The university announced yesterday that Chief Investment Officer James Walsh will be resigning at the end of this academic year. As Cornell begins the process of selecting a new person to manage its roughly $4 billion endowment, it should aim to find a qualified candidate with a sense of pragmatic conservatism and a strong commitment to endowment transparency.
The latter part of Walsh’s tenure, which began in 2006, has been marked by turbulent times for the University’s finances. Cornell’s endowment suffered a drastic loss of about 27 percent last fiscal year. During the same time period, endowments at colleges and universities across the country decreased by 18.7 percent on average, according to the National Association of College and University Business Officers.
Last year’s endowment drop has translated into widespread budget cuts at every level of the University, which has prompted a reduction in academic offerings, faculty and staff. It cannot be overstated that the University’s future growth is contingent upon successful endowment performance. Accordingly, the selection of Walsh’s replacement should be a thorough and comprehensive process.
The University should select someone who can effectively implement a sensible and conservative investment strategy that appropriately considers Cornell’s current fiscal situation. During the high investment returns of 2006, 2007 and part of 2008, the University embarked on ambitious new initiatives and construction projects. In retrospect, these actions seem to lack the foresight that such large endowment growth would not continue indefinitely.
To be fair, this pre-financial crisis mentality also appears to have existed at Cornell’s peer institutions. In fact, some of those institutions have weathered the recession worse than Cornell. It would be ideal if the departure of Walsh prompts a restructuring at Cornell that will promote a more conservative investment strategy.
In addition, we hope that the University’s next CIO will bring to the investment office a sense of transparency that we have found lacking in the past. The Annual College Sustainability Report Card has awarded Cornell B’s, C’s and D’s in its “endowment transparency” and “shareholder engagement” categories over the past few years. Although “transparency” may be a tired buzzword these days, the University should do a better job of engaging faculty and students in corporate governance. With a multi-billion dollar endowment, Cornell wields some economic power in its investments. More importantly, however, the University should aim to be a leader in socially responsible investing.