2. Donor Influence In Hiring

B. Veto Power Given to Donor

(or donor appointee)

Koch foundation contracts tend to provide considerable decision making power to the donor, most times allowing them multiple opportunities to veto decisions about the use of their funding. Older examples were more overt (esp. at Florida State University), but nearly all publicly available contracts for the Koch foundation's large multi-year programs give Koch foundation officials multiple opportunities through which they can veto funding.

In addition to Koch's ability to withdraw funding, a general veto power any part of a program, this section examines additional veto authorities granted to donors through contractual provisions. We trace the evolution of these overtly controlling provisions, many of which have largely disappeared from Koch foundation contracts written since 2015. This authority has been replaced largely by the veto powers granted in Section 1.A and Section 1.B.  

EXAMPLES

 

At Florida State University, the “Affiliated Programs and Positions” established by CKF are required to comply with the following:

1. Objectives and Purposes. (a) The purpose of the Affiliated Programs and Positions is to advance the understanding and practice of those free voluntary processes and principles that promote social progress, human well-being, individual freedom, opportunity and prosperity based on the rule of law, constitutional government, private property and the laws, regulations, organizations, institutions and social norms upon which they rely, These goals will be pursued by supplementing the academic talent that is currently at FSU to create a strong program that will focus on building upon and expanding research and teaching efforts related to economic institutions and political economy. (2008 and 2013 FSU MOU)

All aspects of the programs set forward in the MOU are obligated to comply with the Koch Foundation’s “Objectives and Purposes,”  and compliance is actively enforced by CKF, which:

...reserves the right to discontinue or revoke any part of this Memorandum (including withholding any amounts to be made under any Donor Agreement to which CKF is a party regarding the Affiliated Programs and Positions) [...] if in CKF's reasonable discretion, such action is necessary to protect the Objectives and Purposes set forth in Section I(a) above. (2008 and 2013 FSU MOU, Section 12, pg 9)

A supplemental document to FSU’s 2008 MOU, Attachment C, reveals Koch’s ability to withdraw funding for noncompliance at any point with 15 days notice;

Such termination shall be deemed effective upon the expiration of said fifteen (15) days from the date notice was provided by Donor to Donee and University, if Donee and/or University have not therefore corrected the events of default or performed the acts described in the notice.” (FSU 2008 MOU Attachment C, Section V.H)

 

At Utah State University, the 2008 MOU creates donor funded positions by “augmenting funding for five professors,” called “the Professors”: 

1. Objectives and Purposes.
(a) The purpose of the support for the Professors is to advance the understanding and practice of those free voluntary processes and principles that promote social progress, human well-being, individual freedom, opportunity and prosperity based on the rule of law, constitutional government, private property and the laws, regulations, organizations, institutions and social norms upon which they rely. These goals will be pursued by supplementing the academic talent currently at USU to create a strong program that will focus on  building upon and expanding research and teaching efforts related to individual freedom, social progress and human well-being. The Parties seek to strengthen the foundation that exists at USU and extend efforts related to the research, publication, education, dissemination and academic and public appreciation of individual freedom, social progress and human well-being (Collectively, the “Objectives and Purposes”). (USU 2008 MOU, Section 1.a)

All activities of “the Professors” set forward in the MOU are obligated to comply with the Koch Foundation’s “Objectives and Purposes,”  and compliance is actively enforced by CKF, which:

 CGK Foundation reserves the right to discontinue or withhold any Funding Amount to be paid under this Agreement if, in CGK Foundation’s reasonable discretion, (a) USU has not fully complied with the terms and conditions of this Agreement; (b) the Professors are not advancing the Purposes and Objectives; or (c) such action is necessary to comply with any law or regulation applicable to USU or to CGK Foundation. (USU 2008 MOU, Section 9)

The monitoring of compliance not only an obligation that university hires and officials are responsible for, but the Koch foundation also requires access to faculty “files” and “accounts” on any given business day: 

Additionally, USU will cause CGK Foundation and its representatives to have reasonable access during regular business hours to files, reports, accounts, or personnel that are associated with this Agreement, the Professors and the Funding Amount.  (USU 2008 MOU, Section 10.a)

