The Public Eye

UC Davis Chancellor Katehi apologizes to lawmakers for taking DeVry seat

UC Davis Chancellor Linda P.B. Katehi apologized to lawmakers Monday for what she called a lapse in judgment in accepting a seat on the board of the DeVry Education Group.

“This will not happen again,” Katehi told lawmakers during an Assembly oversight hearing examining outside compensation for university leaders.

Katehi has been under fire for more than a month after The Sacramento Bee reported about her February decision to accept a board seat with the DeVry Education Group and past board tenure with a textbook publisher.

The controversy could lead to changes in policies governing outside executive pay at both the University of California and California State University systems, according to testimony from representatives of both university systems.

“We don’t believe outside employment is an issue at CSU,” said Carrie Hemphill Rieth, university counsel at California State University. “That said, we’d like to keep it that way and we’d like to do more to improve and better ensure the public trust.”

All California State University presidents will be required to report outside employment, she said. Previously, presidents in the 23-campus system were able to use their own discretion to determine whether the outside job constituted a conflict of interest and needed to be reported.

Dennis Larsen, University of California executive director of compensation programs, said UC will review its policies.

“Based on recent events, the University of California Board of Regents has decided to fully review the current policy governing outside professional activities for senior managers, including chancellors,” he said.

During the three-hour hearing, punctuated by the finger-snapping of UC Davis students when they agreed with a speaker and coughing when they did not, Katehi defended her stewardship of UC Davis, where she has served since 2009.

The chancellor resigned from the DeVry board in late February and issued a public apology for accepting the position. She also has pledged about $200,000 in stock toward student scholarships from her time serving on the board of textbook publisher John Wiley & Sons.

UC President Janet Napolitano expressed support for her last month.

Larsen told lawmakers Monday that the DeVry controversy, which stemmed from Katehi accepting the post without permission from Napolitano, will be taken into account during Katehi’s annual review.

But some students at UC Davis who have been occupying the lobby outside Katehi’s office since March 11 insist they will remain until she resigns. Many of those students spoke during the public comment period at the end of the Capitol hearing, as did Katehi’s supporters.

The chancellor told legislators she understands the frustration of students who are saddled with loans and other education costs. She noted that she and her husband, a UC Davis faculty member, have endowed scholarships at various universities and that outside activities are a critical part of her job raising funds for the school.

“Fifty-five percent of our students do not pay tuition, and for that to happen implies a lot of fundraising, it implies a lot of outside activities,” Katehi said.

Assemblyman Kevin McCarty, D-Sacramento, one of four legislators who have called for Katehi to step down, questioned how the chancellor could simultaneously be responsible to Wiley & Sons shareholders seeking higher profits at the same time she served UC Davis students paying high costs for textbooks.

He asked Katehi if she ever sought lower textbook prices for students while she was a Wiley & Sons board member.

“Yes,” Katehi said, adding that she wished many textbooks could be made available online.

McCarty also zeroed in on her decision to accept the post on the board of DeVry, which is under scrutiny by the Federal Trade Commission and which McCarty referred to as a “diploma mill university.”

“What was the benefit to the University of California and UC Davis going to be from you participating on that body?” McCarty asked.

Katehi said she realized within a few days of DeVry announcing her position on the board that she had made a mistake and that “I decided on my own to resign.”

Katehi said her knowledge of DeVry had stemmed from her time working at universities in the Midwest in the 1980s, when she said the for-profit school served autoworkers who needed alternative forms of education.

Napolitano has told The Bee that DeVry was not an appropriate board for Katehi to join and that she would not have approved it.

Ernie Gibble, a DeVry spokesman, sent The Bee an email Monday calling McCarty’s characterization of DeVry as a “diploma mill,” “categorically false.” He said the university is accredited by the Higher Learning Commission and “has provided quality career-focused programs for over 85 years.”

After the hearing, McCarty said he was not satisfied with Katehi’s responses about the benefit of the two paid board seats to the university.

“I asked that over and over, and she could not quantify it and I think the silence speaks for herself,” he said. “There were no quantifiable benefits to the students or the university.”

A lawmaker at the hearing cautioned that they should not overreact to stories in The Sacramento Bee about outside compensation of leaders at UC Davis and Sacramento State University.

“We should not overreact to an article in The Sac Bee and throw the entire UC and CSU system under the bus,” said Assemblyman Rocky Chávez, R-Oceanside.

There were no outright calls by lawmakers for Katehi to quit, but a panelist later sharply questioned her outside board positions.

“This is a big problem,” said Ed Howard, senior counsel for the Center for Public Interest Law at the University of San Diego.

Katehi earned $420,000 in salary and stock serving on the Wiley board across the 2012 through 2014 fiscal years, and she currently receives an annual university salary of $424,360. Howard noted that millions of Californians work multiple jobs or overtime to afford university education.

“These people and millions like them pay the salaries of Chancellor Katehi and other senior management at the University of California,” Howard said. “And when a public employee who makes more than the president of the United States moonlights, not in some community job, but moonlights at another paid job as if $400,000 a year were not enough ... (it) dishonors those sacrifices and the sacrifices of millions and millions of Californians who are just getting by and are paying these salaries.”

Howard noted that he did not believe Katehi adequately answered questions about why she accepted the posts and offered his own theory, saying it made no sense that a board member of a for-profit textbook publisher would advocate for lower book prices.

“It was for the money,” Howard said. “She did it for the money.”

After testimony concluded, members of the public and a UC Davis staffer called for support of Katehi, among them Sacramento Kings President Chris Granger, who called her a “rare leader.”

But others, including students who have occupied Katehi’s office lobby, complained that ethics policies within UC are corrupt and that the system should not allow participation on private boards.

“I have spent the last 25 days occupying the chancellor’s office,” said Parisa Rajabian Esfahani, a fourth-year student. “I did not come here to target Linda Katehi. … We’re talking about a broken structure here, an incredibly broken structure.”

Katehi was hustled out of the room through a back door without answering questions from reporters.

George Mason University professor James Finkelstein, who testified as an expert on corporate board participation by university executives, said after the hearing that he hopes California will “start the ball rolling on this issue on a more national basis.”

“This is an important public policy question,” he said. “These are public executives. They are the only public executives afforded this opportunity (to earn pay on boards). It’s interesting that the people who get to decide whether they get to take advantage of this opportunity are part of the system.”

Diana Lambert: 916-321-1090, @dianalambert

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