5-13-09: Stanford: Endowed faculty positions face difficulty in bad economy

The current economic recession is expected to take a toll on the creation of endowed chairs and professorships, which may have a negative impact on both faculty hiring and the overall health of the endowment.

The economic downturn has been felt across the University, especially in Stanford’s shrinking multibillion-dollar endowment, which just three years ago was the fastest-growing endowment in the nation. A significant portion of this loss in endowment value comes from fewer newly created endowed chairs and professorships.

Endowed chairs and professorships are positions across the University whose salary, benefits and occasionally other costs are paid for by interest from a single multimillion-dollar endowment, usually made in a donor’s name. The positions also come with faculty titles such as “The Charles Louis Ducommun Professor in Humanities and Sciences.”

Stanford has several hundred endowed positions across all seven schools and other institutes, and they play a vital role in the financial health of the University. The School of Humanities & Sciences (H&S) currently has the most endowed positions at Stanford, and H&S Dean Richard Saller said these are crucial to faculty salaries.

“The School of Humanities and Sciences has a two billion-dollar endowment,” Saller said. “About half of the school’s endowment comes from endowed chairs and professorships–it’s by far the biggest single source of endowment for [H&S].”

The current economic climate, however, is not conducive to the large gifts required to establish these professorships. Dean Saller explained that while H&S has created 49 new endowed positions since 2001, only five were created in the 2008 fiscal year, and just one has been created in the 2009 fiscal year so far.

“It’s too early to say for sure, but the University is anticipating in general that donations will be lower this year,” said Stephen Hinton, senior associate dean in the School of H&S.

“There are fewer donors in the current environment stepping up to make these large gifts,” Saller added. “With the decline in the value of the endowment as a whole, the capital value of each endowed chair has similarly declined, meaning less revenue to support faculty salaries.”

At present, a standard endowment to create a professorship costs about four million dollars, and the yearly payout–set at 5.5 percent–helps pay costs that otherwise would be taken out of tuition. Large gifts can establish new endowed positions, and when endowed faculty leave the University, their positions are passed on to new faculty.

Provost John Etchemendy acknowledged that a dip in the economic climate has resulted in added pressure to the University’s general finances.

“[The economy] has not affected existing endowed professorships, except that, since the endowment has declined by about 30 percent, these professorships are paying out that much less income to the budget,” Etchemendy wrote in an email to The Daily. “Since the professors who hold those chairs still have to be paid, the shortfall has to be covered, usually by general funds (that is, tuition).”

As a result of the financial difficulties, Stanford will have to “impose serious restraints on faculty hiring for the next few years,” Saller said.

The University will also be cutting back on raises for existing faculty.

“The gross macro effect is that this year, there will be no salary raises,” Saller explained. “The endowment just won’t pay out as much this year as it has in the past.”

Also ceasing are some additional means to make the most of an endowed position. In past years, certain endowments have grown over time and accumulated enough funds to be split into two endowed positions, a process called “chair-splitting” which results in multiple positions with the same name.

“I must say, in the current climate, that kind of [chair-splitting] is much less likely to be happening,” Hinton said.

Saller agreed that without a growing stock market, chair-splitting is simply “not happening.”

Endowed faculty, however, are not directly feeling the pinch. Faculty salaries are settled independently of endowed positions, so a drop in endowment doesn’t usually affect their finances, although the title does arguably provide some prestige.

“[Offering an endowed position] can be one among several factors in attracting and retaining faculty, especially against offers from other universities,” Hinton said.

Faculty agreed that an endowed professorship, while providing a prestigious title, has little to no effect on career. When asked how an endowed position affected his career, Political Science Prof. Joshua Cohen replied by email, “not at all.”

“The truth is, it’s not that big a deal,” said Graham H. Stuart Professor of International Relations Stephen Krasner. “The more [endowed positions] there are, the less important each one is. You wouldn’t retain a faculty member with just the position itself–you’d need other factors.”

The opportunity for a named endowment, however, appeals greatly to donors and is a key factor in soliciting large gifts for the University.

“Stanford has arguably the best faculty in the nation,” Saller said. “Donors are absolutely delighted to be associated with Stanford faculty, and a named endowment is one way to do that.”

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