An unusual victory for donor intent at Trinity College

The struggle to preserve donor intent in college gifts is often a melancholy tale of schools using every tool they have to reduce or ignore the wishes of donors. I made that point in my Pope Center monograph Games Colleges Play.

So the recent developments at Trinity College with the Shelby Cullom Davis Endowment provide rare good news for supporters of donor intent. Here, after an over two-decade struggle, the endowment’s purposes have been restored to the donor’s wishes.

The endowment was created in 1977 with a $750,000 gift by Shelby Cullom Davis (1909-94), an investment banker who served as ambassador to Switzerland in the Nixon and Ford administrations. Davis chose Trinity College as an outlet for his philanthropy because the father of his son-in-law taught philosophy at the school for many years.

Davis was both an excellent investor and a forceful supporter of free enterprise. It took four years to find a suitable candidate for the Shelby Cullom Davis Professorship of American Business and Economic Enterprise. In 1981 Trinity appointed Gerald A. Gunderson to the post, which he continues to hold.

During those four years, the value of the Davis Endowment rose from $750,000 to $1.6 million. What would be done with the extra money?

The Davis Endowment currently has assets of $16.5 million. That’s about 3 percent of Trinity College’s endowment. (For comparison purposes, the Robertson Foundation, dissolved in 2008 after a six-year battle between the Robertson family and Princeton University, had assets worth about 6 percent of the Princeton endowment.)

To resolve the problem of what should be done with the extra funds, Davis negotiated with the college the creation of the Davis Endowment, which would be controlled by Professor Gunderson. The endowment has two parts. One part was used to endow Gerald Gunderson’s chair. The income from the remaining part of the endowment, according to a 1981 agreement between Davis and Trinity College president Theodore D. Lockwood, would be used to support activities associated with the professorship.

Davis made one crucial decision, which was meant to ensure that his wishes would be honored. In the letter, Lockwood wrote that “The activities sponsored by the Davis Endowment would presumably change from time to time as conditions evolved and opportunities arose,” Davis forcibly crossed out the sentence and wrote “NO EXCEPTIONS WHATEVER” on the letter.

For the first decade, the Davis Endowment functioned as the donor intended. The endowment brought in scholars to offer free-market courses, most notably Dominick T. Armentano, a University of Hartford economist and a leading antitrust expert. The endowment also brought in high-profile guest speakers, such as Irving Kristol. Another program brought in executives, including many from Hartford’s insurance industry.

Gunderson recalled that in the 1980s Davis was very active in making sure that his wishes were respected, including frequent visits to the campus. “Quite frankly, I think the college was scared of him,” Gunderson said in an interview.

But in the 1990s, an aging Davis loosened his control. Management of the Davis Endowment was transferred from him to Trinity College. The college clamped down on the income that could be spent from the endowment, limiting it to $20,000 a year, even though this decision violated a legal requirement known as UPMIFA, or the Uniform Prudent Management of Institutional Funds Act which mandates that colleges have to spend a certain amount (in Connecticut, 4 ¾ percent) of an endowment’s assets each year.

Gunderson says that matters became much worse when James F. Jones, Jr. became president of Trinity College in 2004. Jones made no attempt to touch the portion of the endowment used to fund Gunderson’s chair, although at one point he threatened not to renew Gunderson’s contract (he does not have tenure). Jones tried to divert the assets of the Davis Endowment to other purposes, including funding scholarships for foreign students. In October 2008, according to a 2009 article in the Wall Street Journal, Jones had a particularly angry meeting with Gunderson where he called Gunderson “a liar and a bully” and said that he would, in the future, personally approve all expenditures “down to a box of paperclips.”

By this time, Gunderson had reported Jones to the Connecticut Attorney General’s Office, which regulates charities in that state. In February 2009, the attorney general’s office issued a ruling that declared that there was no evidence that Shelby Cullom Davis wanted either the college or his family to use the endowment’s income for any purpose “other than the study and promotion of the economic theories of the free enterprise system.”

In addition, the attorney general’s office found that Trinity College had illegally diverted $191,337 from the Davis Endowment to pay for an internship program. The regulators ordered Trinity College to restore the money to the endowment.

For the next four years, according to Gunderson, the battle over the Davis Endowment was “a stalemate,” with Jones proposing various schemes for diverting the endowment’s assets and the Connecticut attorney general’s office vetoing them. Gunderson praises the attorney general’s office—and in particular, Karen Gano, a career civil servant overseeing charities—for upholding the law and respecting donor intent.

The issue was ultimately resolved when Jones left Trinity College after the 2013-14 academic year, a year before his contract expired. Jones’s downfall was the result of a plan he announced in October 2012, which would have forced all fraternities and sororities to be co-ed by 2016 with no more than 55 percent of the members being of one gender. The plan earned Trinity a “red light” from the Foundation for Individual Rights in Education, which condemned the move as severely restricting student rights to free association. Alumni contributions plummeted in reaction to the plan.

(Jones left Trinity to assume the presidency of Sweet Briar College. In March, Sweet Briar announced that it would close after the end of the 2014-15 academic year.)

With Jones’s departure, the conflict over the Davis Endowment was concluded. 

In October 2014, a memorandum of understanding was signed between Gunderson and three members of the Trinity College administration. It declared that the restrictions on Davis Endowment spending would be lifted and that the endowment would fund a second endowed chair, this time in honor of Shelby Cullom Davis’s wife, Kathryn Wasserman Davis. As of this writing, the professorship hasn’t been filled, but a candidate is expected to be appointed for the 2015-16 academic year.

The victory for donor intent at Trinity College has also spurred alumni giving. For their 25th anniversary, the Trinity College Class of 1990 is establishing “The Alumni Fund for Trinity College,” a donor-advised fund independent of the college. The fund is established in honor of Gerald Gunderson, who the class says, “has labored tirelessly—and at personal expense—to ensure that the donor’s intent of the Shelby Cullom Davis Endowment was respected at Trinity College.”

What lessons can other donors learn from the Davis Endowment experience? Gunderson offers two. First, make certain that the deed establishing the gift ensures against loopholes. Had Davis not written “no exceptions whatsoever” on Theodore Lockwood’s 1981 letter, the college could have argued that the donor agreed that the uses of the endowment could change over time—and away from what the donor wanted.

Second, Gunderson says, “pick someone who will fight for you.” It took over two decades before donor intent was secured, and a lesser man would have given up, Gunderson advises donors to find professors they like and can work with over the long term.

Gunderson’s next task is to ensure that Shelby Cullom Davis’s intentions are preserved for the next generation.

“It’s a rule of thumb,” he says, “that things begin to go bad (for donors) after twenty years.  Well, we’ve managed to last for 40.”