The President of Harvard Is Named 'Faust'

In the last six years the exceptionally influential Wall Street firm, Goldman Sachs, has been reported to engage in business practices that would appear to be strongly at odds with the professed values of Harvard and just about any other not-for-profit university or college.
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The current president of Harvard University, Drew Gilpin Faust, happens to share her last name with the character in the Western literary canon most closely identified with compromising ideals in the attempt to realize ambitions in the material world. President Faust has an excellent reputation as a scholar of the American Civil War and the American South, but her administrative duties do not primarily emphasize her skills as an historian. No, even as an individual with exceptional scholarly credentials and the administrative leader of the oldest and richest American university, her efforts necessarily focus at least as much or more on raising money. Her colleagues at peer institutions do likewise.

As would be expected of any American university leader, President Faust has delivered many eloquent and high-minded speeches advocating the standard academic values of open inquiry, the seeking of truth for its own sake, and the pursuit of personally-fulfilling careers that benefit the broader society and are about more than making money. Yet, university administrators must deliver ever-escalating donations to the university coffers and the required amounts are not readily obtained from the donations of those variably altruistic graduates who have dedicated themselves to providing medical, legal, scholarly, governmental, journalistic, artistic, or other services to their fellow citizens.

To elicit donations on the scale required for maintaining the place of the modern research university (or even liberal arts college) in a relentlessly competitive environment it is necessary to approach truly rich people. One might even say it is necessary to gain the support of exceptionally rich people who can donate in the tens or hundreds of million of dollars. Needless to say, many such individuals are willing to part with such sums only with an expectation of some type of reciprocal appreciation, whether material or ethereal. Herein lies what is arguably the modern academic Faustian bargain at Harvard and virtually every other institution of higher education, not to mention some institutions of lower education and other non-profit organizations of diverse sorts.

Any reader who has followed the business and financial news over the past ten years will know that two particular concentrations of individuals with personal fortunes of the desired scale are the leaders of Wall Street banks and the founders and executives of technology companies in Silicon Valley. A few examples of such relationships can serve to highlight the nature and depth of the problem.

In the last six years the exceptionally influential Wall Street firm, Goldman Sachs, has been reported to engage in business practices that would appear to be strongly at odds with the professed values of Harvard and just about any other not-for-profit university or college. For example Goldman Sachs employees have been reported to: 1) knowingly promote and sell securities with a high likelihood of losing money, especially collateralized debt obligations, to clients while simultaneously betting against those securities, and then profiting handsomely on both ends of the deal at the direct expense of their clients, according to the New York Times; and 2) violate federal rules prohibiting the participation of their securities analysts in efforts by the firm to market their services to potential client companies pursuing initial public offerings or other stock offerings; and 3) manipulate the supply of commodities such as aluminum so as to profit inappropriately by virtue of what amounts to inside information on the likely direction of changes in market prices. Nevertheless, the Chairman and Chief Executive Officer of Goldman Sachs Group, Inc., Lloyd Blankfein, has been welcomed warmly as a member of several Harvard advisory committees and even the subject of a half-page advertisement in the independent alumni magazine (issue of July/August of 2013) touting his generosity and dedication to the university.

Mr. Blankfein presumably has legitimate business expertise that could be relevant to these various university bodies, but his company's alleged actions should at least raise questions for the university leadership if their publicly professed values are to be taken seriously. Are Harvard's leaders aware of the practices reportedly carried out by employees of Goldman Sachs under Mr. Blankfein's leadership? Do they believe the allegations? If so, do they approve of such business practices? If they are aware but do not approve, as might be expected, how do they justify the university's relationships with Mr. Blankfein? How does President Faust reconcile this state of affairs with her remarks, quoted below, from the Harvard commencement ceremonies in 2009:

I worry that we as universities have not done all we could and should to ask the deep and unsettling questions necessary to the integrity of any society. As the world indulged in a bubble of false prosperity and materialism, should we -- in our research, teaching and writing -- have done more to expose the patterns of risk and denial inherent in widespread economic and financial choices? Should our values have posed a firmer counterweight and challenge to excess and irresponsibility, to short-term thinking with long-term consequences?

The privilege of academic freedom carries the obligation to speak the truth even when it is difficult or unpopular. So in the end, it comes back to veritas -- the commitment to use knowledge and research to penetrate delusion, cant, prejudice, self-interest.

Interestingly, the current Goldman Sachs Board includes Debora Spar , President of Barnard, and previously, until 2010, included Ruth Simmons, then President of Brown President of Brown. Have these academic leaders ever questioned the business practices attributed to Goldman Sachs by journalists? Have they been rendered less likely to call attention to the numerous ways in which Wall Street firms have massively enriched themselves at the expense of the rest of American society?

Other examples of potentially compromising entanglements at Harvard and elsewhere abound. President Faust is on the Board of Directors of Staples, Inc., an office supply company. In September of 2012, David Segal of the New York Times' business section reported that Staples employees are expected to deny customers deals that the company advertises and then pressure these customers to purchase various additional services or protection plans which generate higher profits. President Faust joined the Staples Board earlier (April) in 2012. Was she aware of these allegations? If she was, was she troubled? Did she raise any concerns with Staples management or other Board members? Does President Faust, the Civil War historian, have crucial insights to offer to the management of a for-profit office supply company? Can she really have the time necessary to devote to seriously considering management challenges at Staples while presiding over a major research university with an annual operating budget of more than four billion dollars?

As documented in the New York Times in 2010 by Graham Bowley, numerous university presidents serve on one or more corporate boards. As Bowley notes:

Some analysts worry that academics are possibly imperiling or compromising the independence of their universities when they venture onto boards. Others question whether scholars have the time -- and financial sophistication -- needed to police the country's biggest corporations while simultaneously juggling the demands of running a large university.

I have no doubt that university presidents, if they were to respond to these criticisms, would through their official spokespersons defend the great value of their "engagement" with "business leaders" and argue that it enhances their abilities to effectively "lead" their respective institutions. Indeed, such connections presumably pay off with major donations in some cases. But it requires a superhuman effort in willing suspension of disbelief to accept that such involvements, which can yield hundreds of thousands to millions of dollars in direct and stock-based compensation over a term on a corporate board for these university leaders, have no tendency to compromise their dedication to, as President Faust so eloquently put it, "veritas -- the commitment to use knowledge and research to penetrate delusion, cant, prejudice, self-interest."

The current system in which university presidents are evaluated to a great degree on budgetary matters and the sizes of the donations they can elicit has a particularly dispiriting consequence. These putative leaders are less, perhaps much less, likely to speak out on the broader issues involved in the growing economic inequality characterizing American society. In particular, Faust and the other Faustian academic leaders are not very likely to call attention to the extent to which economic inequality is due to unethical business and corporate governance practices, the existence of which have been thoroughly documented by, in Faust's, case members of her own law and business school faculties. Faust and her peer university presidents are failing, and failing quite miserably, to meet the standard Faust herself laid out in her 2009 commencement address: "The privilege of academic freedom carries the obligation to speak the truth even when it is difficult or unpopular." What we have then is not President Faust's precious veritas, but celebritas, venalitas, and authoritas.

CORRECTION: A previous version of this post incorrectly identified an appearance by Lloyd Blankfein in an alumni magazine as part of a half-page article. The published print was actually part of an advertisement.

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