A $100 Million Thanks for Michigan
By Mica Schneider
A 1962 graduate of the University of Michigan's undergrad accounting program is giving back -- generously -- to his alma mater. On Sept. 9, Stephen Ross, now a real estate mogul, handed the Michigan Business School $100 million. This is the largest donation in the university's history and the biggest sum ever awarded to a U.S. B-school.
Ross, founder and chairman of Related Cos., the real-estate firm that developed the $1.7 billion Time Warner Center on Columbus Circle in New York City, says he hopes the gift will improve the B-school's facilities. "In order to attract professors and students, you have to be competitive with other business schools," Ross says. "You're not going to accomplish that unless you have a first-class facility to do it."
In return, the University of Michigan's board of regents changed the name of the 80-year-old B-school to the Stephen M. Ross School of Business. Ross's gift will add $25 million to the B-school's $250 million endowment, while the remaining $75 million will fund a new or improved home for the B-school. (The school will receive half of the gift in cash. The rest as part of Ross's estate.)
FATTER NEST EGG.
Michigan isn't wasting any time, having already drawn up plans for flashier facilities. B-school Dean Robert Dolan says his office is working with Kohn Pedersen Fox Associates, the architectural firm that the University of Pennsylvania's Wharton School used to design its $140 million Huntsman Hall. The architects have drawn up several concepts for a new building on the site of Michigan's current B-school. Dolan hopes to present the plans to the board of regents before yearend.
Thanks to Ross's donation, Michigan's B-school now has raised $200 million toward a $350 million capital campaign that ends in 2008. Other sizable gifts include a $4 million check in 2004 from Samuel Zell, chairman of Equity Group Investments. Zell had previously contributed part of a $10 million gift to the school in 1999 for a new entrepreneurship center that now bears his name.
Still, other schools are ahead of Michigan. Take Harvard Business School, which has an endowment of $1.5 billion and will wrap up a $500 million capital campaign at the end of 2005. Wharton raised $445 million in a six-year campaign that ended in 2003.
Other top gifts to B-schools include a $60 million donation in 1999 to the University of Virginia's Darden School from Frank Batten Sr., former chairman of Landmark Communications. Arizona State's W.P. Carey School of Business received $50 million in 2003 from William Polk Carey, founder and chairman of investment firm W.P. Carey & Co.
"I don't think it's possible, really, to run a business school playing in the top ranks without significant...gifts from your alumni," says Michigan's Dolan. "You can't compete with them if you're just looking at the tuition revenue you're generating from your students."
A big check from a wealthy alumnus won't reduce costs for Michigan's 1,865 full- and part-time MBAs. Tuition rose $2,000, or around 5%, in 2004. Next year's bill will depend on the support the B-school receives from the state and whether key programs are making enough money, Dolan adds.
Students will, however, benefit in other ways from Ross's gift. For one, the dean will have more bargaining power when he's recruiting faculty or trying to retain professors. More money for scholarships may also help Michigan attract more competitive MBAs.
And some of Michigan's programs could bear more fruit. For instance, the B-school sends MBAs on consulting projects in the U.S. and abroad as part of its Multidisciplinary Action projects, or MAP. When a company can't afford to pay a student for his or her work, Michigan lends financial support. MAP is "extremely effective in terms of the benefit to students, but a heck of a lot more expensive than having 80 people sit in a classroom [in Ann Arbor]," Dolan says.
An alumnus like Ross gives B-school students more than just funding. He's a success story and an inspiration to MBAs of what they can hope to accomplish. And wouldn't it be nice if their success in turn generates future fat checks for the school.
Schneider is a reporter for BusinessWeek Online in London