Creating a Culture of Cronyism

A lucrative form of patronage appears to be emerging at Michigan State in the wake of the Nassar scandal, write James Finkelstein and Judith Wilde.

June 11, 2018
 
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Later in his life, Jonas Salk began thinking, writing and speaking about various aspects of the human condition. In 1985, he went to New York University to discuss his most recent, and what turned out to be his last, book, Anatomy of Reality: Merging of Intuition and Reason. He spoke about changing societal institutions in terms of metamorphosis, with a focus on two powerful ideas.

First, Salk said that our institutions evolve constantly. Second, he stated with great confidence that more often than not, we fail to recognize these transformations as they happen. One very powerful example he gave linked the closing of state mental hospitals to homelessness, which in turn became linked to both the crack cocaine epidemic and then to the emerging HIV/AIDS crisis. Only in hindsight, Salk said, did we begin to understand how these were, at least in part, related events.

While it may seem like a broad leap from Jonas Salk’s evolving institutions to the crisis at Michigan State University, there are early signs that what is happening there may be an early indicator of public higher education’s metamorphosis -- and not in a good way.

In an almost reflexive response to the televised sentencing of Larry Nassar, the elected MSU Board of Trustees accepted the resignation of the long-serving president, Lou Anna Simon, and awarded her a platinum parachute. To many -- not all -- that made sense.

But what happened next, the almost immediate appointment of a former Michigan governor as interim president, without any faculty input or community involvement, led to a vote of no confidence in the board. Salk might have sensed this as an early indicator that a metamorphosis is underway: the transformation of MSU from a meritocracy to an emerging culture of cronyism.

Of course, politicians becoming university presidents is nothing new. In fact, it goes back to the founding of the country. In 1785, Abraham Baldwin, a delegate to both the Confederation Congress and the Constitutional Convention, was appointed the first president of the University of Georgia. More recently, politicians such as John Brademas, David Boren, Thomas Kean, Janet Napolitano, Mitch Daniels, Sam Olens and Terry Branstad, to name a few, have become university presidents after leaving elected office. This list does not include former appointed government officials who also have become university presidents. In their new roles, all received considerably higher salaries and greater perks than they had as elected officials. In fact, as we have stated before, the vast majority of public university presidents are paid significantly more than a governor, a member of Congress or even the president of the United States.

According to the American Council on Education’s American College President Study (2017), the percentage of university presidents coming directly from outside higher education has remained relatively constant since 2001. On the other hand, there has been a decrease in the number of presidents who report their last position as an elected or appointed government official. Nonetheless, the expressed interest and willingness of governing boards to recruit and consider such candidates continues to increase. Michigan State is just the latest example and may well be the canary in the coal mine.

It is worth noting the structure of Engler’s employment agreement. Engler’s salary as interim president is set at $1 less than the lowest-paid president of a Big Ten university. His contract also acknowledges that the board has been notified of “his intent to donate” his salary to “qualified university organizations or entities and that such donation will be at the sole discretion of the interim president.” Of particular interest, however, is that the language does not appear to create a legally binding obligation to do so.

Although Engler declined health care and retirement benefits, he did accept other benefits such as access to a car and driver for “official university duties” as well as a vehicle such as those "furnished to other senior executives." In our review of over 200 presidential contracts, it appears that most provide a car, but this is one of the very few that also provides a driver. There are other significant benefits that he also will accept -- spousal travel, tickets for his family to attend cultural and athletic events, and being permitted to continue serving on several corporate boards -- where he appears to have received over $600,000 last year in director’s fees and stock awards. By contrast, Lou Anna Simon does not appear ever to have held a paid corporate directorship.

The local news media detailed Engler’s first spate of appointments at MSU. These may foreshadow the full metamorphosis of MSU into a political pool for patronage. To start, he appointed Carol Morey Viventi, who served as his deputy chief of staff 25 years ago and since then has spent her entire career in state government. According to the Macinack Center, her last reported state salary, in 2016, was just over $135,000. She now holds a newly created position of vice president and special counsel at MSU with a reported salary of $250,000.

Engler’s former press secretary, John Truscott, was hired on a three-month contract at $325 per hour, to handle crisis communication. On an annualized basis, this hourly rate totals more than $675,000 per year.

Engler also hired Robert Young Jr., former chief justice of the Michigan Supreme Court, at a discounted rate of $640 per hour ($1,331,200 annualized) to coordinate various legal matters. Young initially was appointed to the court by Engler in 1999.

Two of the most recently announced appointees, Kathleen Wilber as executive vice president for government and external relations, and Emily Gerkin Guerrant as vice president and university spokesperson, also are Republican loyalists. Wilber served for 12 years in Engler’s gubernatorial cabinet. She will be paid 30 percent more than her predecessor. Guerrant spent the first seven years of her career as a Republican staff member in the Michigan House of Representatives.

Finally of note, Engler hired his predecessor, former governor James Blanchard, through the law firm DLA Piper. The engagement letters for the $50,000-per-month retainer, $600,000 for the first year, provide only a general description of the services to be provided. These also allow for the possibility of additional billing at an unspecified hourly rate once any official investigations begin, such as the one recently announced by the U.S. Department of Education.

Beyond Engler’s prior relationships with these individuals, there is no evidence that any of these personnel appointments or contracts went through an open and competitive search or procurement process. Rather, using the Nassar crisis, it appears that the board has suspended normal business practices and permitted an interim president to reward members of his former staff and other colleagues with highly paid positions and lucrative, potentially long-term contracts.

Given that MSU will be dealing with the fallout from the Nassar scandal for years to come, it is possible and perhaps likely that these appointments and contracts could extend well beyond Engler’s tenure and be worth millions. Seven years after the Sandusky scandal broke, Pennsylvania State University has paid nearly $60 million in legal and public relations fees, and the meter is still running. In less than a year, MSU already has racked up more than $12 million in fees to their own attorneys and PR. In addition, MSU recently announced that it will pay $500 million to Nassar’s victims ($425 million to the 332 victims in current litigation plus $75 million in a trust fund for potential future plaintiffs), plus an unknown amount to the victims’ attorneys.

There are many differences between being elected to office and being appointed as a university president. For politicians, “to the victor go the spoils.” They get to make a raft of new appointments at every level of government, from personal staff to agency heads to commission members. Past association and loyalty are often essential qualifications to land a position in a new administration. In many cases, these individuals make a personal sacrifice by accepting substantially lower compensation in order to serve. Not only is it clear that there is a new culture of cronyism and patronage being built at MSU, we are learning that it also very lucrative.

Time will tell whether or not the MSU Board of Trustees will survive. But what does seem certain is that the interim president’s appointees will be there for years to come and are the first to cash in on the tragedy that befell Nassar’s victims. Given this new culture of cronyism, we should not be surprised if the metamorphosis taking place results in something more like a character from Kafka than a beautiful butterfly.

Bio

James Finkelstein is professor emeritus at George Mason University. Judith Wilde is the chief operating officer and a professor at George Mason's Schar School of Policy and Government.

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