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Business Ethics Case Study: Harvard University Endowment Plan

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Question 1:

What are the moral/ethics issues?  Identify them.

Answer 1:

Indeed, morals issues comes from outside source while ethical issues related to inside activity.  Morals are values which we attribute to a system of belief such as political, philosophical and religious while ethics are how organization owners apply which belief in their short and long term organization decision. In short, morals affect your stand on specific issues while ethics indicate how you deal with them. However, some people considered moral or ethics are same.

Moral/Ethical issues about the endowment fund distribution in the Harvard Company. Harvard University managers got a total 107.5 million endowment fund, but main issues was that Harvard management team such as manager, faculty, administration and including president are expanding these fund on their folks. So, few alumni student in the 1969 wrote a letter to the university president that they are inappropriate, contrary and unwarranted to the values of the university. President should adopted appropriate distribution policy in the regard of endowment fund.

From the above discussion, it can be concluded that student have rights to get maximum benefit from endowment fund rather than university management team. A few former student, reported to president about the endowment.


Question 2:

Was Harvard right to cap compensation?

Answer 2:

Indeed, cap compensation term used to explain the level of compensation payable by specific or authorize agency.

Jack Meyer and its team of manager left to invest in the own companies which was earning ten times as compare to Harvard salary. Harvard Company was already getting large amount of endowment assets as compare to other organization. In the last few years, Harvard endowment funds increase from $4.7 billion to $22.6 billion. Former student wanted to spend more endowment amount on the student growth and development. University doesn’t charge any fees from student those families earning less than $60000.

From the above discussion, it can be concluded that Harvard university management team have duty to spend endowment amount on student growth and development. Harvard wasn’t right to cap compensation because Harvard university already getting high level of endowment amount. So, they should spend more amounts on infrastructure of the university.


Question 3:

Does the result matter? That is, if the endowment fund performed better or worse before/after the cap, would that alter your answer to question 2? Explain.

Answer 3:

Indeed, Harvard University endowment fund was under pressure so the funds top management teams have to change the compensation plan. In the 2004, the funds was 20 billion less as compare to other years because two successful managers earned around $34 billion each while Meyer check was $6.9 million.

Meyer and his team member have produced good return for the Harvard endowment. From last 10 years, the Harvard fund average return of around 16.1 percent. Its return increasing constantly so they are paying good salary and bonus to their employees and facilities, including principle. Harvard became largest university endowment. However, Yale think that most of university does not manage its investment fund as compare to Harvard University.


From the above discussion, it can be concluded that if Harvard endowment fund will worse in future then we will not adopt the cap compensation because student growth and development is necessary to everyone and if University does not have sufficient balance then they should talk about the government for release fund.


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