Growing Pains: A Regional University's Foray into Big-Time Fundraising Raises Questions of Donor Influence

Last month, Saint Louis University (SLU) received a $50 million gift—the largest gift in the school’s 200-year history—from area philanthropists Rex and Jeanne Sinquefield to create a new fund to finance faculty research and hire new professors.

The Sinquefields' intention was simple: To increase the school's standing nationally while benefiting the surrounding region. "This is a wonderful laboratory," he said. "This is an advantage that SLU has over a lot of universities... It's a big, urban laboratory."

By supporting the school's expanding research footprint, the gift is yet another example of surging regional philanthropy that’s shaping universities nationwide. It also suggests that small regional universities embarking on a crash course in big-time philanthropy may experience some—how do I put this delicately?—pitfalls along the way.

The gift originally stipulated that Rex Sinquefield would have a role in selecting the director of the new Sinquefield Center for Applied Economic Research, prompting an outcry from faculty members who argued that donors shouldn’t be involved in hiring decisions.

The pushback echoes recent controversy surrounding George Mason University’s opaque agreements with the Charles Koch Foundation, and provides more evidence that as universities increasingly turn to private dollars, they’ll face greater scrutiny on issues like undue donor influence, academic independence and transparency.

I'll get to the nuances of the controversy momentarily. But to fully understand the scope of SLU's ambitions and contextualize the Sinquefields' mega-gift, let's first travel back in time to 2014.

That was when Fred Pestello became the Jesuit institution's new president, taking over for the Rev. Lawrence Biondi, a controversial figure who presided over the school for 26 years. As the St. Louis Post-Dispatch noted at the time, "When Biondi gets credit for dressing up SLU’s campus with pedestrian walkways and green space, critics point out that the university’s academic rankings nose-dived during the building spree."

While we can't say for sure what donors and alumni thought about Biondi's penchant for capital improvements and the corresponding drop in academic rankings, the school's faculty made their opinions abundantly clear. When Pestello took over, they told him they wanted more emphasis on research; Pestello himself said he was "surprised" that the school didn't spend more on medicine and engineering.

SLU leadership consequently made growing its investment in research and scholarship a "major priority," pledging to double its research budget to $100 million over the next five years. "I think we should be doing better than we have been," Pestello said.

It would be fair to call SLU's $100 million goal a gamble.

For starters, the school's fundraising team had to scale up quickly, a point that wasn’t lost on Vice President for Development Sheila Manion. "We haven’t ever been through this kind of fundraising campaign. It will be a learning experience, and there will be bumps along the way, but the best thing about this campaign is that it's not going to bricks and mortar, it’s going to programmatic things."

Also consider the regional context. The area is dominated by Washington University, which boasted over $600 million in research support in 2015 alone. In a funding landscape where money tends to attract more money, could an upstart like SLU really compete with what the Post-Dispatch called the region's "900-pound gorilla?"

Yes it can, argued Donn Rubin, head of industry group BioSTL. The school's commitment, he said, was "great for St. Louis. The ideas generated through cutting-edge research provide the raw material for new companies and job creation in the 21st-century innovation economy."

It wasn't always smooth sailing. Last March, the school, faced with a $16 million budget deficit, a decline in enrollment, and an uptick in expenses, laid off four percent of its workforce—roughly 120 employees.

At the same time, SLU embarked on an array of initiatives to support its transition, including a partnership with healthcare provider SSM Health, which plans to invest $500 million to build a new St. Louis University hospital and ambulatory care center.

In retrospect, it makes sense that Rubin, the head of an industry group, would be bullish on more research in the region. But would donors? A year after SLU announced its $100 million goal, it received an encouraging answer.

In August, the school announced a record-breaking fundraising haul of $98.7 million in the fiscal year that ended June 30th. The windfall included a $15 million gift from businessman Richard Chaifetz and his wife Jill, which spurred the university to rename its business school in his honor.

But perhaps even more encouraging, SLU received support from across a broad donor base. The university said a record 14,805 donors made gifts to the university during the past fiscal year. Eleven gifts topped $1 million. This data bucks the larger trend across the higher ed space in which fundraisers lean heavily on mega-gifts—defined as those exceeding $10 million—as "middle of the pyramid" giving lags.

Then again, this data was compiled before the Sinquefields' mega-gift. At $50 million, the donation is half the size as SLU's entire fundraising windfall.

"We're Just Pursuing Excellence"

A retired index fund pioneer, Rex Sinquefield received an MBA from Chicago and amassed his fortune by co-founding Dimensional Fund Advisors along with another active and influential Midwest-based philanthropist, David Booth.

He co-founded and serves as president of the Show-Me Institute, a libertarian-leaning think tank that commissions studies on public policy issues. He’s matched his interest in policy with major political contributions, including bankrolling conservative groups that have lobbied Missouri legislators to back income-tax-cutting measures.

