Perils of Entrepreneurial Philanthropy in Higher Education

A successful entrepreneur and his family wanted to donate a new building to a state university. What happened next illustrated the maxim that “no good deed goes unpunished.”

Because the building was part of a state institution (and all that implies), the original construction estimates quickly ballooned into a project that cost 50% more than a similar commercial project. Stunned, the alum nevertheless agreed to increase his donation. A month after the building plans were unveiled with great fanfare, the cost to complete the building nearly doubled again, because the university's architect greatly embellished the design.

With a price tag now significantly higher than agreed to at the ground breaking, the donor faced some difficult options. He could dramatically increase his gift again, force an uncooperative architect to redo the design, cancel the gift with embarrassment, or recruit additional donors. He eventually retained and worked with another architect to come up with a new design, which exceeded the budget by only 4%. While the building was a huge success, the entrepreneur learned a tough lesson on the perils of philanthropy.

Higher education has benefited greatly from entrepreneurs’ largesse -- from entire universities funded by the Stanford, Rockefeller and Vanderbilt families, to endowed professorships, to many thousands of smaller contributions that help deserving students pay tuition. But many benefactors have learned to their dismay that their good intentions can backfire. Building costs mushroom out of control; university fundraisers deduct a commission from the gift; university leaders divert the donation to other projects or needs.

I’ve seen this happen, from the inside and the outside. I’ve been a professor, a university administrator/fundraiser and an entrepreneur. I have personally donated scholarships, professorships, excellence endowments, lecture hall/conference rooms, faculty offices and a chapel.

My message for goodhearted entrepreneurs: be aware of what can go wrong. Don’t trust your heart, your friends or the university development officers. Most importantly, do your homework before you open your wallet to give back.

Entrepreneurs are Enthusiastic Benefactors

The Chronicle of Philanthropy’s annual corporate giving survey reveals that companies led by entrepreneurs allocate more than twice the percentage of profits to charity than many of America’s largest companies. From the Gates Foundation and its focus on human health, to the $100 million that Facebook’s Mark Zuckerberg donated to Newark’s public schools, many wildly successful entrepreneurs are giving back to the world.

In fact, this web site, EIX.org, is possible because of entrepreneur Richard Schulze, founder of Best Buy, through the The Richard M. Schulze Family Foundation. Schulze aspires to help more entrepreneurs succeed through providing EIX.org