From Stakeholders to Shareholders: How Donor Power Threatens University Independence

There’s something especially fitting about discussing the independence of academic institutions here, in a place that embodies Abraham Flexner’s vision of a “paradise for scholars”—a space defined by what it liberates researchers to discover rather than what it demands of them. In an age when universities face pressures from every quarter, NIAS represents what becomes possible when intellectual freedom is practiced, not merely proclaimed.

I. Introduction

The story of how such institutions came to be—and how far we’ve deviated from their founding ideals—begins with a remarkable act of philanthropic restraint that feels almost unimaginable today. In 1930, when Louis Bamberger and his sister, Caroline Fuld, sold their department store empire to Macy’s, they could have done what many of the era’s magnates did: build monuments to themselves, endow institutions bearing their names, or simply enjoy their wealth in splendid isolation. Instead, they sought out Abraham Flexner to create something unprecedented in American higher education.

What happened next reveals everything about the distance we have traveled from that original philanthropic ideal. When Bamberger and Fuld presented Flexner with five million dollars to establish what would become the Institute for Advanced Study at Princeton University—the institution upon which NIAS is modeled—university officials naturally asked what the siblings expected in return for their extraordinary generosity. Louis Bamberger’s response: “I don’t care what you do, just do it right.” Think about that for a moment. “I don’t care what you do, just do it right.” No conditions. No decision-making authority. Just an abiding faith in the power of open inquiry and the wisdom to step back and let scholars be scholars. How quaint that sounds today.

We live now in an age where such philanthropic restraint feels both rare and almost reckless—a luxury that neither donors nor universities believe they can afford. Universities have come to rely on donors more desperately than ever, particularly as public support has diminished, and donors have come to expect more than just gratitude. They want influence. They want control. They want, in the language of our times, a seat at the table. The transformation I want to explore with you today is how donors have evolved from stakeholders to shareholders—and how universities, perhaps unwittingly, have been the architects of their own vulnerability. This shift threatens something fundamental: the independence that makes universities essential to democratic society and to the advancement of human knowledge.

II. The Transformation of Higher Education’s Financial Ecosystem

How did we get from Louis Bamberger’s restraint to today’s shareholder mindset? The answer lies in a gradual but profound shift in higher education’s financial foundations. That shift began with World War II, which forged an unprecedented partnership between America’s universities and the federal government. What followed were nearly forty years of massive federal investment in higher education—from the GI Bill to billions in research grants that established universities as essential to national defense and prosperity.

This federal investment created something remarkable: for much of the postwar era, universities maintained independence in large part because they weren’t dependent on any single source of funding. Private institutions drew financial strength from a diversified ecosystem that included tuition revenue from an expanding middle class, robust federal research grants, predictable philanthropy from grateful alumni, and steadily growing endowments.

The philanthropic culture of this era reflected Bamberger’s philosophy. Donors saw themselves as benefactors rather than directors, supporting institutional missions without expecting operational control. Alumni giving, while growing in sophistication, remained rooted in gratitude rather than governance. By the 1980s, this equilibrium began to shift, as escalating costs and public disinvestment reshaped the landscape. Driven by technology investments, intensifying competition for faculty, and an amenities arms-race that rankings systems both reflected and reinforced, the costs of institutional ambition skyrocketed.

Meanwhile, state funding began its long decline as a percentage of university budgets. This period marked the birth of modern fundraising as we know it today: multi-year campaigns with ambitious targets, sophisticated donor research, and the emergence of an art and science of cultivation. Universities began asking donors for both money and engagement.

The third era began with a paradox: universities appeared wealthier than ever, yet felt more vulnerable than they had in generations. The dot-com boom, and the 2008 financial crisis and its aftermath revealed how dependent universities had become on volatile revenue streams. Moreover, despite impressive endowments, the gap between aspirations and resources widened.

