Flash Points: How Gifts to Two Black Colleges Reflect the Volatile State of Higher Ed Fundraising

John Schnatter in 2012. Photo: Kathy Hutchins/shutterstock

John Schnatter in 2012. Photo: Kathy Hutchins/shutterstock

Recent developments out of Kentucky illustrate that seemingly innocuous university gifts can encapsulate the complexity, inequity, and chaos endemic to the current higher ed fundraising landscape.

Struggling black universities and colleges? Disputed donations? Corporate intrigue? A toxic funder? The saga, involving former Papa John’s CEO John Schnatter’s $1 million gift to Kentucky’s Simmons College and his former company’s corresponding foray into reputation-burnishing higher ed philanthropy, checks all of the boxes.

Schnatter founded the pizza franchise Papa John’s in 1984, which grew into a $4 billion company on his watch. Roughly a year ago, he resigned as chairman of the board of Papa John’s and the University of Louisville Board of Trustees after Forbes reported he used the N-word on a conference call. On September 4, Schnatter announced a $1 million gift to Kentucky’s Simmons College, the state’s only private historically black college.

Meanwhile, Papa John’s, whose brand had been tarnished by Schnatter’s comments, embarked on a public relations campaign of its own, giving $500,000 to the historically black Bennett College in North Carolina. The company also gave $20,000 in scholarship support to the very same Simmons College, only to revoke the gift because of Schnatter's donation, according to Simmons President Rev. Kevin Cosby.

Papa John’s spokeswoman Madeline Chadwick said that the claim the company took away scholarships is “absolutely false. We are committed to the communities we serve and have provided more than $1 million in grants this year through the Papa John’s Foundation.” Both parties eventually patched things up.

Now, if these gifts flowed to Stanford or the University of Florida, you wouldn’t be reading this article. But underfunded HBCUs need all the help they can get. As Howard University’s Bill Spriggs said, part of HBCUs’ plight “has to do with inequality, which has not been fully dealt with in our nation.” And therein lies the paradox. Higher ed donors profess an interest in equity, yet a vast majority of funds continue to flow to four-year and predominantly white institutions.

There’s certainly a lot to unpack, here. Let’s start by taking a look at the saga’s controversial, hard-charging, and currently unemployed principal character.

Before the Fall

In November of 2017, Forbes pegged John Schnatter’s net worth at $801 million. Since stepping down as the chairman of Papa John’s in July of 2018, Schnatter has sold $157 million in stock, reducing his stake in the company from 31 to 19 percent. It’s only natural to wonder if Schnatter has more gifts queued up. A quick review of his record of giving up until this point may provide some clues.

Back in 1996, Schnatter entered into a multi-million-dollar agreement with the University of Kentucky to assist in constructing and equipping its football stadium. The naming rights were $5 million—a $4 million contribution from Schnatter and a $1 million sponsorship from Papa John’s. According to the Kentucky Center for Investigative Reporting, as of May 2017, Schnatter had personally spent $12.5 million for 42 years of name recognition, or about $300,000 a year.

In 2013, Schnatter told Andrew Wolfson of Louisville’s Courier Journal he had given more than $30 million to charitable causes. Gifts included $1.5 million to the Louisville Zoo, $2 million for the 21st Century Parks’ proposed loop around Louisville, and $1 million to the University of Kentucky, in part to fund a basketball museum.

When asked if he’d give away half his fortune to charity, Schnatter said, “I would have to run it by my wife.”

Three years later, Jim Hopkins, who covers Louisville business and culture issues in Louisville’s Boulevard, took a deeper look into Schnatter’s giving. Upon examining the John H. Schnatter Family Foundation’s returns, he found that the couple gave a “relatively modest” $1.9 million to 86 charities from 2012-2015.

What’s more, Hopkins wrote, the couple passed on “virtually all of the usual suspects” favored by the city’s established families. Hopkins’ conclusion? John and his wife Annette “don’t give a flying fig about old-money Louisville.”

No Stranger to Controversy

Hopkins’ analysis shouldn’t come as a shock. At the time, Schnatter was in his mid-50s. He didn’t inherit his fortune. It’s perfectly common for self-made regional donors to bypass traditional highbrow institutions. Hopkins acknowledged as much, writing that Schnatter has “never been old money, anyway.”

Instead, Hopkins wrote, Schnatter funneled donations to causes focused on children, veterans, animal welfare and “advancing John Schnatter’s growing interest in free enterprise and limited government.”

In 2015, the foundation gave $928,000 to the University of Louisville’s John H. Schnatter Center for Free Enterprise. The gift was a down payment on a previous $6.3 million donation given jointly by Schnatter and the Charles Koch Foundation. The pair also donated $3.3 million to Schnatter’s alma mater, Ball State, in Muncie, Indiana, prompting both universities to defend the grants against familiar criticism that its donors would seek to influence hiring and curriculum.

