Since last July, several University professors have expressed their concern and distrust of Chancellor Mark Emmert’s pay raise — specifically LSU Foundation’s contribution to it.
While many members of the University’s faculty and staff have expressed ill feelings toward what a Faculty Senate resolution called a “disproportionate raise,” others are concerned for other reasons.
Some professors who are endowed by the LSU Foundation are concerned about the low amount of funds available to them this year. Professors are confused about how the foundation can afford to sponsor part of Emmert’s pay raise and loan but cannot continue to support equally their endowments.
Recent media attention surrounding Emmert’s $100,000 interest-free loan from the foundation has caused increased public interest and concern.
How LSU Foundation contributes
LSU Foundation is an independent charitable organization focused on benefitting the University by raising support funds from private donors, said foundation President and Chief Executive Officer Cecil Phillips.
The foundation was chartered in 1960 and is governed by its own board of directors. It is financed entirely by private resources.
Through the foundation, many donors choose to contribute their funds to support certain professorships in specific departments of LSU A&M College, the Agricultural Center and the Paul M. Herbert Law Center, said Phillips. These gifts are called endowments.
Through other gifts and fund-raising activities, the LSU Foundation also sponsors a number of scholarships for University students, Phillips said.
For the 2001-2002 fiscal year, gifts and pledges for academic purposes directed to the University through the foundation amounted to $43.5 million.
Phillips said the money donated for endowments never is spent but instead invested. The funding for University professors’ endowments come from the earnings of the investments.
The foundation also budgets annually to provide six professorships from its general operating budget. Phillips said these specifically are called Foundation Professorships.
Foundation Professorships are not endowed and are generally larger accounts than privately endowed professorships. Phillips said Foundation Professorships pay about $26,000 a year, while the average endowed professorship pays from $5,000 to $10,000 a year.
      “The foundation provides a fund-raising entity for LSU at no cost to LSU,” Phillips said. “Most universities of our size spend quite a bit on it, but that’s not the case here.”
Because the foundation is a private nonprofit organization, it is not subject to public record laws. The foundation does not have to reveal who donated money or the amount of the donation. It also does not have to reveal the amount of money given to specific endowments, scholarships or other funds.
The amounts are made public when they are presented to Board of Supervisors because its actions are public record.
One Professor’s Concerns
Some professors who are endowed by the LSU Foundation are worried the money meant for their professorships has been redirected into Emmert’s salary this year.
Horticulture professor Paul Wilson is one of those.
On June 21, the horticulture department announced Wilson would be the first Ola Cook Holmes Endowed Professor of Horticulture.
Wilson said in December his department head informed him the endowment had fallen through.
“[The department head] was told by the dean that there was no money in the LSU Foundation for funding the endowment,” Wilson said. “Apparently, bad investments had eliminated all interest funds to begin payments of the salary supplements. I assume that they have not squandered the principal.”
Wilson responded to his department’s loss with “stunned disbelief.”
“The disbelief became even more pronounced when it was made clear that somehow ‘some’ interest was actually gained from foundation investments,” Wilson said. “At least enough to provide some much-needed cash to the chancellor. I would also hope that whoever handles the investment portfolio for the foundation has been relieved of his job — since he appears to be incompetent.”
Wilson admitted he likes some of the things Emmert has done at the University and does not begrudge an incremental salary increase as long as Emmert improves the University.
However, Wilson said he does not agree with the board’s decision to reward Emmert with the “top” national salary because LSU is not the “top” national university.
Wilson especially disagrees with the pay raise if it is going to cost him and other professors their endowments.
Foundation’s Response
Phillips is quick to dispel any claims the Foundation has been misusing its endowment funds to subsidize Emmert’s payraise and loan.
“A restricted endowment for a scholarship or a professorship cannot be spent on any other purpose, period,” Phillips said. “It would be illegal. It would be against tax law, foundation policy and University policy.”
Phillips explained the money the foundation contributed to Emmert’s raise came out of its general operating budget. The money for the endowed professors comes from specific donations.
“In most cases, we don’t decide at all [where the money goes]; the donor does,” Phillips said. “About 99 percent of the decisions are made by the donors. Very few gifts come in unrestricted.”
Phillips said if monies meant for the endowment really are being redirected into different accounts, then any offended party could sue the foundation. The endowed professor, the department and the donor could all file a lawsuit again the foundation.
“If there’s a breach of an endowment agreement, or any other gift agreement, then somebody could sue,” Phillips said.
Phillips also said the foundation is audited annually, and the auditors would notice if money from endowments was going into the operating budget.
Phillips described the annual audit as a “tremendous incentive to behave” and added a bad qualified audit could cost many people their jobs.
“I know the credentials of the people who manage our funds,” Phillips said. “Some of the people who criticize [our expenditures] don’t have the background to evaluate the performance.”
Phillips does not know how people came to believe the foundation had made “bad investments.” He said he personally has not reported this to any department or individual endowed professor.
“I don’t think we’ve made bad investments at all, but the market has hurt us badly,” Phillips said. “Our investments have done as well or better than other universities of our size.”
Phillips said professors still should be aware their endowments are not doing well in the market compared to past years. But this is because the economy is down.
Phillips said the “climate for giving” also is bad because of the negative press on LSU and the foundation.
Any time there is “bad press” for the University, donations to the foundation tend to decrease, Phillips said. But the recent attention specifically names the LSU Foundation, and Phillips anticipates a possible dip in donations.
The economy hurts others
Since the University awarded human ecology professor Maren Hegsted the A.B. Clark Professorship last March, the foundation also has lost money from her endowment.