Global campuses, massive science initiatives, generous financial aid policies, and expanding graduate programs—all required capital that even multi-billion-dollar endowments couldn’t easily provide, especially when those endowments carried explicit use restrictions. Universities that seemed rich to the outside world often ran significant operational deficits. With institutional appetite growing more quickly than the philanthropic pie, donors began to recognize their increased leverage, and universities, desperate for their support, began to accommodate demands that an earlier generation might have politely declined. The boundaries that had once protected institutional autonomy eroded as universities convinced themselves that the alternative—saying no—was simply too expensive.

III. Universities as Architects of Their Own Vulnerability

But here we must admit an uncomfortable truth: universities did not simply fall victim to these broader economic forces or the demands of emboldened donors. They were, in many ways, the architects of their own vulnerability. Consider the linguistic shift that occurred over the course of decades of development work. Where once universities expressed gratitude to “benefactors,” they began cultivating “partners.”

The language of philanthropy became increasingly collaborative, as much about seeking advice and counsel as it was about soliciting financial support: “What’s your vision for the University?” “How can we enhance our impact?” “Are we on the right track?” Each phrase, taken individually, seems innocuous, even admirable. Who wouldn’t want engaged, thoughtful donors? But cumulatively, this language sends a powerful signal: that donor input is essential to university decision-making.

Universities moved from saying “thank you for supporting what we do” to asking “what do you think we should do?” More consequentially, universities cultivated an access economy of higher education philanthropy, substantially expanding what donors purchase with their giving. Gifts have become tickets to ongoing attention from leadership. Yes, donors care about their specific gifts and how those funds are used. But increasingly, donors care more about the relationships their gifts create and the influence those relationships afford them.

Their contribution becomes an entry point into broader conversations about academic priorities, strategic planning, and institutional responses to current events. University leaders actively encourage this dynamic, reasoning that the more involved donors feel, the more generous they will be. They invite major donors to join special committees, participate in briefings, and share their perspectives on everything from building design to campus culture. Instead of preserving the boundary between giving and governing, university leaders blur those lines—sometimes to the point where they become virtually indistinguishable.

During my tenure as dean of the Faculty of Arts and Sciences, setting the fundraising agenda for the largest school at Harvard, and continuing into my presidency, I witnessed this dynamic firsthand. We encouraged donors to think of themselves as stakeholders, eagerly sought their advice, believing we were building stronger attachment, deeper commitment to Harvard’s success, and more sustainable giving. When some donors began to think of themselves as shareholders, we were reluctant to push back. The distinction matters enormously: stakeholders have interests; shareholders have voting rights.

IV. How Modern Donor Power Operates

The exercise of those voting rights is often more subtle and sophisticated than the explicit quid pro quo arrangements that dominate public discourse about higher education. The choreography of modern donor influence is a complex dance where universities anticipate donor reactions, donors express preferences without making demands, and decisions get shaped by conversations that never officially happened. These informal channels are more powerful than any gift agreement, with its litany of restrictions, rights, and requirements, because they operate at the level of institutional culture rather than contractual obligation.

Through my years in university leadership, I’ve observed four distinct but overlapping modes of influence. First, the Public Ultimatum. This is the most visible form of influence, where donors make public threats to withdraw support unless universities change course. This approach is comparatively rare but increasingly high-profile, emerging as a central feature in donor responses to recent campus controversies, from the handling of protests related to the war in Gaza to efforts to make universities more diverse and inclusive. Public ultimatums are something of a gamble: by going public, they force institutions to choose between donor preferences and public integrity, and when the stakes are that transparent, there’s a good chance — though not a guarantee — that integrity will prevail. Ironically, by eschewing private persuasion for public accountability, donors risk revealing the limits rather than the extent of their power.

Second, the Quiet Veto, which operates below the radar of public attention. This is when anticipated donor reactions shape decisions before they are ever made. University leaders expend enormous energy trying to steer clear of initiatives that will create donor problems. What is particularly insidious about the quiet veto is that it often works without any communication from donors themselves—administrators imagine opposition and act accordingly, a form of institutional self-censorship that preserves the appearance of independence while undermining its substance.