This wasn’t the first time Schnatter faced public criticism. In 2012, he complained that Obamacare would cost his company millions of dollars annually, prompting commentators like Inside Higher Ed’s John Warner to remind readers that Papa John’s delivery drivers earned $6-7 per hour, not including tips. Schnatter said his comments were “misconstrued.”

In November of 2017, he expressed his displeasure over the NFL’s handling of league’s ongoing player protests during the national anthem. “The NFL has hurt us by not resolving the current debacle,” Schnatter said on the company’s third-quarter earnings call. (Papa John’s was the official pizza company of the NFL.) The company’s stock subsequently fell 11 percent in hours, knocking $70 million off Schnatter’s net worth.

Schnatter stepped down as CEO in January following the controversy, but remained chairman of the company’s board of directors.

In 2018, Papa John’s hired marketing agency Laundry Service to orchestra Schnatter’s comeback. Sometime after, Forbes reported that Schnatter allegedly used the N-word on a conference call with Laundry Service during a role-playing exercise designed to help him avoid future controversies. Schnatter insisted that the comments were mischaracterized and meant to criticize offensive language, not to insult anyone. “Black people,” he told the Courier Journal, “know I’m not racist.”

Schnatter resigned as chairman of the board the same day the incident was reported. “News reports attributing the use of inappropriate and hurtful language to me during a media training session regarding race are true,” Schnatter told Forbes in a statement. “Regardless of the context, I apologize. Simply stated, racism has no place in our society.”

In response, the University of Louisville announced it would change the name of its football stadium from Papa John’s Cardinal Stadium to Cardinal Stadium. In addition, officials in Schnatter’s hometown of Jeffersonville, Indiana, removed his name from a signpost of a gymnasium.

“This Donation is Not About Me”

Schnatter announced his $1 million gift to Simmons College in early September. “My life’s work is to help make other people’s lives better,” he said. “One way for us to do and be better is to support black-led institutions that inspire overlooked and disadvantageous communities [sic]. Supporting Simmon[s] College is a better investment to build a better community.”

At the time, the school’s Chair of the Board of Trustees Mark Lynn, who reached out to Schnatter to create the partnership, said he did not expect a backlash in accepting the funds. Schnatter, Lynn said, “has stepped up, he’s doing what he needs to to make things better, and actions are the king. We’ve talked with him. We’re in this for the right reason. It’s to make the school better.”

The Rev. Gerome Sutton, a minister who led protests outside Papa John's offices last summer and called for a boycott of the chain, was less sanguine. “It doesn't take a rocket scientist to figure out what's going on. (Schnatter) is trying to pay off the black community with 30 pieces of silver,” said Sutton, a Simmons graduate and former member of its board of trustees.

Less than two weeks later, Schnatter told a large gathering of church delegates in Oklahoma that part of the $1 million donation to Simmons College will fund a lodging facility at the National Baptist Convention’s retreat center in Louisville. The organization describes the center as the only black-owned retreat center in Kentucky “and one of the largest black-owned in America.”

“This donation is not about me,” Schnatter said. “It’s about the lives that are going to be impacted, the communities that will be transformed and the young people who will go to school and grow to be great businessmen, businesswomen, doctors, engineers and teachers.”

“There is Definitely Some Bad Blood”

Last year, Michael Gordon, chief executive of Group Gordon, a strategic communications firm, told CNBC that while Schnatter’s resignation from the board was a good first step forward, “Papa John’s needs to do more to show that its corporate values are not aligned with its founder’s behavior.” Then-CEO Steve Ritchie agreed. “Papa John’s is not an individual,” he said in a statement.

True to form, the company offered Simmons College funding for 10 $2,000 scholarships “in good faith,” said spokeswoman Madeline Chadwick. Nonetheless, as of September 13th, the money was pulled from the table. “It felt as though someone has taken weapons of mass destruction and flown them into the hopes and dreams and aspirations of some of America's most vulnerable students,” Simmons President Cosby said.

Which party pulled the money remains an open question. What’s undeniable, however, is the extent to which Schnatter and his $1 million gift hovered over the proceedings.

Simmons spokeswoman Krystal Goodner said that Papa John’s “felt uncomfortable” at the news of Schnatter's donation and communicated to the school on September 3 that it did not want to give the scholarships at the time. On the other hand, Papa John’s claims the school refused the gift because it didn’t want the company’s brand conflated with Schnatter.

