Yves here. This article about Harvard Law School’s endowment applies just as well to other well-heeled professional schools. And in many respects, the ways these endowments operate reveals what “professionalism” has come to mean in America: fealty to monied interests.
By Peter A. LaVenia. Originally published at The Harvard Law Record
Harvard Law School is perhaps the most prestigious law school in the nation with countless (in)famous names attached to its faculty and alumni, an influence unmatched in the Obama regime, and a symbiotic relationship with the commanding heights of the corporate world. Harvard Law’s embrace of the growing business presence in higher education  parallels the emphasis the school places on corporate law and major firm recruiting; its current role is to produce the premiere legal guardians of international corporate control and state power. With an endowment of $1.7 billion, Harvard Law has been compensated handsomely for its role defending corporate capitalism; indeed considered as part of Harvard University’s sprawling $36.4 billion endowment empire  it might be seen more as a giant hedge fudge masquerading as a teaching institution rather than the reverse. The institution socializes its student body to choose big law over the public interest through crushing student debt loads, courses that focus almost exclusively on the legal problems of the wealthy, and its attachment to elite foundations and projects.
Still, Harvard Law has the potential to play a progressive role in eliminating law school debt, promoting expanded legal services for the poor and under-represented, and investing in socially conscious businesses. Yet the endowment is invested in troubling industries and does little to eliminate student debt  or begin to correct a broken legal system . A demand for an end to Harvard Law-as-hedge-fund and corporate shill means envisioning what could be done with the vast resources available to the law school, including its students and faculty. The will to “shake up” Harvard Law School must combine with the knowledge that the administration could enact sweeping reforms to positively impact the student body, the under-represented working class and American democracy, and could do so under the current level of its endowment quite easily. Three demands should be raised: 1. An immediate end to all tuition for HLS students; 2. The establishment of community public interest lawyers paid for by Harvard in cities across the United States; 3. Investment of Harvard Law’s endowment in socially responsible businesses. How this is possible requires examining the structure of the endowment and operating revenue in order to show the ease with which a determined administration could make the changes.
As one of the thirteen major academic units within Harvard University, the Law School pools its funds with the rest of Harvard’s $36.4 billion (FY 2014) endowment  ; these funds are overseen by the Harvard Management Company , a wholly owned subsidiary of Harvard charged with supervising the university’s endowment and assets. While one might assume the majority of Harvard Law’s operating revenue would come from the endowment, this is not true – the majority is primarily from tuition, with a higher percentage (46%) used than any other unit at Harvard, versus 33% of operating revenue from the endowment . In fact, tuition is currently $54,850 (2014-15) and although 80% of Harvard Law students receive some form of financial assistance, only 12% of the school’s annual grant budget covers the cost of attendance . High tuition and lack of real financial aid reform has lead to the staggering $140,616 median debt load of law school students .
Harvard Law seemingly uses tuition to fund such a high percentage of its operating revenue so as to allow the majority of its endowment to continue to be invested at high rates of return. If it so chose, the tuition for its 1800 students could vanish and it would only cost the school $92.23 million a year, merely 5% of the $1.7 billion endowment. This should be demanded for all students regardless of family income and wealth – there would be no need to split the student body on this point, and could be a cross-class rallying cry. It would replace the inadequate financial aid that still leaves students burdened with debt and likely to accept big firm offers. Graduates interested in choosing a career in the public interest would no longer wrestle with debt loads, and the inadequacy of Harvard Law’s current program of eliminating debt for its graduates only if they choose low-income legal jobs as a career soon after their arrival at the school would no longer be necessary. We need look no further at the potential for this than the program Harvard Law had to fund the 3L year for students choosing public interest law from 2008-2009 called The Public Service Initiative; funding was cut because the administration believed too many 1L students wanted to take advantage of it . Perhaps afraid of the ramifications – since 110 1L’s signed up for program when it was available—both in being forced to spend $5.7 million of the endowment annually that would not be invested, and the loss of lawyers from prestige jobs to the public service, the program was transformed into the Public Service Venture Fund  (PSVF) and the Low Income Protection Plan  (LIPP). The LIPP aids “low income” graduates by reducing the amount of their loan repayment; the PSVF provides $1 million annual in seed money to start non-profit firms and subsidize Harvard Law alumni working at firms doing public interest law. Unlike the Public Service Initiative, the LIPP ensures HLS will likely receive at least some repayment from alumni, a far more attractive proposition for an investor than simply absolving debt. Neither cuts to the heart of the dilemma: that Harvard Law could end tuition, should do so, and in doing so would hardly affect school’s operating budget, likely encouraging more now debt-free students to enter public interest law.
The second demand: creation of community public interest lawyers and firms across the nation, could be funded entirely by ongoing grants from Harvard Law’s endowment. With the Public Service Venture Fund the administration committed a paltry $1 million a year for seed money to alumni interested in non-profit work. Instead, why not demand that HLS establish firms of 10 community lawyers in 10 separate cities across the United States, with a base salary of $50,000 a year? At a total cost of $5 million annually, these community lawyers could work with the poor and under-represented, challenge corporate and government wrongdoing, and become an anchor against growing legal inequality in the United States. Harvard Law would cut at the heart of the argument that there are too few public interest legal jobs available by creating 100 of them. A school with a $1.7 billion endowment, recently able to raise $476 million for capital improvements , should have no problem finding the funds to endow such a program in perpetuity. If even some of the major law schools followed suit, there might be a flood of new public interest jobs available for graduates within a few years, and Harvard could reap the credit of being the inspiration.