Third, the Strategic Hire occurs when donor interests influence academic programming. This doesn’t typically involve donors dictating specific personnel decisions, but rather universities creating positions, centers, or initiatives that intentionally align with donor priorities. The mechanism is indirect but effective: donors express interest in particular areas of research or teaching, universities recognize funding opportunities, and academic priorities shift accordingly. Over time, these individual decisions can reshape entire disciplines or schools in ways that serve donor interests—again, while maintaining the appearance of academic freedom.

Finally, the Reputational Shield may be the most perverse form of modern donor influence. This occurs when universities find themselves protecting donors and their activities from criticism or negative attention, reasoning that donor relationships are too valuable to risk. Among the most egregious examples are the well-documented ties at Harvard and MIT with Jeffrey Epstein. Institutions that would usually encourage scrutiny and rigorous debate about public issues instead find themselves avoiding topics that might reflect poorly on major supporters.

The university’s critical function—to examine difficult questions without fear or favor—takes a back seat to the imperative of maintaining donor relationships. These modes derive much of their power by exploiting universities’ genuine dependence without compromising anyone’s self-respect. For the most part, there is no explicit financial coercion, but rather a deep psychological and cultural investment in donor approval and engagement. Through preemption and informality, donors and university leaders alike can maintain the narrative that academic integrity remains intact. The same institutions that will vigorously defend their right to autonomy in the courts reflexively accommodate donor preferences in the actual governance of academic life.

V. The Costs of Shareholder Philanthropy

The real question is what donor influence costs—in other words, what do we lose when the pursuit of knowledge becomes secondary to the cultivation of relationships? These costs accumulate slowly, almost imperceptibly, embedding themselves in the daily practice of academic life. When donor preferences, rather than the demands of knowledge or the needs and interests of the campus community, drive resource allocation, the consequences are reflected in the balance of what universities study, teach, and prioritize. Areas that attract donor interest—entrepreneurship centers, for example—flourish; those that don’t—such as divinity schools—struggle for attention and resources.

Universities begin to organize themselves around fundable priorities. Faculty learn to frame research questions in ways that resonate with donor interests. Graduate students migrate toward fields with better funding prospects. Slowly but inexorably, the investment gap between areas of human knowledge that generate donor enthusiasm and those that do not reshapes the intellectual culture of the institution itself.

The costs of shareholder philanthropy can also be measured in the creeping self censorship that takes hold when universities chase donor approval. It is the cost of what never gets proposed, what doesn’t get said, what remains unexplored. The boundaries of permissible inquiry gradually contract as universities internalize donor sensitivities and limit themselves to lines of inquiry that won’t strain important relationships. And in this way, shareholder philanthropy poses an existential threat to what universities are meant to be: centers of knowledge creation and transmission—institutions that courageously pursue truth wherever it leads, guided only by the logic and rigor of inquiry itself.

This threat is distinct from other forms of external pressure, such as government intrusion. While attempts at state control remain a vital concern – and universities rightly defend their political independence – the erosion of autonomy through donor influence is layered and often opaque, making it more difficult to detect and resist. But it is no less dangerous.

In the address I delivered at my inauguration as Harvard’s president, I reflected on the question of “Why?”, a simple query that animates all research and teaching and forms the basis of academic life. “Why?” is the gateway to discovery, opening the door to scientific breakthroughs, fresh artistic forms, and new remedies for physical and social ills. Without the freedom to ask “Why?”, knowledge, which is the purpose of the university, is out of reach.

When universities become avatars of donor priorities, they lose this essential freedom. They may remain prestigious, well-funded, and influential, but they cease to function as universities in the deepest sense. This retreat from open inquiry is more than a private institutional concern. It imperils the broader ecosystem of democratic society that depends on universities as crucial sources of disinterested analysis, long-term thinking, and critical insight that transcends partisan and commercial concerns.

The ultimate cost of shareholder philanthropy, therefore, goes beyond the compromise of particular research agendas or the silencing of specific voices. It is the potential loss to society of a rare but necessary space—an institution accountable to truth rather than to those who pay the bills. We invited this. We cultivated it. And now we must find the courage to change it. There are concrete measures that universities can take—individually and collectively—to begin restoring the independence that makes us worthy of public trust and private support.

