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A questionable donor-intent protection scheme is resulting in a lawsuit of Hillsdale College against the University of Missouri.

“The best-laid schemes o’ mice an’ men / Go oft awry,” Robert Burns once wrote. It is doubtful the Scottish bard had the management of endowment gifts in mind—more likely the excesses of carousing or thwarted assignations—but savvy philanthropists have long recognized safeguarding donor intent as an issue rife with thorns. Particularly when it comes to legacy gifts and universities, which are notorious for disregarding donors’ wishes.

With few exceptions, such transgressions of donor intent pass unremarked. In 2008, descendants of donors Charles and Marie Robertson clawed back approximately $100 million from Princeton University for failing to observe the terms of a 1961 gift to the Woodrow Wilson School of Public and International Affairs that was intended to be used to prepare students for government service. Few, however, even among the ultra-wealthy pool of major university donors, have the time and resources to pursue such massive litigation if universities ignore donor intent.

But what if a donor were to set up a third party to monitor a university gift—somebody who would ensure that the terms of the gift were honored, with the power to rescind the gift if they weren’t? What could go wrong?

Quite a lot, it turns out! A $5 million lawsuit of Hillsdale College against the University of Missouri paints a clear picture of best-laid schemes doing what they do. At stake is the legacy gift of Mr. Sherlock Hibbs, a successful financier and MU alum who, before his passing in 2002, gave his alma mater $5 million to establish three chairs and three distinguished professorships in MU’s Trulaske College of Business.

The gift came with conditions: These six professors were each required to be a “dedicated and articulate disciple of the free and open market economy (the Ludwig von Mises Austrian School of Economics)." Mr. Hibbs took the unusual step of setting up a third party to oversee that the terms of this gift were honored—and the even more unusual measure of appointing Hillsdale College as both the overseer and the default recipient of the $5 million if it found MU’s fidelity wanting.

And wanting it has been found.

Hillsdale College filed suit in 2017, currently scheduled to be heard before the Missouri Supreme Court, alleging that the University of Missouri found the terms of the gift “distasteful”—blanching at the prospect of being “held hostage by a particular ideology”—and thus chose to ignore the terms of the agreement. Hillsdale is seeking to gain control of the endowment plus expenses (approximately $9 million). MU denies any wrongdoing, pointing to a 2018 document that the hired professors signed indicating their Austrian allegiances.

Cliff-notes version: Donor attaches explicit ideological strings to a pile of money for hiring faculty; university plugs its nose, takes the cash but apparently reneges on the ideology; this malfeasance is identified by the same party that stands to receive said pile of money if it discovers wrongdoing.

In assessing just how Mr. Hibbs’ best-laid schemes went off the tracks, there’s blame enough to go around:

  1. Hibbs transgressed standards of academic integrity in attempting to dictate the ideological orientation of faculty hires. Funding professorships in economics would strengthen his university; demanding, however, that those economists be “dedicated and articulate disciples” of Ludwig von Mises threatens the institution’s academic credibility. But not only did he put MU in a double bind, he also placed Hillsdale in a morally compromising position when he made it both disinterested adjudicator and highly interested beneficiary-in-waiting.
  2. If Missouri found Mr. Hibbs’ requirements “distasteful” and troubling, it should never have accepted the money to begin with. It stood to disregard either donor intent or academic integrity. The pro forma collection of signatures from the endowed professors that they are “dedicated and articulate disciples of the Ludwig von Mises Austrian School of Economics” serves only to illuminate the hollowness of its respect for the goals of the donor.
  3. Hillsdale likewise should never have agreed to being both judge and beneficiary, for reasons already mentioned. The more vigorously it acts as plaintiff, the less credibility it appears to have as a disinterested party.

The entire situation looks like nothing so much as the entirely wrong answer to a complex problem, worked out on the board in gloriously wrong detail. But to wax Socratic for a moment, wrong answers can serve as useful starting points on the path toward wisdom.

For starters, given the frequent tension between donors’ interests and universities’ interests, philanthropists should carefully consider why they’re giving directly to universities in the first place. If Mr. Hibbs wanted to promote the study of free-market economics, would not a like-minded university—like, say, Hillsdale—have been a better fit?

Moreover, donors must exercise particular care in how they structure university gifts. Mr. Hibbs had the right instinct in setting up a safeguarding mechanism. But by putting multiple institutions in ethically compromising situations, he inadvertently ensured that his legacy would be something very different than his original intent.

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