Hegsted said she knows the money for the endowments and Emmert’s payraise come from two different sources, and Emmert’s raise has nothing to do with the decreasing interest from the endowments.
Hegsted still is confused about why the foundation did not inform her earlier.
“Everybody hates to get money taken away from them,” Hegsted said. “The concern I had is that we were not informed beforehand.”
Hegsted said the foundation did not send a letter informing her the interest from her endowment had gone down. If she would have known earlier, she might have spent her the money for research in a different fashion, she said.
Phillips said he does not know why Hegsted was not notified about the loss of endowment interest.
He said the dean of each endowed professors’ department is supposed to manage the endowed funds and keep the professor informed. The foundation does not speak directly with the endowed professors.
Phillips does admit communication among the foundation, the administration and the departments is in need of improvement.
Pay raise to support LSU
While recent controversy deals specifically with LSU Foundation’s contribution to Emmert’s pay raise and loan, the entire salary package has turned heads since the board approved it in July.
Roger Ogden, the chairman of the LSU Board of Supervisors, said there was never any secrecy about Emmert’s pay raise or retention bonus.
Ogden said Emmert went to LSU System President William Jenkins in March 2002 to let him know the University of South Carolina had contacted him about a job offer.
This was the third time USC had contacted Emmert, but this was his first time to follow up on it, Ogden said.
Ogden said Emmert was intrigued by USC because they were offering him their commitment to help build a flagship university, where Louisiana’s Board of Regents and the Louisiana Legislature had not followed up on similar promises.
Ogden said USC and the South Carolina legislature were prepared to give their new chancellor the freedom and power to enhance the university.
Emmert came back from his interview with USC and told Jenkins about his visit, Ogden said. Emmert expressed his frustration with LSU’s failure to commit to what they had originally hired him to do — turn LSU into a flagship university for the state of Louisiana.
“Our discussions [after USC’s offer] were not about Mark Emmert,” The Reveille reported Emmert said in a press conference last March. “In fact, I wasn’t really much of the topic of conversation at all but of the more important subject of Louisiana State University and its future.”
After meeting with Emmert, Jenkins went to Ogden, the rest of board leadership and Gov. Mike Foster to discuss the chancellor’s frustrations and what their next actions would be.
Ogden said they decided to match the amount of the salary package USC was prepared to offer Emmert to get the issue off the table.
“He never asked for more money,” Ogden said. “The Board of Supervisors volunteered. We’ll match [USC’s offer] in order to remove it as an issue and get to the real issue.”
Ogden said the group of leaders spent the next three months discussing how to give Emmert more support in building a flagship university and coming up with the funds to offer him a new salary package.
“Through my discussions with the governor, legislators and President Bill Jenkins, I’ve become convinced that we have the renewed commitment to help LSU become the nationally competitive research institution that the state needs,” The Reveille reported Emmert said last March.
At the Board of Supervisor’s meeting on July 12, members formally approved the package and officially formed the flagship agenda committee, Ogden said.
Emmert’s new salary package was $490,000 a year, with a $500,000 bonus if he stayed with the University for five more years.
Why Emmert needed a loan
Although they were unsure of an exact date, Ogden, Phillips and human resource management analyst Cindy Hudnall said Emmert came to Jenkins in late July to ask for a loan.
Emmert told Jenkins the reason for the loan was to purchase a home in Pensacola, Fla. Ogden pointed out Emmert and his wife do not own their own home because they live in a University-owned residence.
Jenkins had the authority in the LSU System bylaws to offer Emmert the loan without consulting anyone because it would not change the amount of the package. But Jenkins touched base with the board leadership anyway, Ogden said.
Jenkins and the board leadership saw the loan as a good idea because it “further bonds Emmert to the University,” Ogden said.
Ogden said the idea of the loan was appealing to the group of leaders because it gave Emmert the opportunity to enjoy the benefits of owning a home, while at the same time tethering him to the University.
The loan, which came from the general operating budget of the LSU Foundation, did not cost the University any money or add any amount to the salary package, Ogden said. This way, if Emmert chooses to leave the University before the five years are over, he will have to pay the money back in full.
“It never occurred to me that this is something that would be worth announcing, any more than that we would announce which [stock] options the chancellor would choose to invest in,” Ogden said.
Ogden said he was surprised by the amount of controversy surrounding this loa, because the salary package was made public, and this did not change the total amount of the package.
Emmert responds
Emmert said he feels the media and public reactions regarding his financial situation were unfortunate for him.
“My reaction is to do my job as well as I know how to do it,” he said. “What any one individual is worth in terms of pay has to be decided by others and not himself. I’m going to do my job, and at the end of the day, people can decide whether or not that was a good use of their money.”
Public outcry about his Pensacola, Fla., home aggravated Emmert, but he said he understands it comes with the territory of being a public figure.
“An important thing that people often forget is that we don’t own a house,” he said. “But that doesn’t mean we are not very fortunate.”
He now hopes the campus community can focus on the progression and success of the University.
“We have more agreement right now from the Board of Regents and the [Commissioner of Higher Education’s] Office than probably ever in the history of the University about the need to move this campus forward in the national competition,” Emmert said. “And we enjoy even more support from the governor’s office, so all those things have been very heartening and very encouraging.”
But he did agree public concerns prove funding problems, specifically for faculty pay, still exist.
“I continue to make faculty salary one of the highest priorities for our budget,” Emmert said.
For the past four years, the University has topped the Southern ranks in the amount of faculty pay increases, he said.
“We don’t know what we will be able to do next year; it still depends on the legislature and the economy, but I still continue to put that at the highest priority for financing,” Emmert said.