For Sweet Briar College, spring and summer 2015 have been intense seasons. On March 3, Sweet Briar’s directors and interim president announced that the college would close permanently after the spring semester and a modest summer session. The announcement cited enrollment declines, cost increases, and what seemed to be insurmountable obstacles to new resources and perhaps new programs that might keep Sweet Briar alive. Protests, pledges of new financial support, and litigation followed promptly as alumnae and others mounted an uprising of historic proportions.
By early June, the local county attorney and Virginia’s attorney general, along with private plaintiffs in several lawsuits, took the matter of the proposed closure to Virginia’s Supreme Court. On June 9, that court referred the cases back to the assigned county court for resolution. On June 20, Attorney General Mark Herring, who had earlier convened mediation involving all of the parties, announced that the parties had come to resolution on steps to keep the college alive. Two days later, the county court accepted the attorney general’s proposed settlement by transferring the college to a new board with a new president and with financial conditions. Those conditions included that cash be provided by alumnae groups from pledges made during the spring, and that the new board have legal authority to invade the college’s dwindling restricted endowment for operating funds to be used in 2015–2016.
The Story Thus Far
Sweet Briar’s circumstances pose challenges that all boards and trustees will want to understand. People in my own part of the country know Sweet Briar as a beautiful, well-kept, extensive campus of some 3,250 acres of rolling hills and meadows, part of it a stunning horse farm. The college has been a model of wholesome campus life for students, faculty members, and staff. In recent years, several academic programs and Sweet Briar’s diversity programs have emerged as sector leaders. It has had a splendid faculty, including one of my sons. In fact, Sweet Briar has earned admiration throughout its existence. Its alumnae are known as leaders and can-do women. People in the region believe in Sweet Briar and in its alumnae.
Board members everywhere will recognize that overseeing a relatively small institution poses distinct challenges. Sweet Briar has been a college for women since it began in 1901, a residential liberal arts college offering a disciplined set of programs for fewer than 500 students. Academic life has been holistic: Many faculty and staff members own houses built on college land. Many have lived there throughout their careers and raised their children there, belonging in every good sense to the college and local community. The campus is intentionally isolated. It is far from major airports, interstate highways, and cities. Young women have traveled to it from other places to live and to earn their degrees. Talented faculty members have moved there to teach them.
A few similar colleges have closed in recent years. In Virginia, St. Paul’s College, historically enrolling primarily African- American students, and Bristol’s Virginia Intermont College, originally a women’s college but coeducational since 1972, closed in the past two years. Both were in worse financial condition than Sweet Briar. I was a trustee of Virginia Intermont in its final years. It had no money to go on and too little endowment to carry it in bad times.
Somewhat in contrast, several Virginia colleges have added new programs, sometimes enrolling men as well as women, and seem stable and sometimes expansive. Hollins College and Mary Baldwin College come to mind as good examples. In 2007, Randolph-Macon Woman’s College in Lynchburg, historically a liberal arts college for women, became coeducational and added various new programs under its new name, Randolph College.
Sweet Briar’s statements about its problems describe a perfect storm of familiar hazards. A series of small (below-budget) entering classes had put the college into deficit for multiple years. Yield rates on offers of admission had declined, as had graduation rates. Net enrollment was down considerably from the college’s halcyon days and still declining.
In response, the college had sunk well into—and past—its margin of safety in discounting tuition, said to have been 62 percent for freshmen this year. Despite taking steps to expand the mission to include new STEM offerings (pre-med, engineering, preengineering) and the addition of business and other occupational courses, the college was still not succeeding in the competition for new students. It was believed that the rural campus, historically a major asset, and the equine programs had in recent times proved less attractive to new students than offerings in somewhat more urban colleges in the region.
Plant operation costs at Sweet Briar are said to be high: The stunning campus requires continual maintenance. The board reported that unsustainable expenses for deferred plant maintenance were a factor in its decision to close. Margins on operations had declined. Generous alumnae notwithstanding, philanthropic giving had not covered the marginal cost of operation for at least a decade or so. Consultants working for the board saw no way to increase giving to the necessary level. Perhaps the most telling point in the case made to the public, one made during the protests by an alumna who was also a board member: The college simply had insufficient cash to meet expenses during the coming school year.
In fall 2014, as the college’s board of directors worked with an interim president on ways forward, at least two adverse events arose to devalue the college’s bonds. Standard & Poor’s (S&P) downgraded its outlook to negative on the college’s 2006 bond— now held by Wells Fargo—in November 2014 (from BBB to B-). Several weeks earlier, the college negotiated a new covenant provision with SunTrust, which holds its 2011 bond. Consultants hired some five or so years previously offered no last-minute survival strategy.
In spring 2014, the prior president resigned, some have said hastily. Toward the end of that June, James F. Jones, formerly the president of Kalamazoo College and Trinity College, agreed to serve as interim for up to two years. Jones’ wife is an alumna. His background in excellent liberal arts colleges and his and Mrs. Jones’ sympathy for Sweet Briar’s mission made them especially attractive to the college.
