What two conferences teach us about governance and private capital |
When Sen. Maria Cantwell (D-Wash.) cautioned Big Ten presidents about opening Big Ten Enterprises to an outside investor whose “primary goal is to make money” and would be “unlikely to align with the academic mission of your universities,” her warning was a critique of profit versus purpose.
There’s not a university board that doesn’t view institutional mission as its North Star when evaluating private capital. There’s also not a university that’s indifferent to revenue growth in this era of declining enrollment, rising costs and unprecedented financial pressures. University leaders live at the intersection of both realities.
The difference between the Big Ten Conference’s stalled discussions with UC Investments and the Big 12 Conference’s emerging partnership with RedBird and Weatherford reveals how the governance model of any proposed deal with private capital will determine whether the outcome will be successful. These conferences ran parallel experiments in privatization. Both explored monetizing aggregated media rights. Both engaged sophisticated capital. Only one produced a deal. Why?
I challenge the notion that private capital is inherently incompatible with charitable mission. More than two decades ago, in IRS Commissioner v. Redlands Surgical, the court was asked whether a nonprofit health care system could partner with private, for-profit participants, share in economic upside, and still preserve its tax-exempt status as a 501(c)(3) organization. The answer was yes ... provided the nonprofit retained operational control.
The Redlands holding shaped how health care systems engage with private capital. It also established a framework for........