Strings Attached

Pizza baron's gift to Wayne State business school draws scrutiny over provisions requiring consulting with donors on certain courses and stipulations on what a dean should be paid.

August 31, 2016
Wayne State University
Details of a $40 million donor agreement for the construction of a new business school building at Wayne State University have drawn scrutiny.

Terms of a pizza-and-sports magnate family’s $40 million gift to build Wayne State University’s business school have come under scrutiny in Detroit, with clauses about donor consultation on curriculum and dean pay catching attention in particular.

But while a donation agreement between Wayne State and Michael and Marian Ilitch reveals intriguing details about the current tricks of the trade in university fund-raising, much of it is actually keeping with current trends. The university maintains that those much-dissected provisions on pay and curriculum aren’t out of the ordinary -- even though many continue to worry it could leave open the door for the big-name donors to exert undue influence.

Others say that if anything is out of lockstep with current practices, it’s the length of the naming rights being awarded. The donation agreement calls for the school to be named after Michael Ilitch in perpetuity. But even if many of the conditions -- including details on how the donors are to be recognized -- are honored, others are raising concerns of faculty members.

To fully understand the donation terms’ context, it’s important to consider the history of the business school’s donors, as well as development planned around the school’s future site to create an area called The District Detroit. Donors Michael and Marian Ilitch founded the Little Caesars Pizza chain. The couple also owns several other business interests including the Detroit Tigers Major League Baseball team and the Detroit Red Wings National Hockey League team.

They are also pouring money into a high-profile Detroit development. One of their other business interests is a development company currently working on a major overhaul of an area of the city just north of downtown. That overhaul includes a new $630 million arena being built for the Detroit Red Wings to be called Little Caesars Arena. The site for the new business school is about a quarter of a mile away from the new arena. It is about 1.2 miles from Wayne State’s Student Center and surrounding campus, which includes its current business school site.

The Ilitches agreed to donate millions of dollars toward the business school in an agreement signed last year and recently made public after local reporters at the Detroit Free Press and local blog Motor City Muckraker filed Freedom of Information Act requests. The agreement calls for the Michael and Marian Ilitch Foundation to give $35 million to build a new 120,000-square-foot business school for Wayne State. It also calls for the foundation to donate $5 million to establish an endowment fund at the business school once construction is complete by the beginning of 2018.

In the meantime, Wayne State agreed to name the business school after Michael Ilitch -- the school has already been branded the Mike Ilitch School of Business. The name is to remain with the business school in perpetuity, regardless of its physical location.

Wayne State also agreed to several other stipulations, including, controversially, that it would honor requests from the Ilitches or their foundation to consult regarding the business school’s curriculum. It agreed the business school’s dean and senior staff will be compensated at levels consistent with other positions of similar standing. And it agreed to spend a minimum of $100,000 each year for 10 years after the new building is complete in order to promote the business school.

Some other provisions are tied more to the land on which the business school will stand. Wayne State will lease it for $1 per year under a 35-year lease that can be extended to a maximum of 95 years. The university will take on all taxes and maintenance charges.

Some read the agreement as having the potential to infringe on academic freedom. It specifically calls for Wayne State to meet with the Ilitches or their foundation at their request to consult on the curriculum of the business school, its strategic plan or “other aspects of the educational experience.” It specifically says the scope of several types of consultation will not be limited: on providing business school courses on food, hospitality, sports, entertainment and events management; on creating an internship program with Ilitch companies; on developing or serving on advisory boards for the business school; and on improving the rankings of the school.

University officials pointed out that the very next line in the agreement says Wayne State will have the sole right to determine the business school’s curriculum. But some faculty members worry about undue influence.

“There are academic concerns that are being raised,” said Charles Parrish, a professor of political science at Wayne State and the president of the faculty and academic staff union for the university, the American Association of University Professors-American Federation of Teachers Local 6075. “Particularly about handing curriculum over to some external forces.”

Parrish understands why the Ilitches would be concerned with having the business school address hospitality and other fields in which they have expertise. But he said his union is also responsible for protecting the rights of its members.

“It’s a constant struggle in those particular areas,” Parrish said. “If you start directing our members, have some faculty members being told they have to change their areas of research from supply chain management to how you run a good conference center for sports medicine, it’s a problem.”

Wayne State pushed back on the provision over dean pay. The donor agreement says that the dean of the business school and its other senior staff “will be compensated in perpetuity at least at the level of compensation paid by the donee for positions of similar standing at donee.”

Some have taken that to mean the business school dean would have to at least tie as the top-paid dean at Wayne State. The salary for the business school’s dean, Bob Forsythe, was $265,087 last year, but Wayne State in the past has paid deans in its school of medicine more than that. The associate dean for maternal, perinatal and child health, Sonia Hassan, made $524,397 in 2015, although she has several medical roles in research and seeing patients and is the university’s highest-paid employee. The medical dean, Jack Sobel, made $325,569. Officials at medical schools are often the highest-paid at universities.

