Yeshiva University and the Season of Korah

This is the season of Korah when Jews traditionally read the Biblical account of Korah’s attempt to challenge the leadership of Moses and Aaron. Rabbis and Jewish leaders with a particularly authoritarian bent typically use this story as a springboard for sermons and articles that overtly or impliedly rail against challenges to community leadership. In their telling, challengers of the status quo are like Korah, motivated by ego, passion, and personal agendas. Like Korah, they are consumed by the obviously illegitimate idea of popular leadership rather than accepting “proper” leadership. Of course, taking this metaphor to its natural conclusion means that these rabbis and leaders claim to be the equivalent of Moses and Aaron, unburdened by ego and endorsed by the Divine. Beware of metaphors. Moreover, in the Biblical account, God’s attempt to forcibly quell Korah simply spurs more opposition from the people. Only when Aaron’s authority is confirmed through the miracle of Aaron’s flowering staff – a contest with a level playing field in which nobody is punished for participating — are the people satisfied. Thus, the Korah story is actually a polemic against absolute authority and in favor of communal inclusion in important leadership decisions. But of course, all of this somehow gets lost in the sermons.

This is relevant background to the sad story that is Yeshiva University today. YU has been buffeted by negative press over the past few years exposing an array of alleged scandals, most recently the seeming breakdown of its finances and financial oversight. YU has remained tight-lipped throughout, never offering a coherent defense. We are often reminded, however, that YU is modern Orthodoxy’s “flagship institution”. To YU’s leadership, this apparently means that it deserves our loyalty and support without offering us transparency or accountability, perfect authoritarian reasoning for the season of Korah.

Witness the recent article by Steven Weiss of The Jewish Channel which detailed major financial missteps by YU’s leadership over the course of many years. According to the article, YU’s current financial troubles are only partly the result of the Madoff scandal and the post-Lehman stock market collapse. The impact of the Madoff scandal was small, and the market downturn would not have hit YU as hard as it did but for the decision by YU’s current leadership to invest the school’s healthy endowment almost entirely in high risk assets. In this, YU stood apart from virtually all peer university endowments. It also increased its operating expense levels (Richard Joel, its President, is among the most highly compensated university presidents in the United States) and incurred significant leverage to finance various capital expansion and improvement projects. The people whose firms profited from YU’s investments served on YU’s board and investment committee, a clear conflict of interest. The article named names and cited numerous facts and figures to support its key points.

YU’s response? They weren’t given enough time to respond to the article, it was full of half truths and inaccuracies, and the author, a former YU student, had an ax to grind with the university. That’s it. No attempt to offer an alternative version of the events. No attempt to right the “half truths and inaccuracies”. Instead, as always, the press release included a host of self-congratulatory statements about YU producing “great results” for its students and faculty. “Today,” it declared, “YU’s investment portfolio is strong and professionally managed by our investment office with careful board oversight and best-in-class conflict of interest policies in place.” Note the emphasis on “today”; what happened “yesterday” isn’t discussed.

President Joel subsequently issued another press release about the article. This time, he offered a small statistical comparison between the performance of YU’s long term investment pool since 2002 versus that of all other university endowments over this period. The comparison purports to show that the compound annual growth rate over the period was 6.3% for YU’s pool vs. 5.3% for the other university endowments, meaning that YU’s investment strategy produced superior results. But a close reading of the comparison raises disturbing questions. For example, why was 2002 chosen as the starting point for the measurement as opposed to fiscal year 2005 (the year in which, according to the article, YU’s current leadership assumed control of the portfolio and sold off more than half of the endowment’s conservative investments)? Why was the comparison made to the endowments of all other universities rather than to peer university endowments with over a billion dollars? Finally, and most troubling, the comparison is based on YU’s “long term investment pool”, which in President Joel’s words, “includes the endowment”, but apparently includes other things as well. What are they? And why didn’t President Joel just offer a simple apples-to-apples comparison between YU’s endowment and other peer endowments? The answer, not surprisingly, is because that simpler and more honest comparison would have told a very negative story: according to the NACUBO Endowment Study used by President Joel, in 2005-2013, YU’s peer endowments grew by a compound annual growth rate of 5.6% while YU’s endowment grew by only 0.37%. That’s less than the inflation rate over this period.

President Joel’s attempt to reframe the discussion as a comparison of returns is also fundamentally mistaken because the proper benchmark for a portfolio’s performance is not its nominal return but rather its “risk-adjusted” return. Riskier portfolios often produce higher results to compensate for their higher risk profile — but does that mean that YU should invest its entire nest egg in a high-risk portfolio? Ultimately, that’s the question — not a comparison of nominal returns – that needs to be addressed when examining whether YU’s leadership was reckless with its endowment money. And President Joel’s response speaks to only one small aspect of YU’s financial performance discussed in the article; he does not address, for example, YU’s massive operating deficits which, according to Moody’s, may cause YU to run out of cash next year.

We have indeed fallen very far when the President of YU responds to an article claimed to contain “half truths and inaccuracies” with his own half truths and inaccuracies. But it did not have to be this way. President Joel could instead have offered a full accounting to the community of the decisions that were made and why; I’m sure they were well-intentioned and perceived at the time to be responsible. Everyone understands that hindsight is 20-20. He could have openly acknowledged such mistakes as were made, the lessons learned, the corrective steps being undertaken. He could have laid out a roadmap for YU’s recovery. Like the article, he could have offered facts and figures. And he could have said, “I recognize that I will have to ask our staff, students and supporters to make painful sacrifices, in part due to decisions that I helped make. Therefore, I am tearing up my employment contract, which under the current circumstances is inappropriate, and will continue to serve as President only for as long as the board wants me and with compensation that is determined by the board to be commensurate with my efforts and accomplishments.” That act of simple contrition would have demonstrated extraordinary leadership and would likely have restored confidence in YU. I’m sure it would have attracted favorable attention in the media and among the donor community. It would have paved the way for the painful concessions to be asked of YU’s various constituencies. It would have made us proud of our “flagship institution” and its leaders.

Sadly, that didn’t happen. Because in the Korah season’s best tradition of authoritarian leadership, YU’s leaders continue to believe that their institution’s various constituencies – teachers, students, alumni, parents and donors – are not entitled to a responsible accounting — and unavoidably, a reckoning – for the painful mistakes that have been made.

YU’s problem, it turns out, is not its Korahs, but rather, its Moses and Aaron.

About the Author
Yaacov M. Gross is an attorney living in Lawrence, New York.