It’s always interesting to watch the machinations that occur whenever academics must address a conflict between their academic principles and the devilish necessity of money.
This Houston Chronicle story picks up on this earlier article concerning the University of Missouri-Columbia‘s dilemma regarding what they should with a substantial endowment donated by former Enron Corp. Chairman and CEO Kenneth Lay if Mr. Lay is convicted of securities fraud in his pending Enron-related criminal case.
In one of the understatements of the year to date, UM officials say they would “prefer” to remove Mr. Lay’s name from a yet unfilled economics professorship he endowed if he is convicted. However, under the terms of the donation contract, such a move would require the return of Mr. Lay’s 1999 donation of $1.1 million to the school. The professorship remains unfilled to date.
Talk about a tough decision. This one is getting the attention of the highest levels of the UM administration.
In an e-mail obtained by the Columbia Daily Tribune, UM Chancellor Richard Wallace told UM President Elson Floyd and the university’s Board of Curators about discussions he and Provost Brady Deaton had about the Lay chair in economics:

“Unless Mr. Lay is convicted of a felony, the money in the endowment should be retained and used for the purpose for which it was established,” Wallace wrote. “If found guilty then we would prefer to remove the name from the chair and, in accord with the terms of the endowment, we believe that this would require returning the money to Mr. Lay.”

And we thought the periodic scandals in UM’s basketball program caused difficult issues!
From my vantage point, the UM administration is engaging in muddled thinking here. Regardless of the outcome of Mr. Lay’s criminal case, it is reasonably clear that Mr. Lay was at least negligent to some extent in connection with the collapse of a major American corporation that cost investors and creditors billions and that he led a company that now has become synonymous in American society (or at least on Letterman and Leno) with corrupt business practices. Whatever the outcome of Mr. Lay’s criminal trial, that is not going to change. Consequently, using the outcome of the criminal trial as the standard on whether to keep the money seems to be a misplaced standard to use under these circumstances.
If UM decided that it should not keep the donation, I really could not quibble with such a decision. Frankly, there would probably be some public relations benefit to the University in doing so. However, it seems to me that this dilemma also provides an opportunity for a bit of academic administration creativity.
I propose that UM go ahead and fill the chair with Mr. Lay’s name on it and use it to promote academic research into risk analysis in economics and business. Enron was a staggering investment loss, but the risk of such a loss and related insolvency is arguably the most important assessment that is made in any investment decision. Although Mr. Lay’s legacy in business is certainly different from what UM thought it would be in 1999 when it accepted his donation, that legacy nevertheless reflects one key aspect of business and economics. Why not use Mr. Lay’s donation and the unfortunate circumstances of Enron’s demise to promote research into issues relating to the risk of loss and insolvency?