Unless the University develops new ways of fundraising in the coming months, it may not be able to stay on top of the rising costs associated with higher education, Harvard's chief finance official said yesterday.
Vice President for Finance Robert H. Scott said that in order to "keep costs down,...the University is thinking carefully about how to raise money in the future."
Harvard administrators "must be very aggressive about fundraising," Scott added.
But recent questions about Harvard's ability to fundraise effectively while meeting certain ethical standards complicate the plans for more aggressive fundraising that Scott says are necessary.
Some faculty and administrators have raised concerns that Harvard risks its academic integrity by investing in--or profiting from--deals which it cannot control and which may be unethical.
One such controversy was Harvard's investment in Kohlberg, Kravis, Roberts & Company, which took over RJR-Nabisco this fall in a leveraged buyout. Under the conditions of Harvard's agreement with KKR, the University did not have the right to refuse participation in the buyout or investment in RJR-Nabisco.
Since the RJR deal--the largest-ever leveraged buyout--critics from members of Congress to economic policymakers have questioned the ethics of such hostile takeovers.
"The Corporation is thinking about the general issue" of leveraged buyouts, Scott said, although he added that thegoverning board of the Harvard Management Companyusually handles "the thinking about individualissues."
"We don't want to participate in any unfriendlytakeovers," Scott asserted, but, he added, "what'sunfriendly, it's a little hard to tell."
Besides Harvard's investment in KKR, theUniversity has received criticism for itsinvolvement with Medical Science Partners (MSP), acorporation--independent of Harvard--which willoversee the funding and marketing of professors'biotechnical research.
Harvard will reap 10 percent of the profitsfrom its association with MSP.
"We don't control the company in any way,"Scott said, explaining that the University wantedto avoid direct interest in a business agreementwith any of its faculty.
But it is this lack of control in companieslike KKR and MSP that has led critics to questionwhether the risks associated with these agreementsare worth the money that the University gains fromthem.
For example, Scott said it is a necessarychallenge to match the desires of the Universityfor "scientifically rewarding" ventures and thoseof outside investors for "financially rewarding"projects.
As part of the agreement between MSP and theHarvard body that will moniter the profit-makingcompany, the University will only agree to housethe research "where there is overlap" of thosefinancial and scientific interests, Scott said.
But, as Scott said, the University's amount ofcontrol over its fundraising ventures "is anissue" because "once the decision is made to makean investment, it's hard to change your mind.