Subsequent complaints notwithstanding, Jones seemed to be the right person for the job up until the announcement in March. Even his and the board’s critics seem to admit that he recognized the challenges very soon after coming to campus and began strategic conversations with various parties. Not all acknowledge now that they understood his messages, but that is perhaps a different thing. During the weeks since the closure announcement, Jones and Chairman Paul G. Rice have said consistently that the college had come to the end of the road—that it had no alternative to closing. Among the arguments made for the board’s position, including the timing of the closure, two deserve especially serious consideration. First, the board believed that the closure should be orderly, as it argued its timetable was. Second, the board wanted to control costs now in order to preserve assets for severance and similar wind-down payments.
One expects controversy in this situation, and indeed ample controversy, including the lawsuits, came after the closure announcements in March. The board’s critics argued that Sweet Briar’s diminished, but still considerable, total endowment—usually valued at $85 million, down from a high of about $96.2 million—combined with variously estimated pledges and potential gifts, could keep the college going while it cut expenses and developed a new mission. The available unrestricted endowment, which varies, usually falls in the range of $19 million to $20 million. The attorney general’s willingness to lift restrictions on some $16 million in previously restricted endowment, along with alumnae pledges valued in the range of $12 million, may suggest the range of shortfall that the attorney general and the parties to the mediation identified—a range not essentially different from the board’s earlier estimates.
The former board’s critics point to the campus, the college’s extraordinary faculty, and the alumnae as assets that can save it. Some say that the college failed to disclose its problems in time or that it failed to develop new programs soon enough. Allegations of undue secrecy, of sundry improprieties and misrepresentations, and of breaches of various kinds appear in blogs and statements to the press. One pseudonymous blogger claimed to have information that the Sweet Briar board has made a secret deal with Disney, although to whose benefit, the blogger does not say. (Sweet Briar has formally denied the rumor.)
At the end of the day, if midsummer is that, Sweet Briar has uncommon assets: a new board or at least a reconstituted board with a new majority, a seasoned new president (Phillip Stone, the retired president of Bridgewater College and a prominent Virginia lawyer), and access to what seems to be quite a lot of money newly available to it. Yet many of the college’s spring 2015 issues promise to continue. Stone has pledged to recruit new students and to retain faculty members, many of whom are said to have slipped away in late spring and summer. He and the new board chair have attracted backing from alumnae and from the news media as they have begun their new jobs.
Some First Lessons for Boards
What commonalities can other boards find here? What might board members generally learn from Sweet Briar’s crisis? How might the new Sweet Briar board and President Stone find durable solutions to the college’s problems, and might these be useful to those serving other colleges as board members and presidents?
It will be a long while before these questions find meaningful answers, if they ever do. Yet Sweet Briar’s problems and the midsummer solutions deserve study now, if only because they touch so clearly on both the survival issues that small colleges everywhere face and the vexing question that Attorney General Herring’s mediated solution may say about the supposed autonomy and powers of governing boards in private colleges.
Mind the mission. Boards have distinct responsibilities with regard to institutional mission—defining it, monitoring compliance with it, managing assets to sustain it, and so on. During the spring and summer protests, at least some of Sweet Briar’s alumnae seemed open to revising the college’s mission. The original donor’s trust is said to require that the college remain a women’s institution. Yet new eyes and hands may find ways to give Sweet Briar new vitality— new programs, new purposes, and similar changes may be available now when they seemed not to be in early spring.
Thoughtful boards elsewhere might well read in Sweet Briar’s current story messages about how they should monitor their own missions and how central it is to their own work. All missions evolve. Other entities—faculty committees, presidents, state agencies—may recommend changes in missions, but short of significant legal intervention (more significant than what seems to have happened at Sweet Briar), only the board can adopt and implement such changes. By itself, an historic mission, however honorable or well-loved, may not meet a college’s or society’s evolving needs. Students educated only in time-tested ways may find entry into graduate schools or professions unnecessarily difficult.
Develop stress tests, deploy them, and use what they reveal. To my knowledge, stress tests like those applied by regulatory agencies to money center banks or to publicly traded corporations generally do not exist in higher education. They should. Effective stress tests have fiduciary functions that can empower boards, and board members are first and foremost fiduciaries. They need to be trained in how to interpret signals, including reports on audits, accreditation visits, and the like, in best practices when the numbers go the wrong way, and in timely disclosures.
In Sweet Briar’s case, the U.S. Department of Education’s Composite Financial Index told the board and the public nothing, and Standard & Poor’s action came well after the board seems to have known from other sources that the college was in trouble.
Institutional cultures differ, but the core issues—the survival issues—appear in the form of remarkably consistent and knowable variables. They have to do with admission, retention, and graduation rates; with revenue, expenses, margins, and accrued surpluses or deficiencies; with debt and debt capacity, ratings, and changes over time; with accreditation; and in, most instances, with the Composite Financial Index. Stress tests of sundry kinds seem natural as boards deal as fiduciaries with problems that can appear quickly, especially when many problems come at the same time.
