For-Profit Board Seats Cause Headache for UNC President

Interim president updates ethics forms amid questions from reporter, highlighting issues over presidents serving on corporate boards -- and being paid for it.

August 8, 2019
 
UNC
William L. Roper

The chairman of the University of North Carolina system’s Board of Governors stood by its interim president, William L. Roper, Wednesday after a report that Roper hadn’t disclosed on state ethics forms his corporate board seats -- board seats at companies that have done business with the state and parts of the university system.

Roper’s positions on for-profit boards were public knowledge, according to the UNC Board of Governors chairman, Harry Smith. The interim president, who previously served as CEO of the UNC Health Care System, was authorized to keep serving on the corporate boards, Smith added.

“We have reviewed this matter and we are aware of no instance in which Dr. Roper ever involved himself in a decision that presented a conflict,” Smith said in a statement. “In fact, documents produced by the UNC Health Care System demonstrate that he was careful to avoid any conflicts.”

Nonetheless, the situation thrusts back into the spotlight an issue that has for decades been controversial among higher education leadership experts. Supporters of college and university leaders serving on corporate boards say the practice allows higher education executives to connect with different constituencies and make contacts for fundraising or research. Critics worry that paid for-profit board positions suck up presidents’ time and introduce potential conflicts of interest when presidents are board members at companies doing business with their institutions.

“There are presidents who make more on a corporate board than they do in university salary,” said James Finkelstein, professor emeritus of public policy at George Mason University, who has studied higher ed executives’ pay and service on corporate boards. “There is this potential for that relationship, even if it’s inadvertent, to be exploited to the benefit of the corporation.”

The case also brings renewed attention to UNC leadership, which has experienced high-profile turnover in the last year. Roper is president because the system’s former leader, Margaret Spellings, left in January after a tense relationship with the board. And Smith has been a polarizing leader.

Roper was CEO of the UNC Health Care System before becoming interim president of the UNC system in January. He remains on the UNC Health Care System Board of Directors.

He has been on the board of dialysis services company DaVita since the early 2000s. He has also held board seats at three companies in an acquisition chain: MedCo, which was purchased by Express Scripts, which was purchased by the insurer Cigna. Roper remains on the Cigna board.

He made at least $5.1 million for serving on the companies’ boards between 2010 and 2018, WBTV reported. But he did not disclose the fact that he held board seats at the companies on several statements of economic interest he filed with the state to cover the span from 2010 to 2018.

After WBTV contacted him as part of its investigation, Roper amended his state ethics forms, the station reported. But the station said amended forms listed the companies where he held board seats as having no business activity or no known business activity with the state, even though business relationships between the companies, the state and UNC entities are publicly documented.

Two DaVita clinics are listed for referrals on the UNC Kidney Center’s Website, and the UNC School of Medicine has noted DaVita’s support for kidney center research. MedCo and Express Scripts have managed pharmacy benefits for the state’s health plan, which would have covered UNC system employees including Roper, WBTV reported.

Roper issued a statement last week saying he has always disclosed his corporate ties, holdings and stock options to UNC Health Care, the UNC School of Medicine and the UNC system. He has always recused himself from matters that might cause a conflict of interest or the appearance of one, he said.

In an email to WBTV, Roper said he marked the companies where he held board seats as having no known business activity because he actively avoided getting information about such matters in the course of recusing himself. But the amended forms in question were submitted after a WBTV reporter sent an interview request referencing the business relationships in question.

Roper chairs the Cigna board’s compliance committee and serves on its executive and finance committees. The compliance committee “oversees the company’s key compliance and ethics programs, including compliance with the laws and regulations that apply to business operations, such as data privacy and U.S. federal and state healthcare program requirements,” according to the company’s most recent proxy statement.

At DaVita, Roper serves on the board’s audit committee, compliance committee and clinical performance committee.

