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Trustee Conflicts Hits Specialized Press

P&I CFA.jpgThe insider dealing on the Board of Trustees is getting notice in news outlets beyond the popular press. Articles are now appearing in publications destined for investment professionals.

Extensive reviews of the controversy have been published on the Chartered Financial Analyst (CFA) Market Integrity Insights webpage, as well as on the Pensions & Investments website for institutional investors.

The CFA article is clear about best practices when Board members are involved in firms that might serve an institution:

When one of the managers competing to earn the business of the organization employs, or is even owned by, a member of the board or investment committee, there is an obvious conflict of interest. The simplest way to avoid this conflict is for the endowment to adopt a policy that prohibits doing business with firms affiliated with board and committee members. The establishment of such a policy ensures that all appointed individuals are working solely in the best interest of the organization.

Support for this policy can be found in the provision of the Code [CFA Institute Investment Management Code of Conduct for Endowments, Foundations, and Charitable Organizations] that requires board members to act with loyalty and proper purpose, and “avoid conflicts of interest pertaining to the implementation of the organization’s investment strategy whenever possible.” Code guidance recommends that board members not personally profit at the expense of the organization and not have affiliated firms provide services to the organization.

According to the Pensions & Investments piece, the College is refusing to divulge the amounts of investments in Trustees’ firms before the Trustees joined the Board:

According to Mr. Anderson, Dartmouth invested $90 million in three Morgan Stanley real estate funds between March 2005 and March 2007. The college also invested $40 million in Lone Pine funds between March 2009 and April 2011, and $30 million in Greylock funds or funds in which Greylock had an ownership interest, between November 2009 and February 2011.

Mr. Anderson also disclosed an investment of $15 million made in Bain Capital’s Asia Fund II in December 2011.

Mr. Anderson said all the initial investments in various funds were made before the investment professionals joined the investment committee. He would only detail investments made after the trustees joined the board and would not discuss how much was invested in funds from Technology Crossover Ventures or TPG, saying Messrs. Kimball and Coulter were not on the board of trustees when the investments were made.

I think that it is time for the College to come clean with the Dartmouth community. Talking about transparency is nice; actually being transparent is better:

Dartmouth should reveal the details of each and every investment and other financial transaction in excess of $1 million made between 2000-2012 with firms associated with past and present Trustees, members of the Investment Committee, and any other alumni. The amount of these investment should be detailed, along with the level of their associated fees and their individual performance in comparison to indexes of comparable investments.

If these investments were honestly in the best interests of the College, as the Trustees have asserted, the Board has the information to prove this fact. But will the Trustees have the necessary integrity to tell the whole truth to the Dartmouth community?

Addendum: Just to be thorough: there was no mention of these articles in the Dartmouth in the News newsfeed.

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