I said this at the meeting. There’s a huge super abundance of solar energy, we just have to capture it and that’s a fundamental research activity that I think we should be involved in. And we are. The largest grant ever to the Danforth campus came from the Dept. of Energy in April for work on photosynthesis. It’s a little more—they’ve decorated it more in their title, but it’s photosynthesis work that would give fundamental understanding that could help you use plants as models or actually use plants to generate fuel and that’s renewable. So I’m for it. But coal is with us today and our committee observes that renewables are likely in the next 10 years, which is a part of our charge, what’s going to happen in a decade, that renewables, much as we would like them perhaps to be a bigger part, they’re not going to be a big part of the energy picture for the United States in fractional terms. But wouldn’t you like to have the company that generates 1% of US electricity? You’d be affluent and influential. You could be a member of the board of trustees. But we know that it’s very hard to get to a new energy technology that delivers a significant fraction of US electricity. Moreover, we know as a matter of fact, it’s not what we wish or want necessarily but we know as a matter of fact that the developing world, especially China and India, are today deploying old technology, at best current technology, that uses much more coal tomorrow than they’re using today. And it’s almost literally tomorrow. Missouri has a population of roughly 5 million people. China has a population of over a billion. And there are many parts of China that don’t have access to the amount of energy that we do, and yet they’re growing rapidly. China became the largest producer of automobiles in the world last year, over a million automobiles per month. No exports. All domestic. So China, with 80% of their electrical energy from coal, with a prediction that it will still be 80% 10 years from now. Don’t we have a moral responsibility, not only to the United States but to the rest of the world, to work to develop technologies that will work to mitigate the consequences of the combustion from all that coal? That’s why we’re working on clean coal. I mean our, it isn’t something that I’m sitting in my office and I’m saying ‘Hm, we’ve got these big companies, let’s advocate for coal.’ We’re using coal. The rest of the world is going to use coal. There’s a lot of it and our faculty—not Mark Wrighton, I didn’t do coal research, I did solar energy—but our faculty said ‘We have some ideas that we’d like to pursue, do you think Arch Coal and Peabody Energy and Ameren would be willing to fund our research?’ Well those companies, obviously, they have a vested interest in clean coal and they’re investing. And the biggest investments are not in fact with us. Peabody Energy, for example, is investing in China more money than they’re investing with us…

We’re going to be announcing some ambitions in terms of the university operations that relate to the consumption of energy, but overall, we don’t have a position on what’s the best technology. And going back to our committee, I was the messenger at this meeting, not the policymaker, not speaking about whatever we’re going to do, but the committee—properly, in my view; since I’m vice chair I had my say in that—said ‘You know, we’re going to have a whole bunch of energy technologies, and all that are sensible will be used. Wind, geothermals, solar, photovoltaic, hot water from sunlight—everything is going to be used that makes sense.’ And it’s two words: makes sense. We might be able to take carbon dioxide from coal fired power plants and store it, but if it costs more than some number, it’s a losing proposition and it would make coal more expensive than, say, photovoltaics with storage, you know, with electrical storage, like batteries. You have to do what’s technologically feasible and economically viable.

And one other thing about the symposium, because I think you’d written that we didn’t have anything but coal on the agenda. We had a prominent presentation by—two presentations by outstanding women. Maxine Sabbots gave the keynote talk on energy efficiency, and we had Martha Schlicker of Monsanto, who is Vice President for Biofuels, a renewal energy, and we had an Ameren utility representative. Utilities are basically the people who convert one form of energy into electricity. They don’t have a dog in the hunt either, so to speak. They’d be happy for photovoltaics, and they’re under some mandate to do more in that arena. And we had a policy leader from the Brookings Institution. We had two people from coal, but two of the largest coal companies in the world are here, and we’re their partner.

SL: Students have decried a lack of student input in administrative decisions over the last year. In particular, students have criticized the university’s implementation of a smoking ban without student input and its investment of the endowment in a non-transparent manner. What is students’ role in administrative decision-making?

MW: Well, the board has the responsibility for the endowment. So it’s not a lack of transparency, I don’t actually know what the students would like to know more about. And yet, it’s a board responsibility. We have no secrets. We’re not secretly investing in Cuban companies that make cigars and sell them, while we’re introducing a smoking ban. There’s no—the board has formed an internal company called the Washington University Investment Management Company. The chairman of the board is the former chairman and chief executive officer of the country’s largest pension fund, TIAA-CREF, that’s John Biggs, and we hired to be the Chief Investment Officer a woman by the name of Kim Walker, and there’s a small board on this investment management company, and they oversee the investment of the endowment. They take their cues in part from what’s called the Asset Management Committee, which is another Board of Trustees committee, that sets the spending rule.

