Listen to this article
College football rivalries are the stuff of fight songs, homecoming weekends and fraternity pranks. Arguably the most famous such competition is that between the University of Michigan Wolverines and The Ohio State University’s Buckeyes, which dates back to an 1835 border dispute known as the Toledo War.
For Stephen Ross, Michigan class of 1962, this rivalry has always meant more than an autumn afternoon yelling at the television. It even helped push him to give the largest gift his alma mater ever received, back in 2004 (his uncle, Max Fisher, once came up with enough money to persuade Ohio State to name its business school after him).
Of course rivalry was not the only factor contributing to Ross’s decision to donate $100m to the school – the largest gift in the history of any US business school – but it didn’t hurt.
The lack of financial return on his investment concerned Ross when he was first negotiating with Robert Dolan, Michigan’s business school dean (“philanthropy and economic rationale don’t add up”, Dolan told him) but the real estate magnate came to accept that the gift would not make economic sense. Instead, he rests comfortably knowing his business school is among the top in the country, much higher than his uncle’s, and that his gift may have inspired other alums to open their wallets a little wider.
Ross, founder of real estate development giant The Related Companies, was responsible for New York’s $1.7bn Time Warner Center and helps oversee the company’s $8bn-plus portfolio. Over the past few years he has also headed CharterMac, which finances more than 250,000 units of affordable housing. And for years he has been supporting the school where he received his bachelors degree in accounting, providing among other donations a $5m lead gift towards a new academic resource centre for athletes and $1m for an endowed professorship in the business school.
Successful business leaders often donate their fortunes to high-profile philanthropies. According to the Council for Aid to Education, $26.7bn was given to higher education in 2005, up 4.9 per cent from the previous year. But while total alumni giving increased, the proportion of alumni making gifts fell from 13.8 per cent in 2001 to 12.4 per cent in 2005. Fewer people are giving to their alma maters but they are giving more than ever.
“Those really large gifts that were extraordinary are now not so unusual,” says Tim Seiler, director of public service at the Fund Raising School, part of Indiana University’s Center on Philanthropy. According to the centre’s Million Dollar List, there were at least 286 gifts of $1m or more to higher education, totalling more than $2.1bn in the fourth quarter of 2005 alone.
Stephen Ross is in good company. Darla Moore gave $25m to the management school at the University of South Carolina in 1998. Frank Batten gave $60m to the University of Virginia’s Darden School in 1999. Sam Garvin donated $60m to Thunderbird’s international business school in 2004. And a $25m donation to Columbia’s business school from Pequot Capital chairman Arthur J. Samberg was announced this spring.
Lisa Philp, who heads philanthropic services at JP Morgan Private Bank, says people who give to their alma maters rarely make a multimillion-dollar donation as their first foray into philanthropy. “The typical pattern is that a modest donor with changed circumstances will become a bigger donor,” she says. This is not just about making more money but about “the dance of becoming more comfortable” with leaders in the development office and university administration.
When Dolan casually mentioned a fundraising drive in The Related Companies’ New York headquarters in 2003, Ross’s initial offer was $50m. But Dolan’s good salesmanship, combined with competition within the family, convinced him he needed to “make a meaningful gift”.
A $50m gift might sound meaningful. But it would have only supported renovations to the school’s out of date facilities and Dolan was not interested in that. He had commissioned a feasibility plan from an architectural company when he took over in 2001 and learnt that if he wanted to compete with other top-tier institutions, the entire building should be rebuilt to accommodate more innovative teaching styles and group projects.
That is where the second reason for Ross’s extra $50m comes in – trust in leadership. Ross and Dolan met for the first time in 2001, and their relationship was restricted mostly to formal events. But they grew to like one another almost immediately.
Ross also had faith in the architects and the school’s board. Enough faith, in fact, that once he committed to making the $100m gift, which took nearly 18 months of discussions with Dolan, university lawyers and his own in-house legal team, Ross actually let the school use it as they needed to. He put $75m towards new building construction and $25m towards its endowment.
“If you are going to make a gift for the right reasons, you have to let them decide [how to use the money]. They know what they need it for better than you do,” Ross says.
Most donors are not that hands-off, according to Jim Hasson, a partner at law firm Sutherland Asbill & Brennan who specialises in tax-exempt organisations and brokers many estate deals. He says most large donors are very involved in the minutiae of the negotiations, which take months or even years to work out. What used to be simple and genial discussions (“a lot of smiling and shaking hands and talking about how wonderful the donor is”) have become complicated transactions with formal language and ironclad contracts.
Although Ross is confident he made the right decision (and he can follow the new building’s progress on a webcam attached to the school’s website), other philanthropists are more concerned about their gifts. The Robertson family of the A&P supermarket fortune, for example, is in prolonged court battles with Princeton University over a 1961 donation that may have been used for purposes other than those intended. The gift, originally to fund the training of US diplomats, is now valued at more than $650m – far in excess of what is needed.
Official agreements must now ensure against donor failures, too, because many large gifts are made in stock, and are therefore vulnerable to the market. Schools include “what if” clauses in their contracts in case a donor’s fortune disappears. This happened to Georgia Tech’s Graduate School of Management when millionaire restaurateur Tom DuPree came up $19m short on his $25m pledge in 2004. His name was subsequently removed from the letterhead and certain school improvements had to be put on hold.
Such legalistic discussions might turn philanthropic negotiations into little more than a business deal but Hasson believes they actually make the donor more charitable. “It forces them to think seriously about why they are doing what they are doing. It is beyond just saying ‘I am going to get my name on the side of a building or associated with a scholarship.’”
In spite of Hasson’s optimism about donor intent, Ross publicly admitted that the naming was a significant part of his negotiations. “Because I made a gift of that significance, it was nice to have the school named after me,” he says. He believes schools want to have names attached to them these days because it indicates there is a long-term investment in the school’s success.
Ross says it will take another few years for the cash portion of his gift to be paid off and the $25m earmarked for the endowment will only be received upon his death. His was a relatively straightforward deal but other gifts are much more intricate, taking into consideration tax benefits, trust incomes and estate bureaucracy.
And Ross insists he did not make the donation for any reason to do with taxes. “I don’t think you give for any reason other than doing something you believe in and that could have an impact. You give till it feels good – and it felt real good,” he says.
The biggest consequence for Ross now that he has made the gift is being hounded for money all the time. “I’m on everybody’s list,” he says. “It’s a wonderful feeling but also a responsibility.” Oh, and Buckeye fans have even more reason to hiss at him.