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Hunter Fast '12: In defense of Ruth

Correction appended.

Recently, University President Ruth Simmons' positions on the respective boards of directors of Goldman Sachs and Texas Instruments have become causes celebres among Brown's far left. In opinion articles and public demonstrations, President Simmons became the target of numerous accusations of corporate corruption and ethical wrongdoing. Indeed, her mere association with such firms invites criticism; Goldman Sachs' business practices are reprehensible and Texas Instruments manufactures the TI-89 Titanium, the most economically coercive computing device ever conceived. Her detractors take glee in presupposing her guilt of conspicuously vague charges, then employing equally vague terms such as "corporate excess" or "corporate greed" — corporate anything, really — to add weight to these accusations in the absence of real evidence.

For instance, Ruth Simmons has been accused of exploiting her role as President of Brown, and by extension exploiting her students, in order to advance her interests in the corporate sphere. In his Herald opinion column "Et tu, Ruth" (Dec. 3), Simon Liebling '12 insists that Simmons obtained her directorships at Goldman Sachs and Texas Instruments only because of her position as Brown's president. He asserts that her pay as Brown's president should be determined by the other occupations that she holds, since she owes her professional career to the students of Brown.

Many problems exist with this theory, but one simple and very serious flaw is sufficient.  Simmons became a director of Texas Instruments in 1999, and a director of Goldman Sachs in January 2000, while she became President of Brown University in July 2001. That's right. If  Liebling is to be believed, then  Simmons' presidency of Brown retroactively contributed to her ascendance to her directorships. Even in the world of finance, causality only operates in one direction; therefore, this accusation is completely without merit.
Simmons' detractors also decry her six-figure salary and denounce her recent voluntary $64,000 pay cut as a shallow "PR move," and in so doing, they miss the point entirely. Yes, $64,000 is a trifle compared to the $740 million lost by the Brown endowment during the financial meltdown, but then again, so is Simmons' entire salary. The pay cut, Simmons' third in as many years, is intended as a statement that Brown's administrators are willing to make sacrifices to ensure the University's survival in the recession. In demonstrating that the administrators are looking out for the University's interests, even at the expense of their own, they demonstrate to potential donors that Brown University is a safe investment.

In addition to these accusations, President Simmons has received extensive criticism for her role as a member of the Compensation Committee of Goldman Sachs, which was responsible for doling out an estimated $21 billion in employee bonuses in 2009(5). In light of the current financial crisis, one can see why record-setting employee bonuses could be construed as a sign of "corporate excess."

However, this fails to place the size of Goldman Sachs' bonus pool in any real context. These bonuses came at a time when Goldman Sachs posted record profits, and thus, the firm paid these bonuses not because of some divorce from reality — as was the case with AIG's bonuses — but rather as a reflection of the success of the firm. Indeed, this relationship between employee compensation and the firm's profit is not just an intuitive correlation. It is part of Goldman Sachs' official compensation policy, which states that "effective compensation practices should … align aggregate compensation for the firm with performance over the cycle."

In short, large profits for Goldman Sachs mean a large bonus pool for its employees. The Compensation Committee is doing nothing that is inconsistent with existing policy. Furthermore, the Compensation Committee paid the bonuses of the top thirty Goldman Sachs executives entirely in company stock in order to provide a strong disincentive against the excessive risk-taking that precipitated the current financial crisis.

As previously stated, Goldman Sachs' business practices are reprehensible. Up to this point, this has been a defense solely of their compensation practices and Ruth Simmons' role in their formation. Despite this, whether we like it or not, Goldman Sachs is an influential actor in the world of international finance. By having Ruth Simmons on Goldman Sachs' board of directors, Brown University benefits in that she is able to utilize the influence and information that she gains to manage Brown's finances and raise capital for Brown more effectively.

Moreover, her directorial positions serve as a signal to potential donors that donations will be managed effectively and will not go to waste. To have President Simmons forgo these benefits would only harm the University's interests — and ultimately those of its students — by curtailing Brown's ability to raise capital, which would impede the University's ability to render financial aid, pay its workers and fulfill its academic mission. Given that Brown benefits from  Simmons' role in the financial sphere, and that many of the charges leveled against her do not stand up even to a cursory analysis, there are several reasons why she will retain her spot on my T-shirt for at least a little while longer.

Hunter Fast '12 is an economics and international relations concentrator from Bloomington, Ill. He can be reached at hunter_fast(at)brown.edu.

An earlier version of this article gave an incorrect value for the losses to the Brown endowment over the course of the current financial crisis. In fact, the endowment lost $740 million over the 12 months ending June 30.




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