Robertson Foundation lawsuit Q&A

Here are responses to questions regarding the lawsuit filed against Princeton University by William Robertson and other members of the Robertson family in July 2002. 

What is the Robertson Foundation lawsuit really about?

Fundamentally, it is about two things: the mission of the foundation and control of the foundation’s funds. Marie and Charles Robertson ’26 established the foundation in 1961 with a gift of $35 million and a mission that could accommodate changing national and international circumstances over time. The current generation of the Robertson family would like the foundation to have a narrower mission than the one that was agreed upon by their parents. The current family members also are seeking to take control of the foundation’s funds, despite their parents’ clear intention that Princeton University should be the sole beneficiary of their gift. In materials submitted to the Internal Revenue Service when the foundation was established, Marie and Charles Robertson emphasized that the foundation was “for the use of Princeton” and that “Princeton, as the ultimate beneficiary, has control” over it through majority representation on its board of trustees. As a type of “supporting organization” (which is how it is organized under the tax law), the foundation had to be controlled by the beneficiary organization and could not be controlled by the donor or the donor’s designated representatives. This governance arrangement was essential to the University because it could not responsibly make such long-term commitments as constructing buildings and hiring tenured faculty without assurance that the resources to support these commitments would continue to be available.

In carrying out the foundation’s mission, the Woodrow Wilson School has become one of the world’s leading schools of public and international affairs, preparing students for governmental and other forms of public service. Through its representatives on the foundation board for more than 40 years, the University has dramatically increased the foundation’s assets, and these representatives have more than met their fiduciary responsibility to use the assets to support, expand, and strengthen the graduate program of the Wilson School in accordance with the foundation’s mission.

What is the mission of the Robertson Foundation?

According to its Certificate of Incorporation, the foundation was organized to “establish or maintain and support at Princeton University, as part of the Woodrow Wilson School, a Graduate School, where men and women dedicated to public service may prepare themselves for careers in government service, with particular emphasis on the education of such persons for careers in those areas of the Federal Government that are concerned with international relations and affairs; [t]o establish and maintain scholarships or fellowships, which will provide full, or partial support to students admitted to such Graduate School; and [t]o provide collateral and auxiliary services, plans and programs in furtherance of the object and purpose above set forth.”

The mission of the foundation was discussed at great length by Charles Robertson and President Goheen before the Certificate of Incorporation was finalized and approved. In those early discussions and at a number of later points, it was clear that as a liberal arts college and research university, Princeton would not have been the place to establish the kind of narrow training program that the plaintiffs in this case would like to impose retroactively on the School.

In the formative years of the foundation, Robertson Hall was built, faculty were hired, a curriculum was developed, students were recruited, and procedures were established for funding the annual operating expenses associated with the support and expansion of the graduate program. These actions reflected a broad and forward-looking view of the foundation’s mission, and all of them took place while Charles Robertson was president of the foundation.

In fulfillment of this mission, the graduate program of the Woodrow Wilson School seeks to enroll men and women who are dedicated to public service and provides them with knowledge and skills that qualify them for careers in government service. It makes a special effort to help them prepare for service to the federal government, upon graduation or later in their careers, in the areas of international relations and affairs. This latter commitment has been reinforced by the current dean of the School, Anne-Marie Slaughter, a scholar in the field of international law, who has significantly strengthened the School’s international relations faculty in her four years as dean.

The foundation’s mission was set forth as a means to reach a larger ultimate objective: to “strengthen the Government of the United States and increase its ability and determination to defend and extend freedom throughout the world by improving the facilities for the training and education of men and women for government service.” As President Goheen said when the foundation was established in 1961, the objective was to “set new patterns of excellence throughout the nation for the training of men [and women] for the public service,” recognizing that over time the School would have to meet its responsibilities amid “the changing requirements of a shifting world.” Questions about implementation of the foundation’s mission were frequently discussed by the board of the foundation in its early years, especially at key meetings in 1972 and 1976 that clarified and reaffirmed the mission that guides the School to this day.

