September 14, 2000

Faculty Debates eCornell

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As the Faculty Senate resumed discussion of eCornell yesterday during its first meeting of the semester, representatives paused on past decisions to flesh out a consensus, or at least a working agreement, concerning the business.

This time the debate centered around a distance learning corporation realized last week with the installment of a budget and board of directors.

“You will remember that last spring the administration proposed eCornell as a for profit, perhaps venture capital-seeking firm,” said Prof. Charles Walcott, neurobiology and behavior, introducing the events that first prompted the Senate to become involved.

Faculty senators had urged University Trustees against funding eCornell on March 8 following varied criticism of the distance learning proposal. Two days later, however, the Trustees proceeded with preparations for eCornell’s incorporation.

Then last week the Board of Trustees convened once again and granted eCornell 12 million dollars for its first fiscal year and a board of directors to guide the company.

ECornell will create and distribute distance learning courses only for non-degree programs because of a suggestion from the Provost’s Advisory Committee on Distance Learning (the Arms Committee). It was also determined that eCornell would be for profit in structure, but this decision was made independently of the Arms Committee.

And this decision received anything but a vote of ratification yesterday.

“One of the issues that the Arms Committee did not address was whether eCornell should be for profit or not-for-profit,” Walcott said before the Senate addressed the issue itself.

Also without recommendation, a University Faculty Committee (UFC) subcommittee examined the fundamental dissimilarities between for profit and not-for-profit structures dealing with operational constraints, taxes and the implications of such a company on the University’s mission.

While the Senate was adjourned for the summer months, the UFC worked on behalf of the faculty governing body and endorsed the Arms Committee’s preliminary recommendations.

“The proposal was the same in February as it is now,” said Vice Provost Mary Sansalone. “The only modification was to restrict the legal document to non-degree programs.”

Still in the process of resolving some issues related to distance learning during the summer, Faculty Senate representatives withheld their comments about eCornell’s structure until yesterday’s debate.

Michael Goldstein ’64, special counsel to the University on distance learning, attended the meeting to offer insights from his personal experience with distance learning and from his participation in the Trustee meetings last week.

President Hunter R. Rawlings III and Provost Biddy (Carolyn A.) Martin were also present at the faculty gathering.

“The real standard is not to create profit for its owners but to create value,” said Goldstein, expounding on the rationale for eCornell’s for profit structure. “No matter how good [a not-for-profit] is, no matter how successful it is, there is no appreciation there because it has no market value.”

Goldstein likened the Trustees’ $12 million allocation for eCornell’s first fiscal budget to any other investment of the University’s endowed funds. Rather than directing a portion of the endowment to an investment bank, the University is investing in eCornell.

“If eCornell were funded internally it would have to come out of operating funds [or by depleting the endowment],” Goldstein said. Instead, “eCornell is selling all of its equity to Cornell University [and accomplishing its early financial goals] without eliminating control of eCornell by the University.”

ECornell will originate completely in the hands of University leadership, but Prof. Peter C. Stein, physics, raised a specter of doubt about the future of eCornell should the University compromise its positions on the board of directors.

“The process of monetizing means selling a part of the corporation,” said Stein, who opposed the creation of eCornell last spring.

“We sort of think that Cornell has these lofty ideals, and these are not the same lofty ideals that [drive] Firestone,” he added.

Goldstein responded by pointing out that there would be no guarantee that a not-for-profit can draw the investments it may require. If in need of money, “you can beg for it [and] you can borrow it,” he said, but a not-for-profit may struggle for funding nonetheless.

On the other hand, if at some point the University invites other shareholders into a for profit partnership, it would not necessarily have to relinquish full control of the board of directors, Goldstein said.

“You can absolutely maintain control of a for profit, and you can maintain it in a number of ways,” he explained.

For further assurance that eCornell would not be like an ordinary dot-com, Goldstein said, “The value that exists in the corporation is the name and brand of Cornell.”

He added that while the board of directors has a fiduciary responsibility to raise the value of the corporation, it also must respect the Cornell name in order to do so.

The decision on structure was indeed a foregone conclusion before yesterday’s Senate meeting even began. Thus, some senators turned back to dwell on the decision-making process and on whether a not-for-profit structure or another alternative to for profit structure was an option considered at all.

“One thing that should be clear is that whether to go for profit or not-for-profit is a choice,” said Risa Lieberwitz, collective bargaining. “[And] our choice is not simply a question of finances.”

For those still at odds with the new corporation, a new question has replaced the one concerning its structure.

“Do we want ot sell ourselves as equity that will inevitably affect our independence?” Lieberwitz asked the Senate.

Assuring other faculty senators that democracy can be slow — as it sometimes is within their own governing body — Lieberwitz urged her colleagues not to turn their backs on the democratic structure of the University in their support for eCornell.

Also acknowledging the choice involved, Goldstein left it to each senator to decide for themselves which structure would be better for eCornell. Though a plan will be made up by the eCornell board of directors soon, the minds of many faculty senators may remain open for a resolution to the questions facing the issue of distance learning at Cornell.

“Obviously one can analyze it, and one can come to a different conclusion [than I did],” Goldstein said.

Board Complete

The President and Provost selected Prof. William Arms, computer science and chairman of the Provost’s Advisory Committee on Distance Learning to the eCornell Board of Directors earlier this week. Arms has not yet met with Trustee Peter C. Meinig, chairman of the board of directors.

“I am especially pleased that somebody who has been involved in the process will be involved in implementing it,” Rawlings said of the appointment, announced yesterday.

Other Senate Issues

Rawlings opened the meeting expressing appreciation for the summer efforts of the UFC. While most classes were in recess the UFC dealt with issues other than eCornell, such as the engineering dean search and West Campus development.

The Faculty Senate heard from the President about the faculty salary initiative, a plan released last summer. Rawlings paid particularly notice to revenue sources that will supplement funds to satisfy the higher compensation costs. One such source of revenue will be a Campaign for Faculty Excellence.

To meet the goals in faculty compensation, Cornell will have to increase its annual base budget by 15 million dollars.

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y Matthew Hirsch