The language about salaries concerned Wayne State’s Academic Senate president, Louis J. Romano. He doesn’t think the business school dean would be considered of similar standing to the highest-paid medical deans, but he’s not entirely comfortable with the idea of a donor dictating salary levels, either.

“That bothers me a little because they’re setting salaries,” said Romano, a professor of chemistry. “It seems like they’re probably treading grounds I’d rather not see them tread.”

The agreement does not lock Wayne State into making Forsythe or any other business school dean its top-paid dean, said Susan E. Burns, President of the Wayne State University Foundation. Forsythe already makes more than several other deans.

“The language is open to interpretation,” she said. “I think the intention is to keep the dean and key staff competitive. We always want to make sure we’re attracting and retaining the best talent, make it a first-class business school, highly ranked, highly regarded.”

Burns also defended the donor agreement as not infringing on academic freedom.

“This really has to do with making sure we’re keeping the lines of communication open -- the ultimate control over decisions does remain with the university,” she said. “There is going to be an ongoing relationship, letting the donor know what is happening. They have incredible expertise in the world of business. We certainly want to listen to them, in particular in areas where they have the greatest expertise.”

Burns has been in her current position since February, meaning she was not a part of negotiations around the contract in question. She had previously worked in development for Wayne State from 2001 to 2008 before leaving for the foundation of a major Michigan hospital and health care network.

The donor agreement with the Ilitches did not stand out as unusual when Burns first read it, she said. She went on to describe it as larger and “more robust” than a typical agreement, something that’s to be expected for a $40 million gift.

“It’s also the largest gift of this kind to the university, so it’s not surprising it would be longer and have more detail,” she said. “Everybody wants to go in making sure they’re aware of everything, making sure there are no hard feelings down the road.”

The Ilitches are helping Wayne State with a project that the university could not otherwise undertake, Burns said.

The total construction budget for Wayne State’s new business school building is $59 million. The university expects to issue $14 million in bonds and raise an additional $10 million to fund construction. The business school’s budget for the 2017 fiscal year is roughly $11.9 million. It enrolls about 3,700, with about 2,500 being undergraduates.

“I think people try to turn this into a negative, that the Ilitches are too involved in this gift and that they’re not being philanthropic,” Burns said. “The reality is they’ve been very successful. They’re not required to give back to the community. They’re not required to help Wayne State University Business School. It’s always going to be connected with their name. I think it’s appropriate for somebody to want to make sure that something that’s going to bear their name is something that they’re going to be very proud of.”

A spokesman for the Ilitches’ companies did not return a request for comment.

Burns was not aware of Wayne State agreeing to a land lease for any other academic buildings. Similar arrangements have been followed for student housing construction, and the university may consider more alternative facilities deals in the future, she said. That would be consistent with a broader trend in higher education to pursue new construction models.

A majority of the donor agreement does appear to meet current norms in the fund-raising field, said Cedric Richner, co-founder and president of fund-raising consulting firm Richner & Richner and a former regional executive director for the University of Michigan’s $1.4 billion Campaign for Michigan. One unusual point is that the agreement will have the business school carrying the Mike Ilitch name as long as it exists in the future.

“The days of significant naming opportunity in perpetuity without any long-term mitigation strategies or caveats is becoming more and more unusual,” Richner said. “There is an increasing number of tools, approaches and techniques related to negotiating naming rights.”

More broadly, donor agreements are becoming increasingly specific and donors are becoming more hands-on, Richner said. Donor agreements can protect recipients when a lot of money is on the line. They can also protect donors from feeling their money has been misspent.

“Never in the history of humankind has there been so much information readily available to donors and prospective donors,” Richner said. “So donors tend to be much more engaged, have more access to information and are looking for a different kind of return on investment -- quote unquote -- than they were a couple of decades ago.”

In that light, donor agreements could have the potential of heading off problems between universities and donors. Such problems have been known to arise in the past.

Beth Gazley, a professor who directs the master of public affairs program at Indiana University’s School of Public and Environmental Affairs, pointed to Yale University deciding to refund a $20 million gift in 1995. The university moved to return the gift to billionaire alumnus Lee M. Bass after he asked to approve faculty members for courses in a new Western civilization program his gift was to have funded. Bass had given the gift four years earlier.

The example is a case where negotiations between donor and institution broke down -- the donor asked for too much control for the university to be comfortable. That potential still exists under donor agreements, of course. In the case of Wayne State, time will tell whether “consulting” on curriculum ever approaches a level of influence faculty members or university leaders find objectionable.

While they can protect, the increasing popularity of detailed donor agreements has other potential drawbacks, too.

“I can tell you from an anecdotal point of view, absolutely there’s a trend,” Gazley said. “And it’s a little frightening, because it just ends up in more and more intricate legal documents, which create more and more opportunities for lawsuits.”

At the very least, though, the agreement shines a light on the talks that transpired between the university and the Ilitches. It shows what the donors were interested in and what the university was willing to negotiate.

“A contract is an agreement with donor obligations and donee obligations, and that’s what they get out of it,” Gazley said.


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