Rex is also a life trustee of DePaul University and serves on the boards of the Missouri Botanical Garden, among others.

Jeanne is a director of the Neurofeedback and Applied Neuroscience Foundation, serves on University of Missouri's Steering Committee and is an active musician in the Columbia Civic Symphony Orchestra and the Folk String Orchestra. The couple also runs a center for chess and education.

The Sinquefields are also big supporters of the arts. In 2015, they gave the University of Missouri a $10 million gift to fund a proposed new School of Music building.

Their recent $50 million gift to SLU will establish the St. Louis University Research Institute. The school said the money can be leveraged to apply for external sources of funding, help scientists buy new equipment, hire graduate students, and recruit new faculty.

Rex, an SLU alumnus and member of the university’s board of trustees, said the new fund was also intended to finance scholarship in the humanities. "It’s available for any discipline. I want to see what opportunities come our way from the faculty."

To that end, the gift will also support SLU’s chess program and a new Sinquefield Center for Applied Economic Research (more on that in a second). Looking ahead, Rex told the St. Louis Post-Dispatch he suspected medicine might win a large portion of funding because of the expense and prominence of academic medical research.

"We’re just pursuing excellence," Sinquefield said. "Anything that moves us along that path is good."

Faculty Push Back

All of which brings me to the details pertaining to the new Sinquefield Center for Applied Economic Research.

On August 28, David Rapach, professor of economics, and Bonnie Wilson, associate professor of economics, sent a memo to SLO President Pestello, acting Provost Michael Lewis, and the Sinquefields to express concerns regarding the center. (Read the whole memo here.)

"Based on information conveyed by the dean to the Department of Economics," the memo read, "… Mr. Sinquefield and the dean will work together to select and appoint the center’s director, which is effectively a faculty position… Because Mr. Sinquefield is a financial donor, his role in selecting the center’s director violates academic norms of independence from financial supporters and is not acceptable."

Rapach and Wilson went further, arguing that this kind of donor influence can negate the SLU's paramount goal of becoming a premier national research center.

"Allowing a donor to play such a role in hiring decisions compromises the academic integrity of the new center. If the center is to credibly advance scholarship, generate reliable public knowledge, and offer expert advice, it must be transparently independent, including from its benefactor… At a time when Saint Louis University seeks to advance its research mission and elevate its scholarly reputation, it is imprudent to enter into an agreement that could compromise those aims."

The authors also expressed concern that the hiring arrangements for the center violate the provisions of the Saint Louis University Faculty Manual, which stipulates that a hiring committee—not donors—is empowered to hire faculty.

Rapach and Wilson therefore called on SLU to adhere to three conditions. First, that Sinquefield would agree, in writing, to play no role in hiring and promotion decisions. Two, any faculty appointments would made according to SLU’s manual. And three, all documents and agreements regarding the center will be made publicly available on the Saint Louis University website.

"Adverse Reputational Effects"

On September 4th, Rapach and Wilson published another memo to Pestello, Lewis and the Sinquefields, which included an update on the issue surrounding the SLU faculty manual. The director of the Sinquefield Center will no longer have the title Professor of Economics, after the administration recognized that it violated the faculty manual.

In theory, one could call that progress. But Rapach and Wilson were unimpressed.

"Although the reclassification of the director from faculty to staff avoids obvious violations of the letter of the Faculty Manual and the Guidelines, we remain unconvinced that the proposed changes are consistent with the spirit and intent of the manual."

Meanwhile, the duo’s first concern—donors playing a role in the hiring of SLU employees—"remains wholly unaddressed."

Calling attention to the "adverse reputational effects" that plagued George Mason University after revelations of donor influence at the school, they said they were "surprised that SLU is entering, to date, into a non-transparent agreement that grants a donor substantive influence in hiring, as this invites negative publicity for the university."

Two days after the second memo, SLU’s student newspaper, the University News, published a piece on the controversy.

SLU’s Manion declined to comment on the memos, but said, "I would never enter into a relationship that had any kind of unethical, immoral, or illegal implications for the university."

Fair enough—except Rapach and Wilson were firm in their belief that the university acted with nothing but the best intentions. "Our concerns do not presume any ill intent or purposeful bad acts on the part of present or future SLU employees or donors," they wrote in their second memo.

Rather, Wilson was incredulous that administration officials—unintentionally or otherwise—would agree to such donor-friendly stipulations in the first place, jeopardizing the very academic reputation the school has worked to cultivate.

"Something is wrong with the way we are proceeding if it got to this point, and the only thing that stopped it was Dave and I writing a memo. The solving the letter of the faculty manual does not solve the moral concern of maintaining without question the integrity of the institution."