VI. A Path Forward

Change must begin with structural reforms to strengthen the boundaries between giving and governing. This includes bringing more transparency to gift agreements, to reduce speculation about what obligations exist and what independence is preserved; formalizing and adopting ethical guidelines for donor relations that distinguish between appropriate donor engagement and inappropriate intrusion into academic decision-making–if necessary, enumerating presumptively unacceptable demands and conditions; incentivizing development officers to prioritize gifts that enhance institutional autonomy; further diversifying revenue streams so that no donor or small group of donors have the leverage to dictate institutional direction; and, critically, reforming governing board composition where donor influence has become too concentrated.

But structural reforms are not enough. Universities also must rediscover the capacity to say no to gifts with inappropriate conditions and donors with inappropriate demands. This requires a cultural shift away from the assumption that all money is good money and donor approval is the sine qua non of institutional health. Saying no is never easy, particularly when institutions face genuine and potentially worsening financial pressures. Saying no requires difficult choices, sometimes in the worst of circumstances. But the capacity to say no is what sustains independence.

This doesn’t mean universities should adopt an adversarial stance toward philanthropy. On the contrary: in my experience, when universities are transparent and full-throated about their commitment to independence, they attract precisely the kind of donors they most need—those who give because they believe in the mission rather than because they want to shape it. Such donors do exist, and in greater numbers than our current practices might suggest. They approach philanthropy with humility, as stewards of possibility not architects of outcomes, recognizing that universities create their greatest value when freed from external pressures. Their partnership enriches the university precisely because it respects the boundaries that make universities worth supporting in the first place.

It is the other kind of donor—those who view philanthropy as purchasing power, who cannot distinguish between supporting and steering—whose gifts institutions must find the courage to decline. Without that courage, universities signal to all potential donors that independence is negotiable—and donors, quite rationally, will test those boundaries. The path back to independence will not be easy, nor will it be quick. The current dynamic has been decades in the making, and reversing it will require sustained commitment from university leaders. It begins with recognizing that the choice is not between funding and freedom, but between two different visions of what philanthropy can be.

VII. Conclusion

I would like to return, finally, to the essential question that has run beneath this entire conversation: What are universities for? If universities exist merely to serve the preferences of their funders—whether donors, governments, or markets—then the current trajectory poses no fundamental problem. Responsive institutions that adapt quickly to external demands might even be seen as more efficient, more accountable, and more relevant to contemporary needs. But this conception fundamentally misunderstands the university’s essential role in a democratic society.

Universities remain among the few institutions capable of pursuing knowledge without regard to immediate utility, popular approval, or powerful interests. They have been insulated—through tenure, through endowments, through traditions of academic freedom—from the pressures that constrain many other institutions. They serve as society’s designated spaces for thinking that transcends the exigencies of the moment, for research that challenges conventional wisdom, for education that develops critical rather than merely practical capacities.

When donor preferences shape research priorities, when anticipated reactions constrain scholarly inquiry, when access to university leadership becomes a commodity purchased through philanthropy, the university becomes distorted in ways that ultimately serve no one’s long-term interests, and society loses something irreplaceable. The appeal to donors must therefore rest on a deeper understanding of how universities create value: True impact comes from enabling discovery, not directing it.

The greatest gift a donor can give is their trust in the academic enterprise itself—their faith that open inquiry will ultimately prove more valuable than directed research, that independent institutions will serve society better than responsive ones, that the pursuit of truth for its own sake remains among humanity’s most practical endeavors. This perspective should inform every donor relationship, every fundraising conversation, and every institutional decision about accepting or declining support.

The question is not whether donors can be partners in university life—of course, they can and should be. The question is what kind of partnership serves the interests of knowledge, democracy, and human progress. The choice facing universities today is this: We can continue down the path toward shareholder philanthropy, accepting greater donor influence in exchange for continued support, gradually becoming more responsive and less independent until we evolve into something entirely different. Or we can recommit to the principles that make us valuable, accepting the risks that come with independence in exchange for the capacity to serve society’s deepest needs. Some fear that we cannot afford to preserve university independence. I believe we can’t afford to lose it.