"Mr. Fenchak’s review of the university’s finances may be our last opportunity to disclose and correct any potential conflicts of interest or other impairments to Penn State’s governance for a very long time."
___________________________
From today's StateCollege.com:
Penn State’s $4.57 billion endowment is invested under the supervision of a small group called the Penn State Investment Council. The council’s activities are very closely held, and most of Penn State’s Board receives only summary information about the endowment.
According to Penn State, the university paid 1.86% in investment expenses and advisor fees on its endowment in 2022-23 — or ~$85 million. Moreover, this 1.86% expense rate is a significant decrease from the 2.49% rate the university was paying when it first began reporting expenses using normalized industry metrics in 2019 (see Exhibit A-1 on p. 25). From at least 2008 onwards, the university has been paying expenses at least an order of magnitude greater than those of the best publicly available passively managed investments (e.g. Vanguard’s no-load S&P 500 index fund has a 0.04% expense ratio).
Paying high expenses might be worthwhile if they yielded superior returns, but they have not. If the university had invested its endowment entirely in a S&P 500 index fund since 2008, its endowment would now be at least $2.3 billion (i.e. 50%) larger.
Penn State alumni-elected trustee Barry Fenchak has requested information about the investments in Penn State’s endowment so he can assess whether they are suitable for purpose and free from conflicts of interest. Addressing these questions is part of every Penn State Trustee’s fiduciary responsibilities. Nevertheless, the leaders of Penn State’s board have repeatedly denied Mr. Fenchak’s requests, and it has become necessary for Mr. Fenchak to file a lawsuit to obtain the information necessary to do his job. Penn State is now using university resources to defend against this lawsuit and keep the investments held in its endowment secret.
Penn State’s secrecy is especially concerning in light of a pattern of deliberate steps the university has taken to reduce its transparency and accountability. Penn State’s board has been plausibly accused of regularly conducting university business in off-the-record meetings, potentially in violation of Pennsylvania’s open meetings law. In 2017, after losing another lawsuit to trustees seeking information, the university changed its bylaws to prevent reimbursement of legal fees to trustees who sue the university seeking information — even if the university is in the wrong.
Earlier this summer, the university further changed its bylaws to eliminate the independence of the alumni-elected trustees altogether by requiring board approval of alumni trustee candidates before they can appear on the election ballot, prohibiting trustees from publicly speaking in opposition to board decisions and effectively enabling the board’s leaders to unilaterally remove any member who opposes them.
After Mr. Fenchak’s lawsuit was filed, the Board prohibited Mr. Fenchak from attending board meetings in person. Three weeks ago, citing the recently updated bylaws, the board’s governance committee unanimously voted to recommend removing Mr. Fenchak from the Board — although it is far from clear that the allegations against him warrant immediate removal. Two weeks ago, it was disclosed that Penn State is also investigating alumni-elected trustee Anthony Lubrano for public statements regarding the university. Mr. Lubrano has been threatened with sanctions if he discloses the findings of the university’s investigation.
Penn State is Pennsylvania’s foremost public university, and the actions of its leadership should be thoroughly transparent and avoid any appearance of impropriety. Changes to restore transparency and accountability to Penn State’s board must be enacted now, before the current alumni-elected trustees are replaced by others who have been hand-picked by the board’s leadership. Ultimately, replacing the entire membership of the board may be the only way to restore public confidence.
Please let Penn State’s leaders know you want them to restore the transparency of its board and the independence of its alumni-elected trustees by emailing President Bendapudi and the board — and consider making your future donations to Penn State contingent upon the university making these changes.
Additionally, please make a donation to Mr. Fenchak’s legal fund Fundraiser for Barry Fenchak by David Lapioli : Support Penn State Trustee Barry Fenchak’s Legal Fund (gofundme.com) so he can win his lawsuit and complete his review of Penn State’s finances. Mr. Fenchak’s review of the university’s finances may be our last opportunity to disclose and correct any potential conflicts of interest or other impairments to Penn State’s governance for a very long time.