Do you have a savings account somewhere? If I said to you, ‘You can spend 10% per year,’ do you think you could keep your savings at that level by making wise investments? I bet you can’t. That’s what the experts say. I’m not an expert, but that’s what the experts say. You can’t spend 10% of your endowment and be safe, and have some high probability that you’ll still have your savings account. There are risky investments that promise you high returns. If you want high returns, you have high risk. And we try to—here’s our goal: Whatever spending from the endowment, we have the goal that the buying power grows a little bit with time. So that means whatever we take out every year, we’d like to be able to increase it at least by inflation plus a little bit. And that’s our goal. So what’s your guess about inflation? It’s maybe 3%. We’d also like to be spending about 5%. So that means 3% plus 5%, that’s 8% total return. And our historic return is 9%. But if you took out 10%, just to spend it, you’d soon run your endowment down or you’d be in such risky investments that in a time like we’ve experienced in the last 15 months, the endowment would be gone. So we have professionals who look at all that—there are no secrets. IN fact, it’s sort of like watching paint dry, you know, it’s not that interesting. We don’t actually—there’s no one—I have to be careful, because I’m not intimately involve din it, but I don’t think we have people who are getting the annual reports of publicly traded companies and saying, ‘I think we ought to invest in Monsanto,’ or Peabody energy, or any other company. The work is done with investment managers, and it’s key to listen to the strategy of these investment managers and then to hire them and then say, ‘We’ll give you $200 million dollars of our endowment, and we’re going to be watching you. How did you perform?’ And it’s financial. I don’t know how to be more transparent, but ask me any question.

What was the other thing—oh the smoking. Yeah. Completely an administration decision, and the right one. Completely black-and-white. Why should we form a committee when we know what the answer is? Washington University was a forefront institution in terms of relating smoking and lung cancer. That was years ago, and over time there’s been an extraordinarily compelling science case for eliminating the use of tobacco products, and I think it’s the right thing. Even secondhand smoke has been proven to be a challenge to public health. SO here we are, an institution at the forefront of medical science, and I think we shouldn’t permit smoking on our property. So I’ll take the spears on that one.

SL: Moving on, the University recently began a search for a new dean for the engineering school. First of all, when will we have a new dean?

MW: July 1st.

SL: And how will this dean be different from the last?

MW: Don’t know yet. We’ll see who it is. Ask me that question in the process. Provost Macias is responsible for conducting that process. It’s just been launched and we’re focusing our search on internal search, by that I mean a person from the academic community of Washington University. In a time like this, I think it would be a little harder to effect a transition from outside, and I think we really need a person that understands us.

SL: Are there specific qualities that you have in mind that would be different form what we had before?

MW: I think our expectation is what we look for for all our academic leaders, people who have themselves a demonstrated record of academic achievement. In this position, of course, we would want evidence of administrative experience and effectiveness overall, a person who can not be overly frustrated by a constrained economic environment, which we know we’re going to have. I’ve been, as I noted before, I’ve been here about 15 years, and we never had a year where we had no compensation increases materially, and where we had a downturn in the endowment. Al the years I’ve been here the endowment always went up until the year we’re in. And you know, that can be very, it is very disappointing, but you don’t want to let it cripple you. Our challenge continues to be the need to be the institution that seems to be and actually is on the move. And I think we can do that. I’m sure you noticed if you have friends at other institutions—they have big problems, bigger than ours.

SL: The student-led gay rights movement The Right Side of History has made LGBT civil rights a major political issue on campus this year. The leader of the movement, David Dresner, has asked University deans to send letters to students explaining why the University allows military recruiters on campus despite the military’s policy of Don’t Ask, Don’t Tell, which conflicts with the University’s non-discrimination policy. This came one year after the university began an annual James Holobaugh LGBT awards ceremony, which honors the legacy of an ROTC military cadet who was discharged from the military after he came out as gay. What is the university’s position on Don’t Ask, Don’t Tell?