At this point, some further context is required. In July of 2018, Schnatter sued Papa John’s for their handling of his resignation. A settlement was reached in March, but the resentment festered. Six days after news of the scholarship drama first broke, Schnatter, in an interview with Fox Business, said that the old Papa John’s board and the old executive team under Steve Ritchie “used the black community, used race and the media—Forbes—to steal the company and thus destroy the company or hurt the company very badly.”

Is it possible that the company and Schnatter were using Simmons, consciously or otherwise, as an unwitting proxy to wage war in the court of public opinion? Simmons’ Goodner didn’t entirely discount this theory. “Let’s not mince words,” she said. The reason Simmons refused—or didn’t refuse—Papa John’s scholarship gift was “because of the million-dollar donation made by John Schnatter. That definitely ruffled some feathers on Papa John’s situation. We feel like we are literally in the middle of crossfire. There definitely is some bad blood.”

On September 16, Papa John’s announced a new $30,000 donation to Simmons to provide $2,000 scholarships to 15 students. Company executive Marvin Boakye said he was “pleased we were able to resolve our breakdown in communication.”

Bennett College: A Case Study

Papa John’s and Schnatter’s gifts were clearly designed to repair their tarnished brands. It would be naive to suggest otherwise. Donors turn to philanthropy to amend for past misdeeds all the time. Sometimes, the public concludes that no amount of giving can paper over a toxic donor’s transgressions. In other cases, however, the public is willing to grant mercy. Such is the case with these gifts, particularly given that they’re flowing to chronically underfunded HBCUs.

One of the big mysteries in higher ed fundraising is how equity-oriented donors and alumni continue to pass over community colleges, trade schools and historically black universities in favor of wealthy four-year institutions.

The data is particularly stark as it applies to the latter category. In 2017, there were 462 gifts of $1 million or more to higher education. HBCUs received just two of them. Prior to Ronda Stryker and William Johnston’s $30 million gift to Atlanta’s Spelman College last December, the largest commitment ever made to an HBCU was Bill Cosby’s $20 million gift to Spelman—in 1998.

Meanwhile, a recent survey from the Council for Advancement and Support Education found that American colleges and universities raised a record $46.7 billion in fiscal 2018—a 7.2 percent increase over 2017.

A piece by Adam Harris in The Atlantic underscored just how difficult it is for historically black colleges to raise the kind of money that would normally be a rounding error at their public and private school counterparts.

Last year, Bennett College, a historically black female college in Greensboro, North Carolina, announced that it needed to raise $5 million to maintain its accreditation by the Southern Association of Colleges and Schools Commission on Colleges. For most major universities, fundraisers could conjure up $5 million with one phone call. Bennett’s fundraisers took a more realistic approach. The school gave itself 50 days to reach its goal.

Bennett, as noted, received a critical lifeline in the form of a $500,000 donation from Papa John’s. “Papa John’s has supported educational institutions of all levels for years, and we are a proud partner to many colleges across the country,” then-CEO Ritchie said upon announcing the gift. “That legacy continues through The Papa John’s Foundation’s support of Bennett College. “In August 2018, I committed to establishing a corporate foundation, and I’m pleased that its first grant will go to an institution that shares our values of equity, fairness, respect and opportunity.”

“Bailing Out” Instead of “Building”

Bennett College was still short of its $5 million goal as its self-imposed deadline approached. The college extended its deadline. Fortunately, in early February, president Phyllis Dawkin announced that Bennett had raised $8.2 million from over 11,000 donors including an additional $500,000 from the Z. Smith Reynolds Foundation.

Is this good news? Of course. But did the process really have to be so nerve-wracking?

As Harris noted, Papa John’s, a multi-billion-dollar company, “could have donated $5 million” to Bennett, allowing the college to hit its goal with the stroke of a pen. “The rest of the funds raised by the college could have been put away in a rainy-day fund—or built into the school’s endowment.”

Similarly, J.L. Carter Sr., writing in HBCU Digest, asked, “Why is bailing out HBCUs a more attractive ask then building them?” Carter continued:

Bennett deserves support today as it did 10 years ago, and Simmons deserves a chance to thrive. But they don’t deserve to be the targets of ill-timed or opportunistic philanthropy when their very existence depends on it. HBCUs which aren’t on the verge of closure do not deserve to be taunted by major gifts which, if they had received them, actually could have generated more of a return on investment than paying off debts and keeping lights on.

Or consider the fact that the largest gift to Bennett’s campaign—a relatively meager $1 million in the grand scheme of things—didn’t come from an equity-focused alumnus, donor or foundation, but High Point University, a neighboring private liberal arts college.

“High Point University is connected with the United Methodist Church; Bennett College is connected with the United Methodist Church,” said High Point University President Nido Qubein. “We care deeply that this is one of two HBCUs for women in America, and therefore we wanted to step up."