A lot of strings on $12M ‘gift’ to UK business college

Jacalyn Carfagno
Jacalyn Carfagno

Maybe it’s because I grew up in retail, but I’ve never questioned where the power resides when one person hands over money and another receives it.

Who hasn’t seen people laugh at the bad jokes of the guy buying the drinks, heard about someone who’s extra nice to a childless and wealthy relative, thought twice about a pithy remark that might affect a paycheck, sale or tip?

Fiction is full of cautionary tales about too much bargained in exchange for a promise of riches. So is fact.

And that’s what I’ve been thinking about since I read the contracts for the $12 million gift to the University of Kentucky’s College of Business and Economics by foundations associated with Papa John’s founder John Schnatter and Charles Koch, the billionaire industrialist and conservative political activist.

The money will go toward establishing the John H. Schnatter Institute for the Study of Free Enterprise. Business Dean David Blackwell assured reporter Linda Blackford that this represented no threat to academic freedom. The institute’s name, he noted, says “the study of,” not “for” free enterprise.

But even that seemed like small change in the marketplace of academic freedom compared to aspects of the contracts that define how the money changes hands. Each foundation will make specific gifts to the college in six increments, beginning December 2015 and ending June 2020. UK must reapply each year to continue receiving the money and, “the donor has the right to decline providing funding,” in response to these annual requests.

Even more troubling are the clauses that give the donors the right “to terminate this Agreement and to discontinue or withhold any Contributed Amount. Such termination shall be deemed effective upon the expiration of thirty (30) days from the date notice was provided.”

Other grants to UK that I reviewed seemed more secure, less coercive.

Translation: Either foundation can pull its funding on 30 days’ notice. Period.

This short leash puts another aspect of the deal in a different light. Whatever the name of the institute, the Koch and Schnatter contracts have the same language, which defines its mission as to “discover and understand aspects of free enterprise that promote the well-being of society.”

I know a lot of liberals think that capitalism and free enterprise are the bane of society, producing little but greed, inequality, over-consumption and environmental degradation.

I’m not one of those people. I think enterprise and the profit motive often energize people and organizations to innovate, increase wealth and bring things to market that can make life better.

However, there are limits. There are, for example, lucrative markets in things like women, child porn and heroin that I can’t endorse. And, businesses do from time to time shortchange employees, customers and the environment to make an added buck.

UK is committed to creating a number of positions, including a tenured economics professorship, two tenure-track economics professorships, a tenure-track financial economics professorship and a senior lecturer in entrepreneurship as well as “up to” 13 Ph.D fellowships.

What happens if some of those academics, while looking for the benefits of free enterprise stumble into capitalism’s dark alleys, finding things that distinctly don’t promote the well-being of society? With that 30-day notice looming, do they change paths or forge ahead?

And what happens if UK has hired people on long-term commitments and the foundations, for any reason or none, decide to pull out? Blackwell said he made the calculations and decided it was “an acceptable risk.”

Blackwell said the 30-day notice clause didn’t really concern him, noting that donors can stop giving money whether it’s in the agreement or not. Things happen: divorce, death, disgruntlement and the checks stop coming.

Still, other grants to UK that I reviewed seemed more secure, less coercive.

For example, the contract for the recent $23 million gift by Thomas and Janet Lewis to create the Lewis Honors College at UK says the grant “will be fulfilled according to the payment schedule outlined,” and includes premiums on a life insurance policy to fund a $7.5 million endowment. There’s no talk about annual reapplications and 30-day notices.

When in 2014 Bill Gatton, for whom the business school is named, pledged $20 million for a new UK student center from his foundation, the contract read that money “shall be paid,” on specific dates in coming years. “The foregoing payments represent Donor’s minimum obligation,” the contract states, “however it is understood that Donor shall have the privilege to accelerate or increase such payments,” and apply those increases to the balance due.

Again, no escape clause, no requirement to ask again annually.

I have some empathy for UK administrators. Public funding of public universities has shrunk to pitiful levels, meaning that sucking up to rich people is the lot of anyone who wants to keep a university or a college afloat. Money, after all, doesn’t grow on trees.

But there’s another old saying that applies here, too: He who pays the piper calls the tune.

Editorial writer Jacalyn Carfagno can also be reached at 231-1652.

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