Monday, January 23, 2012

Is UM president Donna Shalala guilty of a 'conflict of interest?'

Here's a story that won't be showing up in the pages of the Miami Herald anytime soon.

Jack Stripling and Andrea Fuller, senior reporter and researcher respectively at the The Chronicle of Higher Education - a Washington DC based newspaper - collaborate on an interesting article that appears in this month's issue focusing on what experts say are conflicts of interest involving some American college presidents.

Stripling and Fuller found that "a handful of college leaders [...] collect hundreds of thousands of dollars each year as directors for companies that are headed by or employ university trustees."

Topping the reporters' list of college chiefs with apparent conflicts of interest is University of Miami president Donna Shalala.

Stripling and Fuller write:
As president of the University of Miami, Donna E. Shalala answers to dozens of trustees, many of whom are captains of industry. But two of those board members also answer to her.

Ms. Shalala's uncommon role reversal is a product of her lucrative service on the boards of two different companies headed by members of Miami's Board of Trustees. In effect, her role as a director at a national medical group and at a home-building empire places her in the position of functioning as her bosses' boss.

While corporate board service is not uncommon for university presidents, Ms. Shalala is among a handful of college leaders who collect hundreds of thousands of dollars each year as directors for companies that are headed by or employ university trustees, a Chronicle analysis has found. Such board service is fraught with potential conflicts of interest, corporate-governance experts say, because a university president may be disinclined to question or oppose an industry executive who has a say in his or her continued employment and compensation. So, too, may a university trustee's judgment be clouded in evaluating a president who has influence over the trustee's professional endeavors.
Equally taboo for a president is service on a board connected to a major donor, which describes the family of Leonard M. Miller, a former University of Miami trustee, which gave a historic $100-million gift to the university in 2004, after Mr. Miller died. The gift led to the naming of Miami's medical school in honor of the late Mr. Miller.

Ms. Shalala joined the board of Lennar Corporation, a home-building company co-founded by Mr. Miller, in 2001, the same year she became Miami's president. The company's chief executive is Stuart A. Miller, Mr. Miller's son, and a Miami trustee.

Charles M. Elson, a professor of corporate governance at the University of Delaware, said a president who serves on the board of a company that employs a donor or trustee invites skepticism and even legal repercussions. If a corporate board is thought to have failed in its duties to protect shareholders' investments, a president who is perceived to have blind allegiance to a chief executive could wind up answering for his or her actions in court.

"You never should go on the board of a donor, past, present, or potential, because it destroys your independence," Mr. Elson said.

Ms. Shalala and Pascal J. Goldschmidt, dean of Miami's medical school, also serve on the board of Mednax, a medical group whose chief executive, Roger J. Medel, is a university trustee. Dr. Medel has helped set performance goals and allocate bonuses for both Ms. Shalala and Dr. Goldschmidt, according to company proxy statements.

Ms. Shalala, Dr. Goldschmidt, and officials from Lennar and Mednax all declined interview requests.

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