MW: I’ve been involved in this issue since I was provost at MIT, which actually has ROTC programs with the Navy, the Air Force and, I think, the Army. I may be wrong on that, but I’ve had a fair amount of experience. My father was in the US navy, career navy man, so I know something about how the military works. There is no evidence that sexual orientation has anything to do with performance, meaning that gays or lesbians are going to perform just as any other person. And the military understands that. I think the military is prepared to change their policy. Unfortunately, I think political leaders are frankly not as understanding of the reality here. And I think I would strongly like to see the United States change its policy. And there are a couple of ways to do that. The president of the United States could order it, in principle. And I think President Clinton was trying to find a path that didn’t create so much political problems that he couldn’t move forward. The Congress could vote and change that policy for the Defense Department, and the courts could, in principle, do something, according to my understanding. So I’m hopeful that the policy will be changed. I believe it should be. And there is a conflict between Washington University’s view and policy and my view, and that of the U.S. government. It’s a problem that we’ve been working on for quite some time. I think there’s growing understanding, and you hear that from military leaders or former military leaders, people who are, I believe, in a very good position to know, and I believe that over time the government will change its policy.

SL: Can we ask you a fun one on the way out?

MW: A fun one?

SL: What is your favorite Michael Jackson song?

MW: Name a few to remind me of them.

SL: Thriller, Billie Jean, Beat It, Don’t Stop ‘Til You Get Enough.

MW: I’d have to hear them. I didn’t listen that much to Michael Jackson. My wife accuses me of just having been in the laboratory too long.

(Erin Mitchell | Student Life)

On Oct. 28, Student Life published an article discussing the recently formed student group called Washington University Students for Endowment Transparency (WUSET), a “New student group pushing transparency in endowment.” WUSET, acting in support of a group known as the Responsible Endowments Coalition, has begun to gain recognition on campus, claiming it promotes “responsible” investments. While the purported pros of this organization make it seem as though this group of students is presenting the administration with a delicious candy apple, they fail to take into account that—caramel coating aside—their idea is filled with worms. WUSET is bad. Let’s talk about why.

The most important question to ask is, what exactly constitutes a “responsible” endowment? According to www.endowmentethics.org, such an endowment is one that “screen[s] out or divest[s] from particular investments, such as in tobacco…” Additionally, these endowments make “proactive investments in companies or projects that align with the institution’s mission, such as green energy or low-income housing…” Now I won’t say that green energy is a particularly bad investment or that tobacco is an especially good place to park endowment funds. But I will say that opening up the endowment to student opinion could have potentially serious consequences for the student body.

The endowment, according to the University’s Web site, is a collection of funds designated for such purposes as supporting “professorships, scholarships and fellowships, research, the libraries, teaching, curricular development, buildings and grounds, technology, and new or evolving academic programs.” In short, it provides money to support just about everything a university does. Endowments operate as giant pools of money that are invested; the returns from said investments are then used for the aforementioned purposes. If the University’s money is invested well, then it ought to reap a higher return. This translates into more spending on the part of the University to improve itself. Note that it also yields more financial aid for needy students.

I truly wonder why WUSET would push an agenda that severely limits the types of investments that the school can make. It seems strange that the betterment of the University could be put in jeopardy because the school may soon have to weed out putting its money in anything that could be construed as controversial. The University is very vocal about its politics, and if WUSET accomplishes its mission of endowment transparency, the University as a whole could be very much worse off.

I will not go as far to say that this notion of “responsible” investing is entirely bad and that the school should pour its money into blood-soaked African conflict diamonds. I only say that opening the endowment’s components up to scrutiny by a student body more concerned with myopic politics and less informed about investing is not the best idea. Take the following two investments as hypothetical examples: The Vanguard Consumer Staples ETF (NYSE: VDC) and Market Vectors Global Alternative Energy Trust (NYSE: GEX). In the past six months, one of these ETFs has risen 18.73 percent. The other has dropped 3.14 percent.

I’ll cut to the chase and say that the alternative energy investment is the one that dropped. But out of the two, it’s the only viable investment according to the Responsible Endowments Coalition. The consumer staples ETF, which puts its money in a well-rounded mix of companies whose products have relatively stable demand, invests 7.07 percent of its assets in Philip Morris International. Cigarettes, as noted above, are a no-no under the “responsible” endowment scheme.

I’ll respond to the supposed evidence in favor of a responsible endowment. The $150,000 Wesleyan Student Endowment, a “responsible” endowment, has outperformed the market. It now stands at $150,065.46, according to an article on the Responsible Endowments Coalition Web site. That’s annually a 0.04364 percent return. In the past year, Altria (another cigarette manufacturer) is up roughly 3 percent.

Call it irresponsible, but making money is what the endowment is supposed to do. Before the student body throws its support behind WUSET, I urge everyone to consider whether it’s worth potentially hindering our endowment’s future growth just to help a few misinformed and quixotic students sleep better.