 

At Clemson University, the 2009 MOU is distinct from some other MOUs, in that it references a  that “[t]he University, within its College of Business and Behavioral Science, has established CISC,” the Clemson Institute for the Study of Capitalism. In addition to requiring that the “Donor Supported Faculty Positions” comply with the Objectives and Purposes, the agreement suggests that Koch’s Objectives and Purposes were already the primary objectives of CISC:

I. Objectives and Purposes
(a) The University, within its College of Business and Behavioral Science, has established CISC. The primary objectives and purposes of CISC are to advance the understanding and practice of those free and voluntary processes and principles that promote social progress, human well-being, individual freedom, opportunity and prosperity based on the rule of law, constitutional government, private property and the laws, regulations, organizations, institutions and social norms upon which they rely. It is the Parties’ intention that the objectives and purposes of CISC will be further advanced by CGK Foundation’s provisioning of funds to recruit and hire positions (hereinafter referred to as the “Donor Supported Faculty Positions") at CISC to help strengthen this foundation and extend efforts related to research, publication, dissemination, teaching, and continued academic and public use of the and support the research into the causes, measurements, impact, and appreciation of economic freedom. (Clemson 2008 MOU, Section I.a )

All aspects of the programs set forward in the MOU are obligated to comply with the Koch Foundation’s “Objectives and Purposes,”  and compliance is actively enforced. The Koch foundation:

reserves the right to discontinue or withhold any amount offending to be made under this Agreement if, in CGK Foundation’s reasonable discretion, University has not fully complied with the terms and conditions of this Agreement; the Donor Supported Faculty Positions are not advancing the Purposes and Objectives set forth in Section I above
[...]
The parties acknowledge that the funding commitment made by CGK Foundation under this Agreement is subject to the satisfaction of the terms and agreements set forth in this agreement and that a breach by University of any commitment, agreement, obligation, covenant, representation or warranty, made or required under this Agreement shall give CGK Foundation the ability to terminate this Agreement. (Clemson 2008 MOU, Sections VI.B and VI.I, pages 5 and 6)

The Koch foundation reserves the right to give only 15 days notice before withdrawing all funds

Such termination shall be deemed effective upon the expiration of said fifteen (15) days from the date notice was provided by CGK Foundation to University, if University has not therefore corrected the events of default or performed the acts described in the notice. During the pendency of this 15-day period, CGK Foundation will not be obligated to contribute any funds pursuant to this Agreement and University will suspend any further payments pending the corrective action by the University. In the event of termination of this Agreement, notwithstanding any contrary provision herein, CGK Foundation shall have the right to require that all unexpended Contributed Amounts be returned to CGK Foundation. (Clemson 2008 MOU, Section VI.I)

 

At West Virginia University, the “Donor Supported Professorship Positions” established by CKF are required to comply with the following Objectives and Purposes:

1. Objectives and Purposes
(a) The University and its Department of Economics, within the College of Business and Economics (“College”), have established a focused research effort among select faculty members with the purpose of advancing the philosophical and interdisciplinary understanding of human freedom in the political, economic, social and personal domains and to explore the nature of free market economics and its impact on our society (hereinafter referred to as the “Program”). The Parties desire to further support the Program’s mission by supplementing the academic talent (hereinafter referred to as the “Donor Supported Professorship Positions”) currently within the University and the Department of Economics to create a strong program that will focus on building upon and expanding the research and teaching efforts related to the University and the Program as described herein. (WVU 2009 MOU, Section 1.a)

All aspects of the programs set forward in the MOU are obligated to comply with the Koch Foundation’s “Objectives and Purposes,” and compliance is actively enforced. The Koch foundation:

... reserves the right to discontinue or withhold any amount to be contributed under this Agreement if in CGK Foundation's reasonable discretion (a) the University or the Donee have not fully complied with the terms and conditions of this Agreement; (b) the College, Donor Supported Professorship Positions, and College's operations are not advancing the Purposes and Objectives set forth in Section 1(a) above
[...]
...a breach, whether caused by Donee or University, of any commitment, agreement, obligation, covenant, representation or warranty, made or required under this Agreement shall give CGK Foundation the ability to terminate this Agreement. (WVU 2009 MOU, Section VI.J and VI.H)

