In Virginia, as in most states, being the head of a large public university is a prestigious job. Along with it come lots of perks, such as being appointed to various education and public service committees and also, in some cases, to lucrative seats on corporate boards.
Therein lies the problem.
Two former heads of two major universities — the University of Virginia and Virginia Commonwealth University — have been or are on the boards of some publicly-held firms that have had some very serious problems. These call into question why the academics are involved, what their roles on the boards really are or have been, whether being on the boards hurts their school’s reputation and whether they even have the time for it.
One is John Casteen III, who has just left the presidency of the University of Virginia. He had been a director of Wachovia for years, before the North Carolina bank racked up losses of $23.88 billion in 2008 and was forced into a shotgun merger with Wells Fargo National Bank using taxpayer bailout money.
After its tough and controversial takeover by First Union, Wachovia stumbled because it got involved in subprime mortgages, notably by buying GoldenWest, a subprime mortgage lender. Casteen, who did not respond to questions, was on the board during that takeover and throughout all of the drama when the financial crisis hit in late 2007, spelling doom for Wachovia.
Today, Casteen is a defendant in a massive lawsuit brought on by pension fund managers from California and Louisiana among other places, who say they were cheated by Wachovia and saw their investment crash and burn.
If that weren’t enough, Wachovia has settled with the federal government by paying fines of $160 million for its involvement in laundering drug money through Mexican currency exchange houses.
Both events happened while Casteen was on the board. In 2007, Casteen had total compensation of $243,500 from his service on Wachovia’s board and stock ownership.
Eugene P. Trani left the presidency of Virginia Commonwealth University in 2009 after improving the school’s standing and expanding its presence in downtown Richmond. But Trani was also a director of LandAmerica Financial Group, a Richmond-area title insurer that went belly-up in 2008, taking with it millions in investors’ money.
One wonders what Trani was doing in those final days of LandAmerica Financial Group in late 2008 when bankruptcy loomed.
Today, Trani is on the board of Richmond-based Universal Corporation, a global tobacco marketer. Universal’s subsidiaries have just agreed to pay $8.98 million in a tobacco bribery scandal that stretches from Brazil to Thailand to Africa. The firm has issued a public apology. Trani received total compensation for his board service of $159.032.
Once again, what was Trani doing on the board?He is on the board’s audit and pension investment committees? Did he know about the bribery problems? Did he do anything to correct the matters? He did not respond to requests for comment.
And speaking of tobacco, Casteen has just been appointed to the board of Altria, which owns cigarette giant Philip Mrris USA. His pay wasn’t available, but groups such as Campaign for Tobacco-Free Kids say that high profile people such as university presidents should avoid being used to improve the image of tobacco firms.
Being Virginia, the state may be too conservative to have the student protests of the type in Ohio that led to E. Gordon Gee, president of The Ohio State University, being scolded off the board of Richmond-based Massey Energy, a coal firm with a bad safety and environmental record.
Two other heads of schools are not on corporate boards. One is Ed Ayres, president of the private University of Richmond and the other is Michael Rao, who succeeded Trani at VCU.
In Virginia, the ruling elite, and that includes the Richmond Times-Dispatch, never asks any tough questions about academics and corporate boards. They adopt the stance of many corporations that I have dealt with — you have no right to ask, we defend our board at all costs and directors should be considered gods walking the earth.
Maybe. A spokesman for the National Association of Corporate Directors says that academics can offer valuable and unique perspectives to corporations. But the dangers of academics serving on corporate boards remain.
Peter Galuszka
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