What are college heads doing on corporate boards?
In Virginia, as in most states, being the head of a large public university is a prestigious job. Along with it come lots of perks, such as being appointed to various education and public service committees and, in some cases, to lucrative seats on corporate boards.
Therein lies the problem.
Two former presidents of two major universities -- the University of Virginia and Virginia Commonwealth University -- have been or are on the boards of some publicly held firms that have had some serious problems. These call into question why the academics are involved, what their roles on the boards really are or have been, whether being on the boards hurts their school's reputations and whether they even have the time for it.
One is John Casteen III, who has just left the presidency of the University of Virginia. He had been a director of Wachovia Corp. for years, before the North Carolina bank racked up losses of $23.88 billion in 2008 and was forced into a shotgun merger with Wells Fargo National Bank, using taxpayer bailout money.
Wachovia stumbled because it got involved in subprime mortgages, notably by buying Golden West, a subprime mortgage lender. Casteen, who did not respond to questions, was on the board during that takeover and throughout all of the drama when the financial crisis hit in late 2007, spelling doom for Wachovia.
Today, Casteen is a defendant in a massive lawsuit brought on by pension fund managers who say they were cheated by Wachovia. If that weren't enough, Wachovia has settled with the federal government by paying fines of $160 million for its involvement in the laundering of drug money through Mexican currency exchange houses, something that occurred when Casteen was on the board. In 2007, Casteen's total compensation amounted to $243,500 from his service on Wachovia's board and stock ownership.
Eugene P. Trani left the presidency of Virginia Commonwealth University in 2009 after improving the school and expanding its presence in downtown Richmond. But Trani was also a director of LandAmerica Financial Group, a Richmond-area title insurer that went belly-up in 2008, taking with it millions in investors' money.
Today, Trani is on the board of Richmond-based Universal Corporation, a global tobacco marketer. Universal's subsidiaries have just agreed to pay $8.98 million in a tobacco bribery scandal that stretches from Brazil to Thailand to Africa. The firm has issued a public apology. Trani received $159,032 in total compensation for his board service.
And speaking of tobacco, Casteen was recently appointed to the board of Altria, which owns cigarette giant Philip Morris USA. His pay isn't available, but groups such as Campaign for Tobacco-Free Kids say that high-profile people such as university presidents should avoid serving to improve the image of tobacco firms.
The state of Virginia may be too conservative to have the sort of student protests that triggered president of Ohio State University E. Gordon Gee's scolding off the board of Richmond-based Massey Energy, a coal firm with a bad safety and environmental record. But the dangers of academics serving on corporate boards remain.
| August 18, 2010; 9:39 AM ET
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