In late January, Baruch College’s The Ticker reported that CUNY Chancellor Matthew Goldstein had been named chairman of the board for the J.P. Morgan Funds, the mutual funds arm of JPMorgan Chase. The board oversees 140 different mutual funds, with total assets of $580 billion. “Goldstein’s role at CUNY,” reported The Ticker, “will remain unchanged in the face of the new chairmanship.”
That wasn’t true for long. Just two months after his appointment, Goldstein announced his resignation after 14 years as CUNY chancellor. With the transition has come renewed attention to Goldstein’s long-standing service on corporate boards, and whether such blending of academic and corporate roles should raise concerns. As CUNY prepares to choose its first new chancellor in the 21st century, any corporate connections of potential nominees are likely to draw close scrutiny.
J.P. Morgan Funds
Goldstein began serving as a trustee on individual J.P. Morgan Funds in 2003. He joined the full board in 2005. The most recent Security and Exchange Commission (SEC) filings state that Goldstein received a salary of $325,000 for his work as a J.P. Morgan Funds trustee. For at least the past five years, his J.P. Morgan income has been about two-thirds that of his CUNY salary.
But his new role as the board’s chair, which began on January 1, comes with increased responsibilities and probably a big bump in pay. The board’s previous chair was paid $500,000 per year. If Goldstein matches or exceeds that amount, it means that J.P. Morgan Funds is now paying him more than his $490,000 annual salary from CUNY.
According to the CUNY rules governing the chancellor’s role, outside work “may not interfere with the executive’s primary commitment to CUNY.” There are hard limits in place as well: CUNY officials in policy-making posts are limited to two days per month of “outside consultation or professional activities,” and these must generally be charged to annual leave. That limit dates from the 1980s, when New York legislators expressed concern that commitments to corporate boards might diffuse the attention that should be paid to university affairs.
Donald Schepers, associate dean at Baruch’s Zicklin School of Business and former director of Baruch’s Zicklin Center for Corporate Integrity, says that Goldstein’s upgrade to chairman of the J.P. Morgan Funds means a significantly increased time commitment. Chairs are public figures, charged with counterbalancing their full-time corporate counterparts. “Chairman of the board, of any board, is going to be a demanding job,” says Schepers, and a chair might be expected to spend hundreds of hours per year on his or her duties.
Goldstein’s predecessor as board chair, Fergus Reid, gave an estimate of his work week in a May 18, 2004, letter to the head of the Securities and Exchange Commission, which is posted on the SEC’s website. “I have served as an independent chairman of the J.P. Morgan Funds (or predecessor funds) for over 14 years,” wrote Reid. On an ongoing basis, he explained, “on average I spend more than one-half of a regular business week on the affairs of our Boards and our Funds and can assure you that most of our trustees would be willing to do the same if called upon.”
According to Fund Director Intelligence, an industry news site, when Reid decided it was time to retire as chair, planning for the transition began a year in advance. Reid said at the time that increased regulatory pressure, the complexity of financial products subject to trustee approval, and a “dramatic” increase in the scope of the J.P. Morgan Funds’ business had created “a bigger workload and greater responsibilities in the board room.”
Clarion asked CUNY’s press office for a current list of Goldstein’s board roles, and how much time he has recently devoted to these and other outside commitments. CUNY spokesperson Michael Arena replied that, according to the office of CUNY’s general counsel, “the service and time allotted by the chancellor is within the executive compensation plan guidelines, including the two-days-a-month rule.” He did not provide details.
A recent report from Reuters, however, gives a sample of the kinds of duties Goldstein’s new job entails. As chair of the overall Board of Trustees for the J.P. Morgan Funds, Goldstein sits on the boards of a number of individual funds within the group. He chairs the Governance Committee of one such fund, the Pacholder High Yield Fund, and his responsibilities in that role include “participat[ing] in the selection and nomination of persons for election or appointment as Directors; periodic review of the compensation payable to the Directors; review and evaluation of the functioning of the Board and its committees; oversight of any ongoing litigation affecting the Fund, the Adviser or the non-interested Directors; oversight of regulatory issues or deficiencies affecting the Fund; oversight of the Fund’s risk management processes; and oversight and review of matters with respect to service providers to the Fund.”
While serving as CUNY chancellor, Goldstein has spent periods of time on several other corporate boards, including Health-Chem Corp.; the National Financial Partners Corp.; and Centro NP, a New York-based property group now known as Brixmor. While these posts have brought him significant income – in the mid-2000s, for example, he was paid nearly $50,000 a year each by Centro NP and National Financial Partners – his JPMorgan work has paid far more. Goldstein has also been a member of several non-profit boards and government commissions, and chaired Mayor Michael Bloomberg’s Charter Revision Commission in 2010.
Some argue that CUNY can benefit from leaders’ links with the business world, particularly an association with a large firm like JPMorgan. The company is one of only a handful mentioned in CUNY’s 2012-2016 master plan, which celebrates JPMorgan’s partnership with Queens College on a “workforce pipeline” for IT students.
That partnership arguably benefits JPMorgan as well, however, and serving on corporate boards can raise questions about competing objectives. “Sitting on Macmillan or McGraw-Hill would be a definite conflict of interest,” says Schepers, given these firms’ financial stake in higher education. While Goldstein does not sit on the board of any firms in the education industry, several of the J.P. Morgan Funds do hold stock in education-related companies, including McGraw-Hill and Pearson, the London-based educational testing and publishing company. One J.P. Morgan fund holds $14 million worth of stock in American Campus Communities, a developer that has a contract to build dorms at the College of Staten Island.
Robert Rhoads directs UCLA’s Globalization and Higher Education Research Center. Beyond the potential for specific conflicts, he is concerned that commercial ties skew academic leaders’ focus away from “the broader vision of the university as a center for advancing deep forms of citizenship and civic engagement.”
Rhoads argues that a chancellor or president’s corporate links should trigger a demand to know what universities are getting from the deals. Without strict accountability, “the personal benefits to the individual leader seem vast,” argues Rhoads, “and leave one to wonder about the real motivation for such forms of involvement.”