The Koch foundation is able to withhold funding after providing just 15 days notice:

Such termination shall be deemed effective upon the expiration of said fifteen (15) business days from the date notice was provided by CGK Foundation to Donee and/or University, if Donee and/or University have not therefore corrected the events of default or performed the acts described in the notice. During the pendency of this 15-day period, CGK Foundation will not be obligated to contribute any funds pursuant to this Agreement and Donee will suspend any further payments pending the corrective action by the Donee and/or University. In the event of termination of this Agreement, notwithstanding any contrary provision herein, CGK Foundation shall have the right to require that all unexpended Contribution Amounts contributed be returned to CGK Foundation. (WVU 2009 MOU, Section VI.H)

 

At the University of Louisville, a 2015 MOU creates the John H. Schnatter Center for Free Enterprise in a partner donorship with John Schnatter (CEO of Papa John’s). Unlike many past agreements, where all programs and hiring must comply with a centrally defined “Objectives and Purposes,” the "Center's Mission" and “Objectives” are stipulated a supplementary document:

The mission of the Center is to engage in research and teaching that explores the role of enterprise and entrepreneurship in advancing human well-being (the "Center's Mission").

The Center’s staff and activities are required to “support the Center’s Missions.” In fact, the MOU states unambiguously that “the Donor agrees to contribute funds to the Foundation exclusively to support the Center Programs to advance the Center's Mission” (UL 2015 MOU, Section 4.a).

The MOU further clarifies that compliance is determined by the sole and “reasonable discretion” of the Donor, who retains the ability to withhold funding at anytime, and revoke the agreement altogether:

The Donor has the right to terminate this Agreement and discontinue or withhold any Contributed Amount. . . If at any point during the Term, the Donor determines in its reasonable discretion that: (i) the Foundation or the University has not acted in good faith under this Agreement; (ii) the Center Programs are not advancing the Center's Mission as stated in this Agreement, . . . the Donor shall notify the Foundation and the University of its determination, and the Parties shall make a good faith effort to meet within sixty (60) days to discuss the Donor's determination. If the Donor's determination does not change after the end of this sixty (60) day period, the Donor has the right to terminate the Agreement upon providing thirty (30) days' notice to the Foundation and the University. During the pendency of the sixty (60) day period and any following thirty (30) day notice period, the Donor shall not be obligated to provide any Contributed Amount. In the event of termination of the Agreement, the Foundation and the University each agree to return all uncommitted Contributed Amounts to the Donor within fifteen (15) days of the Donor's request. (UL 2015 MOU, Section 8.a)

 

At the University of Kentucky, a 2015 MOU created the John H. Schnatter Institute for the Study of Free Enterprise with partner donor John Schnatter (CEO of Papa John’s). Much like the University of Louisville, the "Institute's Mission" replaces Koch's “Objectives and Purposes.”

In this instance, the agreement's preamble asserts that "has for at least (10) years engaged in academic programming, teaching, research and support for faculty and graduate students within the Gatton College for the study of free enterprise" and the "Parties desire to expand those existing activities." 

The agreement stipulates Dr. John Garen to be the director of the Institute, and ten years prior to this agreement, in 2005, Garen became chair of the UK's economics department. According to his CV, he began coordinating the BB&T Program for the Study of Capitalism in 2007. 

Attachment A attributes the Institute's "Mission" to the University:

The Gatton College of Business and Economics will house the newly created John H. Schnatter Institute for the Study of Free Enterprise (the "Institute"). The Institute enables the Gatton College to continue and expand its longstanding mission to discover and understand aspects of free enterprise that promote the well being of society (UK 2015 MOU, Attachment A)

The agreement then carefully states:

the University has informed the Donor, and the Donor is relying on such representation, that the Institute's mission is to discover and understand aspects of free enterprise that promote the well-being of society (the "Institute's Mission") (UK 2015 MOU, Section 2.a).

