Universities and Due Diligence

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According to recent report of Council for Aid to Education (CAE) universities in the US received a whopping $43.6 billion as a donation from individuals, companies and organizations in 2017.

Among the universities that received generous donations, Harvard stands first with an earning of $1.28 billion, while an obscure university in Indiana managed to earn about $400 million as well. Most universities these days have an excellent team in place that goes around the world persuading corporates, organizations and wealthy patrons to donate their money for education.

Take New York’s Metropolitan Museum of Art as an example, which has a separate wing in the name of America’s greatest philanthropic dynasties – the Sackler family. This family comprising physicians Arthur, Mortimer and Raymond Sackler has donated lavishly to a wide range of institutions right from Harvard, Guggenheim, Louvre and many Universities in Columbia, Oxford etc.

The catch, however, was that Sackler family fortunes were made from a prescription painkiller called OxyContin launched by their Company, Purdue Pharma in 1996. OxyContin is a highly controversial drug that has been named as the main culprit behind the opioid crisis that is brewing in the US, spawning millions of drug addicts.

When the lid blew off this controversy, Sackler’s reputation as the most benevolent philanthropic family suffered a huge setback. That’s not all. The institutions that have so long accepted donations from the Sackler family became the subject of controversy and their reputation suffered as well.

Fund Raising and Due Diligence

The Sackler family saw philanthropy as an opportunity to enhance their global image and earn respect and respectability through generous donations.

Many politically exposed people (PEP) and tainted organizations use philanthropy as a route to gain respectability and recognition in the society. Their donations might be substantial and extremely valuable for social institutions but when such people come in the media glare their misdeeds cast a shadow on all others who are associated with them.

That’s a due diligence should not be a norm but a must where Universities are concerned. Due diligence is basically the investigation that is undertaken before a company invests money in a venture, business or an agreement with a third-party.

Ethical Trends

One of the most positive trends that are in evidence today is that investors and customers are able to force a company or institution to behave ethically.

Last August, a professor resigned from Oxford’s Blavatnik School of Government because he raised many objections related to the school’s main donor Leonard Blavatnik whose close association with Russian President Vladimir Putin and business interests were highly controversial.

In the same month, around 85 students and academicians raised objections for accepting a $10 million donation from Charles Koch Foundation because they feared that their core principle of academic freedom might be compromised by the donor’s agenda to promote certain political ideology.

These are valuable lessons that Universities ought to learn. They need to conduct a risk assessment of prospective donors through media insights and must identify potential regulatory risks that are likely to arise.

Conducting due diligence for all donations should become a mandatory process and they will need to follow a due diligence checklist to ensure that the donations that they receive are, from individuals and organizations that enjoy a spotless reputation.