University of California President Janet Napolitano said UC Davis Chancellor Linda P.B. Katehi made a mistake when she accepted a position on the board of a for-profit university last month, but added that Katehi should not have to resign over the controversy.
“The minute I heard about it, I was concerned,” Napolitano said in an hourlong interview with editors and reporters of The Sacramento Bee on Wednesday.
Napolitano said Katehi had turned in paperwork to allow her to assume the DeVry Education Group board seat, but had not received her permission.
“I did not think DeVry was an appropriate board for one of our chancellors to be involved in,” Napolitano said. “I didn’t think it was appropriate for the University of California’s reputation to be linked with DeVry.”
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Katehi has been under fire since The Bee reported last week that she accepted the board position paying $70,000 annually with $100,000 in restricted stock units. DeVry has been under federal scrutiny, accused of exaggerating job placement and income statistics.
A subsequent story reported Katehi also served as a paid member of the the board of textbook publisher John Wiley & Sons across 2012 to 2014, earning $420,000. That ramped up criticism of the chancellor and prompted Assemblyman Kevin McCarty, D-Sacramento, to call for her resignation from UC Davis.
The chancellor resigned the DeVry post on March 1. After The Bee reported her Wiley board position, she apologized Friday for “having accepted service on boards that create appearances of conflict” and donated $200,000 in Wiley & Sons stock to student scholarships.
In response to the controversy, state legislators have called for hearings in the coming weeks to review the university’s policy about outside compensation for its top-level employees, but Napolitano defended the policy as adequate to prevent conflicts of interest.
McCarty, chairman of the Assembly budget subcommittee overseeing education finance, disagrees. “They are a taxpayer-funded university and have some accountability to the Legislature,” he said.
Napolitano has launched a review of all the board seats held by senior managers and chancellors. “We will look immediately at my direct reports ... going through, seeing what boards they are on, making sure they have accurately and completely reported whatever compensation they have received,” she said.
Particular attention will be paid to the amount of time top UC executives are spending on the boards. “The No. 1 commitment is to the job and to the university and to the campus,” she said. “All of us have so-called extracurricular activities, and that’s part of life, and we anticipate that and build that into the policy.”
James Finkelstein, a professor of public policy at George Mason University, has researched the impacts of top university officials on boards for nearly two decades. He estimates that a board seat requires at least 10 days of service per year. “It’s a significant time commitment with significant financial gain to the individual,” he said.
Following public outcry a decade ago over the extensive outside activities of some of its campus chancellors, the University of California adopted a policy limiting the number of boards that top employees can serve on and setting ground rules on conflicts of interest.
The current policy, ultimately adopted in January 2010, applies to a senior management group that includes the university president, campus chancellors, medical center CEOs and directors of three national laboratories, as well as some administrators who report directly to them. It caps those employees at three for-profit board positions for which they are paid and have governance responsibilities, and mandates that they use only personal time for board business.
It also prohibits them from conducting any business with a board until their superior – sometimes the Board of Regents itself – has assessed potential conflicts of interest and approved the appointment.
On Wednesday, Napolitano said that Katehi’s paid board seat with Wiley & Sons was approved by the Office of the President before Napolitano’s tenure began in 2013. But the UC president said she became aware of the appointment through annual reviews and doesn’t consider it a conflict of interest.
“Chancellors do not pick textbooks; that’s done by the faculty,” she said. “And, quite frankly, I think having someone who’s involved in university life and ... being at the board table when issues about textbooks are being discussed, I don’t think that’s a bad idea.”
Ed Howard, senior counsel for the Center for Public Interest Law, said Napolitano’s defense of Katehi’s Wiley & Sons board tenure is “exhibit A” of why UC’s conflict of interest policy is insufficient.
“The president of the university owes it to the students and the residents who pay the salaries of these chancellors to suggest affirmative program reforms that make sure it never happens again, not to defend the status quo,” he said. “We deserve better than that.”
Howard said the University of California needs a clear conflict-of-interest policy and not a process dependent on the judgment of an individual. “The Legislature needs to insist on conflict-of-interest standards,” he said.
Nine University of California chancellors received nearly $1.5 million in cash compensation, in addition to deferred compensation and other stock options for outside work for corporations and nonprofits from 2012 to 2014, according to data provided by UC.
Senior management contracts specifically anticipate board membership, she said. “That’s a very common aspect of university leadership,” she said.
The university’s policy allowing chancellors to serve on boards didn’t become a public issue until Katehi’s DeVry issue arose, Napolitano said. Most public universities permit their top leaders to take paid and unpaid board seats, she said.
“There’s an advantage to having leadership of a university involved in boards of different types,” she said. “It’s a way of expanding outreach. It’s a way of expanding your contacts. It’s a way of expanding our knowledge of what’s going on.”
Napolitano said she serves only on nonprofit boards and is not paid for her time. She says she chooses instead to focus on her job at the university.
But Finkelstein said his research has found no demonstrative value to a university when one of its leaders sits on a corporate board. There is, however, substantial financial value to the board member, he said.
“I would urge state Legislature or higher education commissions to address this matter in a very direct and open way and to at least have a public debate,” he said.
Despite the fact that Katehi accepted the DeVry seat without Napolitano’s approval, the UC president said calls for her resignation aren’t appropriate. Instead, she said the “mistake” will be factored into the chancellor’s next performance review.
Katehi earns $424,360 a year as chancellor of UC Davis, where she has served since 2009.
Napolitano called Katehi a good chancellor and said that her resignation from UC Davis would hurt the campus. “It’s not easy to find replacements for good chancellors, and she is a very good chancellor,” Napolitano said.
“When you look at the performance of Davis academically, when you look at it competitively, when you look at money raised, all the kinds of things that benefit a campus, she’s been a very good and effective leader,” Napolitano added.
This isn’t the first time the chancellor has been at the center of controversy. The most notorious instance happened in 2011, when university police officers casually doused 10 student protesters with pepper spray as they sat with their arms linked. Video of the incident went viral and sparked emotional responses from across the globe. Katehi said that police were told to withdraw if students refused to leave the quad and that she did not approve officers clad in riot gear moving in on students.
Despite support from Napolitano and some local lawmakers, others continue to call for Katehi’s resignation.
One student group, the UC Student Workers Union, has scheduled a “Fire Katehi” rally to be held on campus Friday at noon, according to a post on Facebook.