Andrew Shaffer,
State College
https://www.statecollege.com/articl...bility-urgently-needed-for-penn-states-board/
___________________________
From today's StateCollege.com:
Penn State’s $4.57 billion endowment is invested under the supervision of a small group called the Penn State Investment Council. The council’s activities are very closely held, and most of Penn State’s Board receives only summary information about the endowment.
According to Penn State, the university paid 1.86% in investment expenses and advisor fees on its endowment in 2022-23 — or ~$85 million. Moreover, this 1.86% expense rate is a significant decrease from the 2.49% rate the university was paying when it first began reporting expenses using normalized industry metrics in 2019 (see Exhibit A-1 on p. 25). From at least 2008 onwards, the university has been paying expenses at least an order of magnitude greater than those of the best publicly available passively managed investments (e.g. Vanguard’s no-load S&P 500 index fund has a 0.04% expense ratio).
Paying high expenses might be worthwhile if they yielded superior returns, but they have not. If the university had invested its endowment entirely in a S&P 500 index fund since 2008, its endowment would now be at least $2.3 billion (i.e. 50%) larger.
Penn State alumni-elected trustee Barry Fenchak has requested information about the investments in Penn State’s endowment so he can assess whether they are suitable for purpose and free from conflicts of interest. Addressing these questions is part of every Penn State Trustee’s fiduciary responsibilities. Nevertheless, the leaders of Penn State’s board have repeatedly denied Mr. Fenchak’s requests, and it has become necessary for Mr. Fenchak to file a lawsuit to obtain the information necessary to do his job. Penn State is now using university resources to defend against this lawsuit and keep the investments held in its endowment secret.
Penn State’s secrecy is especially concerning in light of a pattern of deliberate steps the university has taken to reduce its transparency and accountability. Penn State’s board has been plausibly accused of regularly conducting university business in off-the-record meetings, potentially in violation of Pennsylvania’s open meetings law. In 2017, after losing another lawsuit to trustees seeking information, the university changed its bylaws to prevent reimbursement of legal fees to trustees who sue the university seeking information — even if the university is in the wrong.
Earlier this summer, the university further changed its bylaws to eliminate the independence of the alumni-elected trustees altogether by requiring board approval of alumni trustee candidates before they can appear on the election ballot, prohibiting trustees from publicly speaking in opposition to board decisions and effectively enabling the board’s leaders to unilaterally remove any member who opposes them.
After Mr. Fenchak’s lawsuit was filed, the Board prohibited Mr. Fenchak from attending board meetings in person. Three weeks ago, citing the recently updated bylaws, the board’s governance committee unanimously voted to recommend removing Mr. Fenchak from the Board — although it is far from clear that the allegations against him warrant immediate removal. Two weeks ago, it was disclosed that Penn State is also investigating alumni-elected trustee Anthony Lubrano for public statements regarding the university. Mr. Lubrano has been threatened with sanctions if he discloses the findings of the university’s investigation.
Penn State is Pennsylvania’s foremost public university, and the actions of its leadership should be thoroughly transparent and avoid any appearance of impropriety. Changes to restore transparency and accountability to Penn State’s board must be enacted now, before the current alumni-elected trustees are replaced by others who have been hand-picked by the board’s leadership. Ultimately, replacing the entire membership of the board may be the only way to restore public confidence.
Please let Penn State’s leaders know you want them to restore the transparency of its board and the independence of its alumni-elected trustees by emailing President Bendapudi and the board — and consider making your future donations to Penn State contingent upon the university making these changes.
Additionally, please make a donation to Mr. Fenchak’s legal fund Fundraiser for Barry Fenchak by David Lapioli : Support Penn State Trustee Barry Fenchak’s Legal Fund (gofundme.com) so he can win his lawsuit and complete his review of Penn State’s finances. Mr. Fenchak’s review of the university’s finances may be our last opportunity to disclose and correct any potential conflicts of interest or other impairments to Penn State’s governance for a very long time.
Andrew Shaffer,
State College
https://www.statecollege.com/articl...bility-urgently-needed-for-penn-states-board/
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