How does the Woodrow Wilson School carry out the mission of the Robertson Foundation?

The Woodrow Wilson School is widely acknowledged to be one of the leading schools of public policy and international affairs in the world. It attracts extraordinary scholars and students, and it makes significant contributions to the public service, to the federal government, and in the fields of international and foreign affairs. The School chooses students dedicated to public service and provides a rigorous multi-disciplinary training that enables them to become leaders in government. By emphasizing fundamental analytic methods and intellectual breadth rather than narrowly targeted vocational skills, the School prepares students to deal not only with the immediate policy challenges confronting the government when they graduate, but also the challenges that will await the government in future years.

The School prepares students for a world in which the boundaries between international and domestic policy issues are increasingly blurred. It prepares them to serve within the government, but also in the vast array of non-governmental organizations and private firms that work with and for the government and increasingly provide services that were once provided directly by government. The ability of the government of the United States to defend and extend freedom throughout the world depends on effective leadership not only within the government, but in the many organizations that collaborate with the government in carrying out its objectives. The School advances the mission of the Foundation through its curriculum, its opportunities and requirements for non-classroom learning (including internship programs), its career office, the quality of its faculty and its research programs, and its outreach and communications activities. More detailed information is provided in a statement, Implementing the Mission of the Robertson Foundation, that has been adopted by the School’s faculty and endorsed by the University-designated members of the Robertson Foundation board.

A report by Joseph Nye, Jr., former dean of Harvard’s Kennedy School of Government, concludes that “as demonstrated by the words and actions of Princeton University President Shirley Tilghman and Woodrow Wilson School Dean Anne-Marie Slaughter, the University and School are fully committed to the mission of the Robertson Foundation and more than capable of fulfilling it.”

Is this broad conception of mission something new?

No. The catalogue for the very first year of operations of the expanded graduate program [1962] reports that the program

includes both international and domestic affairs—indeed, the distinction here is increasingly hard to draw for there are few ‘domestic’ activities without international implications, and events abroad quickly make themselves felt internally. Princeton’s conception of ‘public affairs’ is broad. Anyone whose decisions and actions normally have important consequences for the public welfare is regarded as engaged in public affairs, whether he is employed in the executive or legislative branches of government, and whether his position is appointive or elective, civilian or military, or located in international, national, state, or local fields of action. Clearly a definition of public affairs framed in these terms also embraces some non-government activities, for example, certain types of work in journalism, in private foundations, and in business, labor and consumer organizations.

The foundation’s Certificate of Incorporation authorized support for the entire graduate program at the Woodrow Wilson School—including “scholarships and fellowships” and “collateral and auxiliary services, plans and programs”—not just for a narrow subset of activities. In two pages of typewritten notes that pre-dated the gift, Charles Robertson recommended that the School’s curriculum should “not [be] limited to areas pertinent only to foreign service” and needed to include “an understanding of the problems and aims of labor,” “a thorough knowledge of the history, political institutions, economy, etc. of the U.S.,” and “the effect on policy of scientific … development.”

Haven’t questions been raised about the number of Woodrow Wilson School graduate students going into government service?

Between 1973 and 2005, 67 percent of all graduating MPA (Master in Public Affairs) students who took jobs chose employment in the public and non-profit sectors upon graduation. Over 41 percent took positions in government service, with 25 percent going to the federal government, 5 percent to state government, 5 percent to local government, and 6 percent working for foreign governments. Over 21 percent went to work for non-profit or international organizations, and another 3.6 percent took first jobs in academia. This past year, 88 percent took jobs in the public and non-profit sectors, with 56 percent working for governments or international organizations like the United Nations and the World Bank. More than half of the eligible students in last year’s graduating class applied for the prestigious Presidential Management Fellows program, providing two-year internships in the federal government, and despite intense national competition, more than half of Princeton’s applicants were selected. As impressive as they are, these first job statistics are only one of many measures of the School’s success, as some students will go into government service later in their careers and others will work with government agencies or engage in government-related activities in other ways.

