Business Foundation

The McCombs School of Business Foundation has established revenue-generating enterprises to benefit the business school, while also attracting thousands of dollars in private gifts each year.

As an independent nonprofit, the foundation benefits the McCombs School of Business and provides close to $5 million in contributions to the school and more than $600,000 in scholarships each year. The foundation also supplements business school dean Thomas Gilligan’s salary with an extra $100,000 and doubles the salaries of some lecturers and professors through compensation for their work with a training program for professionals.

Joe Holt, CEO of the Austin region of JP Morgan Chase and chairman of the foundation’s board of trustees, said the foundation’s leadership is aware of the weight transparency has on its credibility with donors. 

“There is no transfer of funds unless they are approved by trustees,” Holt said. “That level of transparency created credibility with donors and alumni. In all the things that are swirling around right now, the most important thing we can do is make sure that the intent is right and the actions are transparent.”

According to the most recent IRS records available, donors contributed more than $97,000 in 2011. But the foundation’s primary source of revenue is from the Executive Education Program, a training program for professionals. 

Five business faculty members provide training at conferences for corporations and state agencies and are compensated by the foundation in amounts ranging from about $300,000 for senior management lecturer Gaylen Paulson to almost $570,000 for John Daly, communication studies and management professor. This compensation is in addition to their University salaries. Other professors occasionally provide training through the program, but their compensations are not listed individually on tax records.

The program brought in about $7.4 million in revenue during the 2011 fiscal year. The foundation uses the money toward regular philanthropic operations, Holt said.

Like other external foundations, the business school foundation has allowed donors to establish enterprises benefitting the University that would face legal constraints if carried out by the University itself.

Dallas attorney Del Williams, former chairman of the foundation’s board, said former business school dean George Kozmetsky initially set up the foundation so that private gifts could be invested in stocks — something state laws prohibited at the time. 

Kozmetsky laid the groundwork for the MBA Investment Fund, LLC, which was created in 2001 as the first private investment company managed by students, Williams said.

Business school spokesman David Wenger said the fund operates under a management agreement with the foundation.

“The MBA Investment Fund manager has full discretion to manage the fund while giving quarterly accountability reports to the foundation,” Wenger said. “While every attempt is made to increase the value of the fund, its primary purpose is to serve as a real-world educational experience for the student portfolio managers.”

In addition to establishing the investment fund, the foundation has also helped the business school with property acquisition. In 2011, the foundation purchased the property where Players Restaurant sits on Martin Luther King Jr. Boulevard for $3 million. The University then bought the property from the foundation for $1.5 million as part of a deal to obtain the property below its appraised value of $2.5 million. State law prohibits the University from purchasing property at more than the appraised value. 

The University plans to use the property to expand the AT&T Executive Education and Conference Center and construct a graduate business school building. The owners of Players can continue to operate on the property for up to 10 years.

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Printed on Tuesday, April 30, 2013 as: McCombs Foundation profits from enterprises 

Gross Receipts: $7,953,730

Total assets: $16,213,291

Total liabilities: $1,089,474

Net assets: $15,123,817

Year founded: 1978

Number of people on board: 9

Employees: 48

Led by Susie Brown, associate dean for business affairs, the McCombs School of Business Foundation gives millions of dollars annually to the business school and provides more than $600,000 for scholarships through the Ex-Students Association.

Joe Holt, chairman of the foundation’s board of trustees, said the foundation’s main source of revenue is the Texas Executive Education program, a management-training program for individuals and corporations.

The foundation provides supplemental salary to various McCombs professors and lecturers for working the executive education seminars.

Business school dean Tom Gilligan also receives a $100,000 supplement to his salary through the foundation.

MBA students benefit from the foundation through the MBA Investment Fund, the first private investment company managed by students, which was created by former dean George W. Gau. About 20 students work as portfolio managers and investment counselors for the investment every year.

The University reached a multi-million dollar deal with Players restaurant to purchase its land near the UT AT&T Executive Education and Conference Center. Eventually the University may construct a building to house the graduate business program, according to University officials.

The transactions took place Tuesday in increments dispersed by various purchasers. The McCombs School of Business Foundation, which is independent from the University, paid Players an initial $3 million cash plus a 10-year lease for the Players establishment at no rent, said Kevin Hegarty, chief financial officer and vice president for the University.

Hegarty said the University then bought the property along West Martin Luther King Boulevard from the foundation for $1.5 million cash and assumed the 10-year lease that is worth about $1 million. He said the property was appraised at $2.5 million.

“The University is not, by law, allowed to purchase property at higher than the appraised value so the [foundation] helped pay,” Hegarty said. “Foundations are set up around the University to benefit the University.”

Hegarty said under the 10-year lease the University can call off the lease with six months’ notice and would pay Players about $100,000 for each year left on the lease. The payback method also applies if Players calls off the deal, which the establishment can do after two years into the lease, he said.

He said there are no firm plans for the property, but the foundation may have proceeded with the deal for possible plans for a business graduate school building.

“One natural unit that would be interested in this is the business school,” Hegarty said. “That’s to be determined.”

The Daily Texan spoke with Eric Hirst, associate dean for business graduate programs, in February when the University first began negotiations with Players. Hirst said the business school was considering plans for a new building to house the MBA graduate program because the current McCombs’ business school classrooms do not allow for teamwork, which is essential to the program.

“When we look at our current facilities, we’re not able to do what management does,” Hirst said. “That affects our ability to engage in teaching.”

Hegarty said the deal is very different from 2004 when the University tried to acquire the land through eminent domain, virtually sidestepping the owners to seize the land for public use.

“The transaction was very amicable,” Hegarty said. “They were pleased with it, we were pleased with it.”