The MOU further clarifies that compliance with the "Institute's Mission" is determined by the sole and “reasonable discretion” of the Donor, who retains the ability to withhold funding at anytime, and revoke the agreement altogether:

The Donor has the right to terminate this Agreement and discontinue or withhold any Contributed Amount. . . .If at any point during the Term, the Donor determines in its reasonable discretion that: (i) the Foundation or the University has not acted in good faith under this Agreement; (ii) the Center Programs are not advancing the Center's Mission as stated in this Agreement, . . . the Donor shall notify the Foundation and the University of its determination, and the Parties shall make a good faith effort to meet within sixty (60) days to discuss the Donor's determination. If the Donor's determination does not change after the end of this sixty (60) day period, the Donor has the right to terminate the Agreement upon providing thirty (30) days' notice to the Foundation and the University. During the pendency of the sixty (60) day period and any following thirty (30) day notice period, the Donor shall not be obligated to provide any Contributed Amount. In the event of termination of the Agreement, the Foundation and the University each agree to return all uncommitted Contributed Amounts to the Donor within fifteen (15) days of the Donor's request. (UK 2015 MOU, Section 8.a)

 

At Ball State University, the Charles Koch Foundation and the John H. Schnatter Family Foundation are donor partners in the creation of the John H. Schnatter Institute for Entrepreneurship and Free Enterprise. The 2016 Grant Agreement  very cautiously establishes the “Institute’s Mission” as:

the University has informed the Donor, and the Donor is relying on such representation, that the Institute's mission is to become a national model for values- and ethics-based entrepreneurship, developing research and talent to help solve contemporary problems and promote understanding of the characteristics and virtues of free enterprise in helping people improve their lives (the "Institute's Mission") (BSU Agreement, Sec. 2.a)  

Broadly, the agreement gives Koch and Schnatter the “sole and absolute discretion” to withdraw their funding for any part of the Institute Programs, at any time:

The Donor has the right to terminate this Agreement or decline to provide any Contributed Amount in response to a Foundation Grant Report if, in its sole and absolute discretion: (i) the Foundation or the University has materially breached this Agreement; (ii) the Institute Programs are not advancing the Institute's Mission as stated in this Agreement; or (iii) such action is necessary to comply with any law applicable to the Foundation, the University, or the Donor. Such termination or decision not to provide any Contributed Amount in response to a Foundation Grant Report shall be deemed effective upon the expiration of thirty (30) days from the date notice was provided by the Donor to the Foundation or the University. In the event the Donor terminates the Agreement, the Foundation and the University each agree to return all uncommitted Contributed Amounts to the Donor within fifteen (15) days of the Donor's request. (BSU Grant Agreement, 8.a)

 

At George Mason University, a 2016 MOU accompanied a $30 million donation that not only renamed the law school after Antonin Scalia. The Koch foundation contributed $10 million along side $20 million from an anonymous donor.

The compliance established by older Koch contracts through their "Objectives and Purposes" is instead split into two separate provisions.

Section 1 is a provision where Koch's coded language is proposed as a shared definition of "Academic Freedom" that is to be honored by all parties of the contract: 

Promoting Academic Freedom. Consistent with the Donor’s principles of supporting a diversity of ideas in higher education, the Donor’s grant is intended to help promote a republic of science at the University and the School, where ideas can be exchanged freely and useful knowledge will benefit the well-being of individuals and society. Thus, the Parties agree that the academic freedom of the University, the School, and their faculty, students, and staff is critical to the success of the School’s research, scholarship, teaching, and service; (GMU 2016 MOU, Section 1)

Much like the other contracts created after 2015, a pre-stated "Mission" replaces Koch's “Objectives and Purposes.” In this case, the "School's Mission" includes the strategic mission of George Mason University's School of Law, as well as several donor specific goals: 

to become a national leader in legal education by applying tools of economics and other social sciences to the study of legal doctrine, process, and institutions . . To accomplish its goals, the Law School intends to;
  • Retain focus on the study of Law & Economics, which is a recognizable and recognized brand and which furnishes the faculty with a common culture and frame of reference in which to structure the School’s priorities.
  • Develop additional related areas of concentration and intellectual leadership such as intellectual property, legal history, constitutional studies, administrative law, and the relationship between law and liberty. (GMU 2016 MOU, Attachment A) 

(Toward these goals, the donation stipulated the creation of two new centers within the GMU School of Law; the Center for the Study of the Administrative Slate and the Center for Liberty & Law.)