Harvard Law’s commingles its endowment with Harvard University’s, primarily into ethically questionable businesses . These investments include petrochemical corporations engaged in dangerous hydraulic fracturing for natural gas, banks cited for refusing to invest in underprivileged neighborhoods, large hedge funds, and a myriad of businesses not connected to the betterment of society or the legal profession (the full endowment portfolio and most egregious offenders will be listed in the appendix). Harvard Management Corporation’s directors are paid salaries akin to their Wall Street colleagues, far higher than one would expect if the school were primarily interested in education rather than the art of making money; compensation for the top five executives in Fiscal Year 2012 was $29.5 million . In short, Harvard Law, as a premiere provider of legal aid to questionable corporations worldwide, through its faculty and graduates, uses its endowment to further aid these corporations and expand elite power.
There is a tendency in Harvard’s investment choices towards very large corporations with few, if any examples of socially conscious businesses. Even though the most egregious offenders listed in the appendix are a short sample, anyone willing to examine the complete list provided will find familiar corporate names either as direct investments or through larger investment funds. Not only is Harvard Law entangled with the larger corporate world, it is choosing to do business with some of the most troublesome entities in that sphere. Addressing the problem of corporate control at Harvard Law will require divestment from these types of businesses and placement of funds in the hands of socially responsible entities. While Harvard has take some steps to invest in those types of businesses, without full discussion of possible divestment we can only conclude that Harvard Law is choosing to use its endowment to buttress the corporate world its faculty and students are trained to serve.
Investment in socially responsible businesses is the third pillar of major reform against the corporate culture at Harvard Law. Confronting the administration with divestment demands has proved difficult in the recent past, as students from across the University called – unsuccessfully – for Harvard to sell its stock in corporations contributing to the climate crisis. Yet a successful drive to move Harvard Law’s $1.7 billion into socially responsible investments would likely create the impetus to do the same with rest of the University’s funds, and impact the culture of the Law School in a profoundly anti-corporate direction. As a first step (in what is likely to be a multi-step process) Harvard Law should pull its funds from the most egregious offenders (as listed in the appendix), with an aim toward public discussion and debate in which socially responsible businesses the Law School should invest.
None of the three main pillars of change will be easy to accomplish, but they constitute the basis of a platform to rally large numbers of students, alumni, faculty and staff around. Transforming Harvard Law from a mainstay of corporate control and elite rule will require changing the culture and the possibility graduates might have to enter public interest law without debt, to say nothing of major encouragement from the administration. Using the ample endowment at Harvard Law to do so should be at the core of student demands for serious structural reform. Harvard has long been a model for the nation’s law schools and legal profession. A successful campaign to shift the dynamic of the school would ripple across other top law schools until it engulfed the rest.
Click here to view an appendix containing HLS’s full investment portfolio, including a list of the worst offenders.
 Nicolaus Mills, “The Corporatization of Higher Education,” Dissent, Fall 2012. www.dissentmagazine.org/article/the-corporatization-of-higher-education
 Ron Unz, “Paying Tuition To A Giant Hedge Fund,” The American Conservative, December 4, 2012. http://www.theamericanconservative.com/articles/paying-tuition-to-a-giant-hedge-fund/; Harvard University Financial Report: Fiscal Year 2014. http://www.hmc.harvard.edu/docs/Final_Annual_Report_2014.pdf
 80% of Harvard Law students incur debt, and 2012 graduates left with an average debt of $124,312. http://grad-schools.usnews.rankingsandreviews.com/best-graduate-schools/top-law-schools/grad-debt-rankings/page+3
 Owen Bowcott, “ABA President To Tackle ‘Broken US Legal System,’” The Guardian, October 8, 2013. http://www.theguardian.com/law/2013/oct/08/aba-president-tackles-broken-us-legal-system?INTCMP=SRC
 Nikita Kansra & Weinstock, Samuel Y. “Harvard Endowment Grows To $32.7 Billion.” The Harvard Crimson, September 24, 2013. http://www.thecrimson.com/article/2013/9/24/endowment-growth-hmc/; Harvard University Financial Report (FY 2014), pp.1
 Harvard University Financial Report, pp. 5
 “Why Huge Salaries Don’t Necessarily Make Law School Grads Rich,” Bloomberg Businessweek, Oct. 22, 2014. http://www.businessweek.com/articles/2014-10-22/law-school-grads-make-good-salaries-but-have-high-debt-and-few-jobs
 110 1L’s signed up for the PSI in 2009, nearly 50% more than Dean Minow had expected. See: Elie Mystal, “The Harvard Law Financial Aid Situation,” Above The Law, http://abovethelaw.com/2009/12/the-harvard-law-financial-aid-situation-with-emails/
 While Dean, Elena Kagan was able to raise $476 million for HLS to aid in hiring professors, campus construction and financial aid; there is no reason a continuing program of gift-giving should not focus instead on providing aid for students who wish to enter the public service debt free. See: Sharon Theimer, “Kagan: Harvard Law’s $476 Million Dean,” The Boston Globe, July 7, 2010. http://www.boston.com/news/local/massachusetts/articles/2010/07/07/kagan_harvard_laws_476_million_dean/
 Not all of Harvard University’s nearly $33 billion is invested into stocks and hedge funds; that level fluctuates around $1 billion, while much of the rest has been put into illiquid holdings such as real estate.
 “Harvard Endowment Managers’ Pay Reported,” Harvard Magazine, May 15, 2013. http://harvardmagazine.com/2013/05/harvard-endowment-administrator-pay-disclosed