The UNC system on Wednesday released a letter from the State Ethics Commission evaluating Roper’s statement of economic interest. The commission did not find an actual conflict of interest but found potential for a conflict of interest that does not prohibit Roper from serving, it said.

“Dr. Roper should exercise appropriate caution in the performance of his public duties should issues involving Cigna, Inc., DaVita, Inc. or any entities in which he owns financial interests come before the UNC University System or the UNC Health Care System for official action,” said the letter, signed by Mary Roerden of the State Ethics Commission and dated Aug. 1.

The UNC system also released an Aug. 2 letter from Roper asking that his statements of economic interest be amended “to include certain disclosures I inadvertently omitted in my original filings.” At several points, it references the fact that companies where he was a board member “may have had material business dealings with the state … although I am not aware of any such dealings with the UNC Health Care System.”

Roper added that he’d listed his board memberships on his curriculum vitae and that they were in several of his university biographies.

“I fully informed the School of Medicine, UNC Health Care System, and the UNC System Office of my relationships with DaVita and Express Scripts,” Roper wrote. “Based on guidance provided by the State Ethics Commission in response to my initial disclosures, I worked with the UNC Health Care System to ensure we had in place, and, in fact, took necessary precautions to avoid participating in discussions or decisions on topics that may have given rise to a conflict, or the appearance of a conflict, due to these relationships.”

Another statement released by the system came from the UNC Health Care System's senior vice president and general counsel, B. Glenn George. George, who has held that role since December 2011, said she was advised early in her tenure of Roper's board memberships.

"Dr. Roper consistently left the room whenever there was discussion of issues related to dialysis services, and I never observed him participate in any discussion or decision related to those services at UNC Health Care," George wrote. "Similarly, I do not recall any meetings in which Dr. Roper participated in decisions involving pharmacy services comparable to those provided by Express Scripts."

Corporate Entanglements and University Leaders

University and system leaders have long found themselves scrutinized for their corporate ties. City University of New York chancellor W. Ann Reynolds took flak in 1994 from some who said she spent too much time on boards for five companies. More recently, University of California, Davis, chancellor Linda Katehi resigned in 2016 after a series controversies that included her briefly accepting a board seat at the company operating DeVry University and serving on the board for textbook company Wiley Inc.

Not all presidents serve on corporate boards, but the practice is far from uncommon, according to Judith Wilde, chief operating officer and professor in the Schar School of Policy and Government at George Mason University. She and Finkelstein have long studied college presidential pay and corporate board membership. (They have both contributed opinion pieces to Inside Higher Ed.) In a 2010 study, 43 of 134 presidents sampled served on a total of 73 different boards, she said. They made about $11 million in total.

Even a college president who receives little or no compensation for an external board membership may be tugged at by competing priorities, though.

“They all have full board meetings at least once a year,” Wilde said. “They also have committee meetings so that we figured, on average, a president participated in 24 meetings per year per corporate board.”

Presidential contracts often contain provisions allowing presidents to serve on corporate boards for compensation if it does not interfere with their responsibilities to a campus, Finkelstein said.

“In the best contracts, there is language dealing with conflicts of interest,” he said. “Increasingly, the contracts limit the number of boards, most often to no more than two, sometimes three, sometimes only one. And the best contracts we review also have a reporting requirement to the board in terms of compensation received or the amount of time spent.”

The ethics scrutiny is the latest in a long string of leadership controversies at the UNC system and its institutions. Spellings departed from the system’s presidency in January after tensions with the board. Carol Folt resigned the same month from her position as Chapel Hill chancellor amid disagreements over the future of the Silent Sam Confederate monument.

Then in March East Carolina University chancellor Cecil P. Staton said he would soon step down in a decision he “did not initiate.” That prompted one UNC Board of Governors member to criticize the board’s chairman, Smith, for having an “irrational personal vendetta.”

Asked for reaction Wednesday to reporting on Roper’s statement of economic interest forms, two leaders in the system’s Faculty Assembly declined comment. One faculty member said he had “no words.”​

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