The agreement carefully states:

the University has in formed the Donor, and the Donor is retying on such representation, that the School’s mission is to become a national leader in legal education by applying tools of economics and other social sciences to the study of legal doctrine, process, and institutions (the “School’s Mission”). (GMU 2016 MOU, Section 2.a)

Yet it is the ultimately donor's sole and “reasonable discretion” that determine's the program's compliance with the "Support for the School" is determined by , who retains the “sole and absolute discretion” to withdraw their funding for any part of the Institute Programs, at any time:

The Donor has the right in its sole and absolute discretion to terminate this Agreement or discontinue or withhold any Contributed Amount if: (i) the Foundation or the University has not fully complied with any provision set forth in this Agreement; (ii) the Foundation of the University are not providing the School Support as stated in the Proposal, or (iii) such action is necessary to comply with any law applicable to the Foundation, the University, or the Donor. Such termination shall be deemed effective upon the expiration of thirty (30) days from the date notice was provided by the Donor to the Foundation or the University. In the event of termination of the Agreement, the Foundation and the University each agree to return all unexpended Contributed Amounts to the Donor within fifteen (15) days of the Donor's request. (GMU Grant Agreement, 7.a)

This language is line for line identical to what the Koch foundation uses for the creation of a center at Ball State University, swapping “Institute” for “School” and the italicized selection replaced with a synopsis of the “Institute’s Mission” (BSU 2016 Agreement, Sec. 2.a).

At Florida State University, Section 7 of the Koch MOU describes the mechanism of explicit control over the Affiliated Programs and Positions in the two donor created programs, in the Study of Political Economy and Free Enterprise, and Excellence in Economics Education programs (SPEFE/EEE).

The “SPEFE-EEE Program Advisory Board” is created to “preserve and safeguard the philanthropic and educational intent of [the Koch] Foundation, its Donor Partners, as well as the educational objectives of FSU” (FSU 20082013 MOU, 7.a)

Through “periodic assessments” the board is to “[e]nsure compliance with the terms of this Memorandum through appropriate administrative or legal channels” (FSU 2008, 2013 MOU, 7.a.(iv)).

In the event that faculty or administrators want to ignore CKF input, they are not free to do so, as “FSU agrees to take the input of the SPEFE-EEE Advisory Board into consideration when evaluating the performance of the SPEFE and EEE Programs” (FSU 2008, 2013 MOU, Sec. 7.b.(vi)). 

In both the 2008 and 2013 MOU, CKF is allowed to appoint the three person board, including one CKF representative. The “decision rule” of the board “in all matters will be unanimous vote of all three members” (FSU 20082013 MOU, Sec. 7.b).

The agreement was revised in 2013 to require two of the board members to be department faculty, but these members are still selected by Koch. Both MOU allow the CKF representative to maintain veto power in all decisions (FSU 2008/2013 MOU, Sec. 7.a and 7.b).

The board’s freedom to withdraw/withhold funding is unequivocally spelled out in the MOU:

No funding for a Professorship Position or any other Affiliated Program or Position will be released without the review and approval of the SPEFE-EEE Advisory Board” (FSU 2008 MOU, Sec. 3.d.iii).

The power granted to the Advisory board in the 2008 MOU included full veto power over all hiring:

No funding for a Professorship Position or any other Affiliated Program or Position will be released without the review and approval of the SPEFE-EEE Advisory Board (2008 MOU, Section 3.d.(iii)). 

In 2013 the selection process for tenure-track hires was revised superficially. The department extends an offer to a potential hire, at which point CKF can decide to fund it or not. Koch has the final say (through its veto power) over the use of their own funds. The revision to Section 3.d.iii reads:

After the Dean has approved the selection and the department extends an offer to the chosen candidate, the Dean or his department representative will send information regarding the candidate to CKF together with a proposal to fund the position as a professorship provision under 3 (a) above. The decision of CKF on the funding proposal will under no circumstances jeopardize the offer to the candidate approved by the Executive Committee and the Dean. Nor will the approval of the Dean create an obligation for CKF to provide any funding under this Memorandum or a Donor Agreement (2013 MOU, Sec. 3.d.iii).