In February 2006, the Woodrow Wilson School announced a new program, the Scholars in the Nation’s Service initiative, which draws on Robertson Foundation funds and new endowments from other donors to encourage college juniors and entering graduate students to consider careers in the federal government. It provides juniors with a federal government internship between their junior and senior years; a two-year federal government position immediately following graduation; and admission to the two-year MPA program after returning to the Woodrow Wilson School. The Scholars in the Nation’s Service program will especially seek to enroll students who have majored in the sciences and engineering or who speak such critical languages as Arabic and Chinese.

What is the dispute about control of the Foundation?

As indicated earlier, through this lawsuit Robertson family members are seeking to overturn the decision by Charles and Marie Robertson to designate Princeton University as the sole beneficiary of the Robertson Foundation and to overturn other key decisions that their parents made when creating the foundation. For example, for the Robertson family to receive the favorable tax treatment accorded to them for their gift, they could not retain control of the funds, but instead had to convey them to a charitable organization they did not control. The Robertson Foundation was created in 1961 as a charitable entity, controlled by and exclusively supporting Princeton University. In 1970, Charles Robertson confirmed to the IRS that the foundation “is operated exclusively for the benefit of Princeton University,” and “controlled by Princeton,” and these arrangements had been “agreed to by the donors.” There currently are more than 45,000 “supporting organizations” in the United States, all of which must abide by regulations that do not permit donors to such organizations to retain or regain control of their funds. 

To preserve the charitable nature of the gift and to ensure that decisions about the academic program of the Woodrow Wilson School remain under the control of the University, controlling membership on the board of the foundation (four seats) was given to the University. As President Goheen explained to the IRS in a 1961 letter supporting the foundation’s application for tax-exempt status, “the stipulation that the majority of the Trustees of the Foundation … are to be University representatives … is essential, since no university could plan so many permanent appointments to its faculty and develop an expanded program of this magnitude unless both policy control and continuous financial support for the program were assured to it…. Indeed, the Trustees of Princeton University would not have agreed to accept this gift, and authorized this most important and greatly expanded program of post-graduate instruction for the public service, if they had not been advised and believed that the University controlled the foundation through its majority representation.” President Goheen noted that the foundation’s Certificate of Incorporation provides that “only if Princeton ceases to be a tax-exempt organization may the foundation direct its funds to any other institution.” The governing documents of the foundation also provide that if the foundation should ever be dissolved, it “shall distribute or transfer the property and funds of the corporation … to Princeton University.”

The Robertson family was given the other three seats on the foundation board, thereby enabling the family to play a significant role in the management of the foundation. From the inception of the foundation until his death in 1981, Charles Robertson served as president of the foundation. With the exception of the year in which he died, the foundation’s board has met at least once a year since 1961 and every meeting has been attended by Charles Robertson, his son William, or both. Until recently, the family was very supportive of the foundation and the Woodrow Wilson School, expressing this support on several occasions; and most foundation decisions were made with the unanimous support of the board. In its lawsuit, the current generation of the Robertson family challenges the decision of Charles and Marie Robertson to vest majority control of the foundation board in University-appointed trustees.

The family has questioned a number of governance practices that the foundation followed over most of its history. Commencing when Charles Robertson was president of the foundation, it has had a practice of proceeding fairly informally, as seemed appropriate given the broad consensus over most of the foundation’s history regarding mission and management. Current Princeton President Tilghman, who also serves as president of the foundation, has responded positively to the family’s requests for more formal governance structures and other procedural changes. Among other things, she has instituted new and more transparent procedures for reviewing and approving foundation funding of operating and capital construction expenditures, and she appointed a non-University employee as secretary/treasurer of the foundation, with authorization to retain outside accounting and legal services as needed.

