Penn’s donor backlash raises questions about how much influence philanthropists should have

In mid-September, Ronald S. Lauder, of the Estée Lauder cosmetic company, made a special trip to Philadelphia to see the president of the University of Pennsylvania, his alma mater, to which he and family members have given many millions over the decades.

The school in two weeks was scheduled to house the Palestine Writes Literary Festival, billed as a celebration of Palestinian culture and arts, but criticized by some for inviting speakers who had a history of making antisemitic remarks.

He wanted it canceled. As is now widely known, Liz Magill, Penn’s president, didn’t comply, citing academic freedom and free speech.

That set off one of the biggest — if not the biggest — backlashes from donors that an American university has ever seen.

» READ MORE: With backdrop of donor withdrawals and student protests, Penn president vows to regain trust of alumni

Chief among the critics was Lauder, who told Magill in an Oct. 16 letter that he was re-examining his financial support of the university. He wrote that he “had two people taking photos and two more who listened to the speakers” at the festival and found them to be “both antisemitic and viscerally anti-Israel.”

Lauder, a Wharton alumnus, gave Magill a directive involving the Lauder Institute of Management and International Studies that he and his brother, Leonard A. Lauder, also a Wharton grad, founded at Penn in 1983 with a $10 million gift. They created the institute in honor of their father, Joseph H. Lauder, co-founder of Estée Lauder Inc.

“Let me be clear as I can,” he wrote, “I do not want any of the students at the Lauder Institute ... to be taught by any of the instructors who were involved or supported” the festival. He also wrote to Steven J. Fluharty, dean of Arts and Sciences, asking to meet with students and faculty involved in the festival, though he said in the letter that he never heard back.

In effect, a member of one of Penn’s biggest donor families gave an order on how personnel at the Ivy League institution should be deployed.

A spokesperson for Lauder, 79, said he was not available to comment.

Penn has declined to comment on Lauder’s letter specifically, but the sentiment expressed has raised concerns on and off Penn’s campus about how much influence deep-pocketed donors should have.

» READ MORE: Under pressure from Jewish community, Penn president unveils plan to combat antisemitism

“Let us be clear,” wrote the tri-chairs of Penn’s Faculty Senate. “Academic freedom is an essential component of a world-class university and is not a commodity that can be bought or sold by those who seek to use their pocketbooks to shape our mission.”

The chairs — political science professor Tulia Falleti, law professor Eric A. Feldman, and child development and education professor Vivian Gadsden — also warned about “individuals outside of the university who are surveilling both faculty and students in an effort to intimidate them and inhibit their academic freedom.”

Risa Lieberwitz, professor of labor and employment law at Cornell University and general counsel for the American Association of University Professors, called Lauder’s demands an “extreme example of a donor interfering at a completely unacceptable level.”

“This is an issue that’s long overdue for close attention,” Lieberwitz said. “What’s happening now should lead to ... everybody within universities saying ‘let’s look closely at the way in which donor relations are structured and consider reforms ... to strengthen the independence of the university and the academic freedom of faculty.’”

Universities need to be independent from pressures from donors and legislators, she said.

“If donors want to support higher education, ... they should do that because they support higher education,” she said.

But Michael Poliakoff, president and chief executive officer of the American Council of Trustees and Alumni, defended the donors’ actions.

“They are doing exactly what they should be doing and really calling to account their alma maters for moral and intellectual failure,” he said. “These people own that money and it is their absolute right to direct it to the things that align with their moral and intellectual vision. It makes absolute sense for them to be articulating that their hearts are broken and their wallets will be shut until significant changes happen.”

The Council for Advancement and Support of Education, a nonprofit that focuses on educational philanthropy, declined to comment on Penn’s situation, but pointed to its standards, which describe donors’ appropriate role.

“Donors provide funds to help a university service its vision or fulfill a specific purpose, providing capital to empower innovation and provide more access to students, ... but in giving that gift it does not ‘buy them a say’ in how the university runs,” CASE says.

