University Development Office Business Ethics: The Ohio State University Edition

business_ethics_highlights_2Non-profits and universities are not immune to controversies that have business ethics at their core.

Here, TaxProf Blog reports on a dispute between the surviving family of Michael Moritz and the development office at The Ohio State University. In 2001, the now-deceased Moritz gave $30 million to Ohio State to fund scholarships and faculty lines in the law school. Intended as a perpetual gift, the Moritz family was surprised to find the endowment decreasing and fewer scholarships being funded than were called for in the agreement. They were further surprised to learn that the development office was deducting “development fees” from the gift—to fund the development office’s efforts to woo other donors to give money to Ohio State. Ohio State defends the development fees as a standard practice that need not be addressed in a donor agreement.

This piece could be used in the classroom as a vehicle for discussion about donor intent in charitable gifts and the role of disclosure. >>>

LINK: Moritz Family Fights Ohio State Over Undisclosed 1% Annual Development Fee Charged Against Naming Gift To Law School, As Endowment Has Shrunk From $30m To $22m In 17 Years (by Paul Caron for TaxProf Blog)

In retirement, and out of gratitude, [Michael Moritz] gave back — big time — to his alma mater. In 2001, he donated $30.3 million to Ohio State to endow four faculty chairs and give 30 annual scholarships to needy law students. In recognition of the largest-ever gift to one of its academic units, Ohio State renamed its law college in honor of Moritz.

[H]is widow and son now have battled Ohio State for more than two years. They contend the university is diminishing the Moritz legacy by illegally draining millions of dollars in “development fees” they fear threaten the survival and terms of his perpetual donation.

They also wonder whether other donors to many of the 5,500 endowment funds totaling about $4 billion held by Ohio State are aware of the $16.3 million in cumulative annual fees their gifts are charged to pay the salaries of university fundraising employees and the cost of pursuing and entertaining would-be donors.

University officials say the withdrawal of development fees is legal. The Moritz family disagrees — strongly.

What do you think?

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  1. Pingback: CEE Review: Color blindness of the Sears catalog | Ethics of self-driving cars, and more » Center for Ethics and Entrepreneurship

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