Hasn’t there also been a dispute about the investment of the Foundation’s assets?

There has. Until very recently, the investment of the foundation’s assets was overseen by a three-member volunteer investment committee—including University-appointed trustee John J.F. Sherrerd, long-time University trustee John Beck, and family-appointed trustee William Robertson. Due in large part to the financial acumen of Messrs. Sherrerd and Beck, this arrangement produced excellent investment results; in recent years, however, Messrs. Sherrerd and Beck expressed growing concern about this kind of volunteer oversight of an endowment that had grown from $35 million to approximately $600 million, especially at a time of increasingly complex global markets. They proposed, and the foundation board agreed, that the time had come to add a layer of day-to-day professional managers, under the continuing oversight of the foundation’s investment committee. Messrs. Beck and Sherrerd concluded that the goals of the foundation would be best served by engaging the Princeton University Investment Company (PRINCO) as professional manager. Since PRINCO was already charged with managing the University’s endowment, it represented an attractive and logical means of helping to maximize return on the assets of an organization whose singular mission is to maintain an important University program. PRINCO had an excellent track record and offered the most cost efficient alternative for the foundation. William Robertson objected to engaging professional management and to the selection of PRINCO, but after re-examination the board decided that the foundation would be best served by taking both steps. It was this decision, made after extensive review yet vigorously opposed by William Robertson, that seems to have precipitated the lawsuit. In PRINCO’s first 24 months of engagement, the market value of the foundation’s assets grew from $561 million to $695 million, an increase of almost 24 percent after all expenditures.

Haven’t questions been raised about the University’s spending of Robertson Foundation funds?

In its March 13, 2006, filings, the University demonstrates how the plaintiffs’ allegations of overcharging or misspending fail to stand up to scrutiny. In some cases, the allegations result from looking at charges to the foundation without looking at offsetting credits. In some cases, they result from misrepresenting the formula adopted in 1965 that was used for almost 40 years with no objection until the filing of the lawsuit. (One of the governance reforms under President Tilghman’s leadership has been the adoption of a new and more transparent funding formula.)

The University has identified four areas in which the University has paid costs that it could have charged to the foundation under its Certificate of Incorporation: (1) even though the Certificate authorizes funding for the entire graduate program of the Woodrow Wilson School, the University only charges the foundation for the expansion of the graduate program that resulted from the Robertson gift. This decision to charge the “base-year costs” (adjusted for inflation) to the University has resulted in charging the foundation nearly $210 million less than it could have been charged over the past 40 years; (2) by using a simplified method of calculating indirect costs for the foundation from 1993 through 2002, the University charged the foundation $10 million less than it would have under the previous method; (3) by waiting until the end of the year to be reimbursed by the foundation for its share of the costs of the graduate program of the Woodrow Wilson School, the University allowed the foundation to earn $13 million in additional interest and investment returns from 1990 through 2004; and (4) the foundation paid less than half the construction costs of Bendheim Hall even though Woodrow Wilson School activities account for nearly 95 percent of the space—The foundation would have had to pay an additional $2.8 million if it had been charged at the 95 percent level.

Hasn’t the lawsuit raised questions about the University’s management of other donated funds?

Plaintiffs have attempted to do this by citing a flawed 2003 report prepared by a former University staff member that contains numerous errors. The report was thoroughly investigated by the University’s internal auditor, who reported to the Trustee Audit Committee his conclusion that no wider review of endowed funds was warranted. One particular allegation in the former employee’s report concerned an endowment provided to the University in 1959 by the Danforth Foundation. That $1 million grant, which has now grown to $25 million, was provided to support “academic and non-academic programs of a religious nature” at the University. As President Tilghman has reported to the Danforth Foundation, the earnings from this endowment have always been used solely for these purposes through the Department of Religion and the Office of Religious Life. Princeton has an excellent reputation among its alumni and other donors for its exemplary management of donated funds and its careful stewardship of gifts that have been given over more than 250 years to support a wide range of programs and activities at the University.

