UNITED STATES

US: Decision-makers gambled and Harvard lost
If an ordinary corporation had the kind of fiscal year Harvard University just had, some of its directors would be gone, write Fred Abernathy and Harry Lewis for The Boston Globe. Long-term investments down $11 billion; another $1.8 billion lost by top management speculating with cash accounts; another half-billion gone in an untimely exit from a debt rate gambit. The institution left so illiquid that it was forced to sell assets and issue bonds at the worst possible time, just to pay the bills.A publicly held company would have experienced a shareholder rebellion - especially after the Globe reported that the chief investment officer had repeatedly warned the president about the risks he was taking with the institution's cash. But the Harvard Corporation is legally answerable to no one. It consists of six fellows plus the president they hire (and occasionally fire). The fellows serve for unlimited terms, just as they have since 1650. Only they have a voice in appointing their successors. The much larger, alumni-elected Board of Overseers is powerless; it may hear about important Harvard affairs only days before the rest of us.
Harvard's treasurer acknowledged that in hindsight, the university might have managed its investments differently. Yet, he noted, even with the downturn, the endowment grew over the past decade at a healthy annualised rate of 8.9%. True enough, but the Corporation manages not only Harvard's balance sheet, but the expenses of the university as well. The 8.9% growth of the endowment wasn't nearly healthy enough to cover the staggering growth in costs.
Full report on The Boston Globe site