Revisit the basics, time and again. And keep revisiting them so that the board knows what managers are doing, at what expense, and with what benefit. No matter how one reasons about tuition discounting, Sweet Briar’s reported 62 percent is too much: Board members need to know it when they see it. Alternative pricing models exist. Trustees must be aware of what they are, and how they might affect the college.
Similarly, board members need deep knowledge of admission trends, of marginal costs and revenue, and of changes in the college’s competition. They should understand the variables involved in institutional accreditation and know what they need to learn from visiting committee reports and actions that accrediting commissions take.
Every board has the right to control its agenda. This advice may suggest that too much board time can be committed to topics that fall below the level of mission and fiduciary trust, and thus that the board should decide which issues can best empower it to be responsible for the institutional mission and for its own fiduciary functions.
Be faulted for telling too much truth too soon rather than for telling too little or too little too late. Much of the criticism directed at Sweet Briar’s directors rings hollow to my ear. The criticism directed at the interim president does as well. Yet hindsight inevitably works to the disadvantage of persons on a prior shift. Just as the remedies proposed by those who want to save Sweet Briar will take many years and cost a great deal of money (at least the sums approved by the attorney general and perhaps much more over many years), the causes inevitably go back decades.
That may be true of any institution whose resources will not sustain its mission. If board members are to lead through the toughest times, times when the bad news comes from S&P, from accrediting agencies, or from the admissions office, they need accumulated community knowledge—the kind that comes from conscientious training in how to do the board’s core work and from hard conversations conducted consistently over several years.
Know at least as much about hazards as about promising beginnings and distinguished pasts, and practice hard-eyed optimism. Institutions do sometimes come and go. Board members know that. Not all colleges are perpetual, however much graduates, faculty members, and board members may want their own institution to last forever. Is closure the only remedy for a specific troubled college, or does sudden access to funds in a restricted endowment or major success in raising funds change the future? Might a merger, reorganization, or restructuring work when other strategies do not? When closure threatens or actually comes, how can the board best satisfy its obligations to its constituents—to students, faculty members, past donors, graduates?
Fiduciaries often have to make hard calls. Mediated resolutions rarely generate dramatic changes in the underlying conflicts that lead to mediation. Old problems require as much of new boards and presidents as they did of the prior leaders. Problems persist because they are serious, because prior generations of good people have not found remedies. Many people will have followed Sweet Briar’s spring and summer with awareness that the college’s core problems still seem to exist—that the new board and new president have ample work yet to do.
Much Left to Know
Meanwhile, one would like to know quite a lot as Sweet Briar moves forward under its new board that one cannot know at this point. Virginia’s Supreme Court has done no one a favor by failing to provide a rule to explain when and how a college is a corporation (with directors empowered to make ultimate corporate decisions), and when it is a trust governed by the attorney general or county court.
Virginia’s Code is not consistent about this and other governing principles that affect both private and public institutions. The code styles the University of Virginia as a corporation, but not other universities such as the College of William & Mary and Virginia Tech. Efforts to clarify the meaning and sort out the distinctions as recently as 2005, when the general assembly added important autonomy provisions for public universities, came to nothing. Neither legislators nor staff attorneys knew what the distinctions meant. As revised, the code simply carries forward confusing language from prior times.
Because the July court actions assigning Sweet Briar to a new board came as a result of a closed or secret mediation, no one knows what the deal was. Its final shape is evident in the loosening of legal constraints on previously restricted endowments, in the appointment of the new board and president, and in requirements that the advocacy groups generate cash on a timetable apparently accepted by the parties to the mediation and the attorney general. Yet if the parties in mediation agreed on the underlying principles to guide future board conduct, no one knows what they are or what they mean.
When a mediation concludes without publication of whatever was agreed and conceded, only the parties themselves will know the governance principles going forward. Future generations of board members can learn from their predecessors, but not from public sources. Similarly, the attorney general’s (or governor’s?) commitments to the new president—which plausibly may have to do with eventual repayment of the released endowment funds, with the president’s authority in the event of conflicts within the new board, or with almost anything else that may have been in play during the mediation— are all at this point and very likely in perpetuity secret or sealed topics.
Finally, it is in the nature of dramatic public intrusions into private processes (selection of board members, conditions on gift pledges, selection, and empowerment of the president) that precedents are created. Today’s crossing of the line between public and private becomes tomorrow’s rule of conduct.
Future boards in other institutions will face issues not unlike Sweet Briar’s 2014–15 crisis. They will inevitably struggle with the secrecy that surrounds this mediation. They may well need to know, yet find themselves unable to know, when they must act as corporate board members and when as trustees of entities subject to public scrutiny. They and perhaps future attorneys general and county judges will surely need to see the bright line that separates public from private business.
At the moment, the Sweet Briar settlement provides no answers to these real-life questions that board members and public officials will inevitably face. Yet for Sweet Briar’s bold new venture and for colleges and universities generally, such questions need crisp, clear, and public answers.