Hasn't there been a dispute about funding for a program related to the Woodrow Wilson School?

Princeton University has reimbursed the Robertson Foundation for the costs associated with a three-year trial program, known as the Graduate Funding Agreement (GFA), that from 2000 through 2002 provided funding for graduate students in academic departments at Princeton that were closely related to the Woodrow Wilson School of Public and International Affairs.

The GFA was established to support Ph.D. students in three contiguous departments -- economics, politics and sociology -- for the purpose of attracting and retaining excellent faculty in the Woodrow Wilson School. This objective was fully compliant with the purposes of the Foundation and plainly authorized by its charter, but the University also has acknowledged an error in not disclosing to the Robertson Foundation board that the Foundation would be funding the program.

The University in March 2007 reimbursed the Foundation for the $782,375 that was expended under the Graduate Funding Agreement, not because of any reservations about the appropriateness of the program, but solely because of its inadequate disclosure to the Foundation board. The program is no longer in place, having been discontinued in 2002 at the conclusion of its three-year trial. While in operation, the program helped support 34 graduate students.

What other materials are available from the University?

In addition to the document referenced earlier on “Implementing the Mission of the Robertson Foundation,” the following materials are available:

• A press release and supporting documents that the University posted on Jan. 9, 2006, when it filed motions for summary judgment on three key issues in the case:

    • Princeton University is and will continue to be the sole beneficiary of the Robertson Foundation and is and will remain entitled to designate four of the Foundation’s seven trustees;
    • The Robertson Foundation’s decision to retain PRINCO to manage the foundation’s investments represented a good faith exercise of its independent business judgment; and
    • The foundation’s Certificate of Incorporation authorizes the foundation to spend realized capital gains as well as other income.

• A statement posted on the University’s Web site on Feb. 7, 2006, in response to an article about the lawsuit that appeared in the Wall Street Journal.

• An op-ed published in the Feb. 17, 2006, Trenton (N.J.) Times by University Vice President and Secretary Robert Durkee.

• A “President’s Page” by President Tilghman published in the March 22, 2006, Princeton Alumni Weekly.

• A press release and supporting documents that the University posted on March 13, 2006, when it filed briefs responding to allegations of improper spending.

• A letter to the editor published in the Aug. 11, 2006, Wall Street Journal by Vice President and Secretary Robert Durkee.

• A guest column published in the Aug. 23, 2006, Pittsburgh Tribune-Review by Vice President and Secretary Robert Durkee.

• A letter to the editor published in the Oct. 24, 2006, Daily Princetonian by Vice President and Secretary Robert Durkee.

• A letter to the editor published in the Nov. 21, 2006, Washington Times by Vice President and Secretary Robert Durkee.

• A press release that the University posted on Nov. 28, 2006, following the first day of oral arguments before New Jersey Superior Court Judge Neil H. Shuster.

• A press release that the University posted on Nov. 29, 2006, following the second day of oral arguments before New Jersey Superior Court Judge Neil H. Shuster.

• A letter to the editor published in the Dec. 15, 2006, Providence Journal by Vice President and Secretary Robert Durkee.

• A letter to the editor published in the Jan. 9, 2007, New York Sun by Vice President and Secretary Robert Durkee.

• A statement to CBS Evening News for a Feb. 11, 2007, segment.

• A letter to the editor published in the March 22, 2007, Pittsburgh Tribune-Review by Vice President and Secretary Robert Durkee.

• A letter to the editor published in the March 23, 2007, Washington Times by Vice President and Secretary Robert Durkee.

• A letter to the editor published in the May 31, 2007, Miami Herald by Vice President and Secretary Robert Durkee.

• A letter to the editor published in the June 5, 2007, Detroit News by Vice President and Secretary Robert Durkee.