Whose Financial Interests Are University Trustees Serving?

November 1, 2016

Over the past month, college students across the county have explored how financialization affects their schools with a series of trainings led by Refund America, Hedge Clippers, LittleSis, and the Roosevelt Institute.


As many students know, Wall Street firms make billions of dollars off of higher education every year through vehicles including toxic swaps and exorbitant investment management fees. One important factor that drives this financialization of higher education is the dominance of Wall Street financiers in decision-making positions at universities.

This overrepresentation of financiers at universities contributes to a more corporate education culture—the phenomenon of universities becoming “billion-dollar hedge funds with schools attached.” According to a study published in the Stanford Social Innovation Review, 56 percent of board leadership positions at major U.S. private research universities were held by people with a professional career in finance, up from 26 percent in 1989. At liberal arts colleges, the number was 44 percent, up from 28 percent in 1989. While hedge fund managers, bankers, and other financiers sit on the boards of elite universities, they also actively undermine higher education by avoiding paying their taxes, as well as by contributing to politicians, think tanks, and other nonprofits that advocate cutting higher education spending.

While Wall Street’s grip on universities might seem bleak, it actually puts students in a unique and potentially powerful position. When organizing against the financialization of their schools and for the resources they deserve, students have the opportunity to challenge some of the most powerful people and institutions in the world.

One key part of taking on these powerful people is knowing what you’re up against. At LittleSis, we focus on investigative research on power structures, and, in particular, tracking relationships between powerful people and institutions: a trustee’s relationship with a big bank, for instance, or an endowment manager’s relationship with a hedge fund. LittleSis.org is a tool for activists and researchers, a wiki-style online database that anyone can join and contribute to that lets you track and map relationships between powerful people and institutions. For college students, this type of research helps inform organizing strategy and shows how Wall Street’s higher education takeover is excellent for banks’ bottom line but terrible for students, teachers, and economic equality.

Take, for example, Duke University in North Carolina. Eight of Duke’s 35 trustees are Wall Street financiers who work for firms including Bank of America, the Bank of New York Mellon, and private equity giant Kravis Kohlberg Roberts & Co. The chairman of the board is billionaire David Rubenstein, the co-founder and co-CEO of the Carlyle Group, one of the biggest private equity firms in the world, and arguably one of the most powerful people in the world. Rubenstein is also on the leadership council of Fix the Debt, a pro-austerity organization. He played an integral role in lobbying against the passage of the carried interest loophole, a tax loophole that allows private equity firms including Carlyle to avoid billions of dollars in taxes—money that could go toward education costs such as Pell Grants or better salaries for teachers. We’re talking major money diverted from the public and put straight into financiers’ pockets—perhaps $180 billion for the carried interest loophole alone. From 2012 to 2014, the Carlyle Group alone avoided $5.1 billion in taxes thanks to this loophole.

View the map on LittleSis

Mapping these relationships among powerful people and organizations—what we at LittleSis call “power research”—can also help build powerful student coalitions across movements. For example, the Carlyle Group owns several corporations that might be of interest to climate justice and racial justice student organizations, including Philadelphia Energy Solutions, the largest oil refinery on the East Coast, and Combined Systems, which produces the tear gas used against Black Lives Matter protesters in Ferguson, Missouri.

Power research often reveals blatant conflicts of interest, such as when university trustees who manage endowment money and earn fees from the university have private financial interests that are in conflict with the university’s educational mission. These conflicts of interest raise red flags about what exactly trustees are looking out for: the university’s best interests, or their personal financial interests?

For instance: some quick power research reveals Duke trustee Stephen Pagliuca is co-chairman of Bain Capital, which has been employed to manage money for Duke’s endowment. With some additional calculations, students could determine how much Bain Capital earned in fees from its relationship with Duke and show what that money could have gone toward that would support students instead of Bain’s bottom line. Further research might reveal that other firms represented on Duke’s board also earn fees managing the university’s endowment.

Bringing transparency to these kinds of conflicts of interest can support calls for more democratic and accountable decision-making structures at universities. This could include boards of trustees who are more responsive to the concerns of students, faculty, staff, and community members, not just Wall Street.