The advisory board also retains the ability to fire instructors by withholding funds for their annual renewal, as:

The Parties intend that the Teaching Specialist Position will be funded by payments consisting of five installments [...] with annual renewal dependent upon satisfactory evaluation of the FSU Economics Department and the SPEFE-EEE Advisory Board that the individual is advancing the Objectives and Purposes set forth in Section 1(a). (FSU 2008 and 2013 MOU, Sec 4.d)

Thus, not only does the board have veto power over instructor hiring with Koch funds, but annual renewal of funding can only proceed with their explicit approval.

At Utah State University, the 2008 MOU created donor funded positions called “the Professors.” The hiring process very clearly gives the Koch foundation (formerly the Charles G. Koch, or "CGK" Foundation): 

CGK Foundation will not be obligated to pay any of the Funding Amount with respect to a candidate for Professor position that has not been approved by CGK Foundation. In the event that USU and CGK Foundation fail to agree on a candidate for a Professor position, CGK Foundation may in its sole discretion cease all obligations under this Agreement or any other agreement between the parties regarding such Professor Position. For the avoidance of doubt, nothing herein will restrict USU's ability to hire any individual. Rather, in order to receive or use any of the Funding Amount and for an individual to fill a Professor position, USU's compliance with the terms of this Agreement is required, including CGK Foundation's approval of such individual (USU 2008 MOU, Section 3.c(iv)).

At Clemson University, the 2009 MOU establishing CISC, the Clemson Institute for the Study of Capitalism, is distinct from earlier MOUs, in that it removes the Koch foundation's role in defining the Objectives and Purposes.

It is the first MOU on record where Koch does not retain veto power, although it is also the first MOU where the Koch foundation names a Clemson professor by name, and hands the veto authority to him:

(b) Prior to the extension of any offer for the Donor Supported Professorship Positions, Dr. C. Bradley Thompson shall present the candiate's credentials to CGK Foundation.
(c) No funding for a Donor Supported Professorship Position will be provided by the CGK Foundation without the approval of Dr. C. Bradley Thompson and the Dean of the College of Business and Behavioral Science (Clemson 2008 MOU, Section II)

The MOU goes on to clarify to all parties that the funding will not be released for anything unless all aspects are in compliance with the Koch foundation's Objectives and Purposes:

The Parties agree and acknowledge that the funding commitment made by CGK Foundation under this agreement is subject to the satisfaction of the terms and conditions set forth in this Agreement and that a breach by by Donee or University of any commitment, terms, agreement, obligation, covenant, representation of warranty made or required under this Agreement shall give CGK Foundation the ability to terminate this Agreement. (Clemson 2008 MOU, Sections VI.I)

At West Virginia University, their 2009 MOU which created two “Donor Supported Professorship Positions” followed the pattern set by the 2009 Clemson MOU, namely endowing a Koch appointed professor with the donor's veto:

(ii) Prior to the extension of any offer for the Donor Supported Professorship Positions, the Dean of the College of Business and Economics, in consultation with Professor Russel Sobel or his successor, shall present the candidates's credentials to CGK Foundation
(iii) No funding for a Donor Supported Professorship Positions will be released without the approval of the Dean of the College of Business and Economics, in consultation with Professor Russell Sobel or his successor (WVU 2009 MOU, Section 2.f)

The MOU goes on to clarify to all parties that the funding will not be released for anything unless all aspects are in compliance with the Koch foundation's Objectives and Purposes:

The Parties agree and acknowledge that the funding commitment made by CGK Foundation under this agreement is subject to the satisfaction of the terms and conditions set forth in this Agreement and that a breach by Donee or University of any commitment, terms, agreement, obligation, covenant, representation of warranty made or required under this Agreement shall give CGK Foundation the ability to terminate this Agreement. (WVU 2009 MOU, Section VI.H)