Lessons on legacy giving from the Sherlock Hibbs endowment

After a six-month legal battle, the University of Missouri and Hillsdale College have ended a dispute with an anti-climactic resolution. The two institutions agreed to split a gift that Sherlock Hibbs gave to Mizzou in 2002, currently valued at $9.2 million.

Mr. Hibbs, now deceased, donated $5 million to the University of Missouri in his will, with the stated intent of Missouri hiring “dedicated and articulate disciples of the Ludwig von Mises (Austrian) school of economics.” If Missouri were to fail in upholding its end of the arrangement, Mr. Hibbs stated that the money would go to Hillsdale College, a conservative college in Michigan. From emails between Mizzou administrators that were made public by the case, it appears that the University of Missouri sought a way around Mr. Hibbs’ restrictions by simply recasting descriptions of current faculty members in business and marketing. Hillsdale called their bluff and sued.

The unusual court case ends with both sides claiming victory. Hillsdale College will receive $4.6 million, half of what is now in the endowment. Christian Basi, University of Missouri’s spokesperson, said “We are pleased with this resolution because it allows both institutions to use the gift proceeds to teach free and open markets as well as Austrian economics and other economic philosophies. This benefits students at both institutions and ends this dispute.”

I doubt many Mizzou alumni, students, or faculty share Mr. Basi’s apparent pleasure at handing over nearly $5 million to benefit students at another institution. Especially while the university is in the middle of a capital campaign to increase their endowment to $1 billion to keep up with nearby University of Illinois ($2.2 billion) and University of Kansas ($1.8 billion).

Jay Nixon, former Democratic governor of Missouri and an alumnus of Mizzou, represented Hillsdale College in the suit. “Schools should vet potential donors on the front end,” he said, “but once they accept the resources, they must embrace the purposes for which they were given. Focused on this bequest, my alma mater didn’t do it in this matter.”

The lawsuit offers a cautionary tale to higher education donors—particularly those considering a legacy gift. Mr. Hibbs passed away at age 98 without any heirs. Without the oversight of Hillsdale College, this violation of his donor intent would have gone entirely unnoticed.

Any donor considering endowing a gift should think carefully about agencies they can trust to protect their legacy. For many people, the right person is a close family member. For others, it may be an outside organization that shares their vision and values.

Hillsdale proved a wise choice for Mr. Hibbs. The liberal arts college in Michigan, with a decidedly conservative reputation, holds Mises’ personal library. The school’s economics program “is shaped by a free-market perspective, and professors will help guide you through the essential ideas of thinkers such as the Austrian School economists Ludwig von Mises and Frederick A. Hayek.”

In my role at the American Council of Trustees and Alumni’s Fund for Academic Renewal, I have spoken with several higher-education donors concerned about their legacy gifts. One of the more disheartening conversations was with a retired professor who formerly held an endowed chair. The previous chairholder asked him to look after the named endowment, as the original donor had passed away without any heirs.

Despite repeated requests from the professor, the university refuses to conduct an audit on the endowment or provide clear financial reporting. This professor would like to leave a generous gift to the institution in his will, but he has little faith that the university will responsibly steward his gift.

Another donor I spoke with wondered whether it was unusual for a chair her late husband had endowed to remain empty—for seven years.

With their glossy brochures and complex giving vehicles, university planned-giving offices operate like a well-oiled machine. But I am reminded of a Seinfeld episode that takes place in a rental car lot. Jerry reserves a rental car but, upon arrival, finds an empty lot. Exasperated, Jerry tells the attendant “you know how to take the reservations, you just don’t know how to hold the reservation and that’s really the most important part of the reservation, the holding. Anybody can just take them.”

The same Seinfeldian wisdom applies to the university gift. Too often, university fundraising campaigns are focused simply on securing the gift. When cases like the Hibbs endowment emerge, one wonders if they have the integrity to hold them and to honor their agreements. And that’s really the most important part of the agreement—honoring it.

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