The standards also cite specific examples in which donors should not have influence, including faculty appointments, admissions decisions, coach selections, program priorities, and investment policies.

Although Penn has received hundreds of letters from donors, alumni and others expressing concern, the actual impact on the Ivy League university’s finances is small. Scott L. Bok, chair of the board of trustees, said those expressing concern represent a minority of donors.

“We can survive this, but we don’t like what we’re going through,” Bok said. “And we want to win all those donors back over time.”

He also noted that “on the positive side, we have received some meaningful contributions from alumni who wanted to show solidarity at this time.”

Penn said donor contributions represent only about 5% of overall operating revenue. Major revenue sources include tuition and fees, research funding, income from auxiliaries and commercialization, and investment income off Penn’s $21 billion endowment, which covers about 17% of the academic operating budget.

» READ MORE: Penn president said university ‘should have moved faster’ in opposing Palestine Writes speakers with a history of antisemitism

The bigger concern for Penn is the reputational hit delivered from within its university family. It was alumnus and Apollo Global Management CEO Marc Rowan, currently chair of Wharton’s board of advisers, who spearheaded the campaign, encouraging alumni to ”close their checkbooks” until Magill and Bok stepped down.

While Penn has made clear that Magill and Bok are not leaving, Penn leaders have said they are committed to mending relationships.

» READ MORE: Penn donor who gave $50 million calls for university leaders to resign over ‘embrace of antisemitism’

Magill at a trustees meeting earlier this month said she regretted that anyone doubted her position on antisemitism — she has since released a plan to combat it — and vowed to regain the trust of alumni. And last week, Wharton dean Erika James, speaking at the Economic Club of New York, said Penn must repair relationships and address the harm to its reputation, according to Bloomberg.

Bok said he doubts the university could have done anything that would have changed the outcome. Canceling the festival “would have been contrary to decades of policy,” he said. He also maintained that the school quickly condemned some festival speakers. No one could have predicted, he said, that the festival would be followed so quickly by Hamas’ attack on Israel, which further inflamed concerns.

» READ MORE: Penn plans to review policies and training following controversy over Palestine Writes festival

The current Middle East crisis isn’t the only issue that has impacted philanthropy to colleges over the years. In 2021, alumni at the University of Texas-Austin threatened to pull back funding after students urged the school to change its fight song, “The Eyes of Texas,” which is linked to Confederate Gen. Robert E. Lee, according to Inside Higher Education. Although the university kept the song, alumni were upset the president didn’t take a stronger stance.

Closer to home, that same year, a small group of St. Joseph’s University alumni said they would withhold funds, citing the school’s “wokeism.”

While philanthropy may be a small part of Penn’s budget, it has funded major initiatives over the years, the Lauder family’s included. Penn declined to release the total from the family, which has sent three generations to Penn for their education.

Last year alone, Leonard Lauder, 90, — who has a net worth of $16.7 billion, according to the daily Bloomberg Billionaires Index — donated $125 million to Penn for a tuition-free program to recruit, train, and deploy nurse practitioners to work in the nation’s underserved communities.

» READ MORE: Penn receives record $125 million to offer free tuition to nurse practitioners to work in underserved communities

Penn’s $121 million College House was renamed the Lauder College House in 2019 in recognition of major financial support from the Lauders. Penn didn’t say how much they gave.

In addition to founding the institute, Ronald Lauder also funded a major renovation of the building that houses it, completed in 2018. Penn did not release the amount, but the work included all four floors, an expanded lobby, and a new event and dining space, Penn said.

Not every member of the Lauder family seems as disturbed by Penn’s response as Ronald Lauder. His nephew, William Lauder, 63, executive chairman of the Lauder company and a Wharton alumnus, continues to serve on Penn’s trustee board and was seen in what appeared to be friendly talks with Magill and Bok at the trustees’ meeting this month.

He did not return an email to his office for comment.

Ronald Lauder has been more involved in politics, once running as a Republican for mayor of New York and once serving as the U.S. ambassador to Austria. He has also been deeply involved in combating antisemitism and currently serves as president of the World Jewish Congress.