Trustees and fellows of the Corporation make their greatest impact on the University during the three weekends a year they convene to set policy, but the off-campus activities of some members have caught nationwide attention with a series of scandals in the financial world.
Most recently, Trustee Steven Cohen P'08, the billionaire founder of SAC Capital Advisors, faced renewed scrutiny this week after two of his former employees were arrested and charged with insider trading by the Department of Justice.
Cohen brings considerable influence to the University — he was named one of the world's 100 most important people by Time Magazine in 2007 — but in November, two hedge funds connected to SAC Capital were raided by the Justice Department as part of a sweeping insider trading investigation. SAC Capital was subpoenaed as part of the investigation. Monday's arrests of Cohen's former employees have revived speculation that the ultimate target of the investigation is SAC Capital itself.
Fellow Steven Rattner '74 P'10 P'13 came under considerable fire last year when the Quadrangle Group — a private investment firm Rattner co-founded in 2000 — was investigated for a pay to play deal with the New York State pension fund. The Securities and Exchange Commission initially settled with Quadrangle last April, but Rattner was not included in the settlement. At the time, Quadrangle released a statement saying, "We wholly disavow the conduct engaged in by Steve Rattner, who hired the New York State Comptroller's political consultant, Hank Morris, to arrange an investment from the New York State Common Retirement Fund. That conduct was inappropriate, wrong and unethical."
In November, Rattner reached a settlement with the SEC for $6.2 million with an agreement not to do business in the securities industry for two years. On Dec. 30, after a long public feud, he settled with then-State Attorney General and current Governor Andrew Cuomo for $10 million in restitution and a five-year ban from appearing before a public pension fund.
Rattner has admitted no wrongdoing.
A year ago, President Ruth Simmons also faced scrutiny for an external affiliation. Simmons serves on the board of directors of Goldman Sachs and sits on the subcommittee that determines executive compensation. Critics slammed Goldman for doling out large bonuses to its senior executives after receiving a federal bailout, and claimed excessive Wall Street compensation created perverted incentives that led executives to favor short-term gains at the expense of the financial system's stability.
"These people are high-profile," said Stephen Nelson, an associate professor of secondary education and professional programs at Bridgewater State University. "Therefore, they are under an enormous microscope."
When people become involved in an outside investigation that damages their reputation even if they are never found guilty, the institutions those people are associated with can also be negatively perceived, Nelson said.
He said many members of university boards are selected because they have expertise in the financial sector, so it is difficult for the public to separate their actions as board members from their decisions as businessmen. But to progress to a point where the damage to the university is greater than the assets the person brings, Nelson said an investigation must reach "some threshold where enough people are sufficiently concerned." But that threshold is difficult to discern.
Because Rattner admitted no guilt in his settlements, the effect of the investigation on the University lies in a "gray area," Nelson said. In cases like these, he said the "degree of taint" should be weighed against an individual's contribution to the institution.
"I think if you are being investigated, people are going to be wondering," said Jay Lorsch, a professor of organizational behavior at Harvard Business School. "That's the problem. You lose your virtue."
In situations where blatant wrongdoing is not exposed, a decision to stay on the board or recuse oneself is often at the individual's discretion, said Ronald Ehrenberg, director of the Cornell Higher Education Research Institute and professor at the Cornell School of Industrial and Labor Relations.
"Rumors can swirl around somebody," Nelson said, but "it would be doing a disservice to feed the flames of that reputation of the falsely accused."
Nelson said when a person has "a blackened or otherwise impaired public persona," it may come time for the person to withdraw from the board in order to maintain a university's reputation.
Herbert "Pug" Winokur reached that point in 2002. Winokur sat on Harvard's corporation and the board of directors at Enron Corporation at the time of its collapse in 2001.
Winokur stepped down voluntarily amidst outside pressure, writing in a letter to former Harvard President Lawrence Summers that the controversy was "diverting attention from your agenda for Harvard and from the important work of the corporation and the university."
Winokur faced heavy criticism and protests from organizations such as the student group HarvardWatch prior to his announcement, the Harvard Crimson reported at the time.
Chancellor Thomas Tisch '76 P'07 said there has never been a case in his tenure where a member has left the Corporation due to accusations of wrongdoing.
"I'm truly honored to serve with every member of the Corporation," Tisch said. "I can say without equivocation that every member makes valuable contributions to our work and that every single member strengthens Brown in important ways."
Tisch added it was not his role to single out Corporation members, and could only talk about the body's members in general.
Last February, after announcing she would not seek reelection to Goldman's board, Simmons told The Herald "You're not in charge of everything that your friends do and every policy that organizations that you're affiliated with issue."