MEMORANDUM

October 27, 2005

We want to share with the campus our perspective on what we as officers of the board have learned from what has become a very emotional and highly charged issue. We also want to make clear our commitment to improve board governance and provide leadership and direction to the university.

We hope this communication and the ensuing dialogue with the community will be considered not only responsive to the faculty resolutions and student expressions of concern, but also to what we see as our responsibilities as trustees of this great university.

Apology to the Campus

First, we want to be clear. We are chagrined that the board’s own processes over the years did not allow us to have a clear understanding of what contracts were in place, their provisions, and the various forms of compensation which the president was receiving. We acknowledge this deficiency and we apologize to the entire community for it.

Had we been more vigilant and had more robust processes, the situation we have had to confront might never have occurred. The board has resolved to do better, much better, in the future—to be a board fully worthy of the fine institution to whom its care is entrusted.

This controversy has placed a great strain on the university and the board. Many in the greater university community respected Dr. Ladner as an effective leader under whom the university prospered. Applications tripled. Selectivity improved measurably. The endowment grew eight times in size in one decade. Most importantly, the national stature of American University improved in external rankings thanks to the quality of the faculty and the students attracted here.

The 23 trustees wrestled with the allegations against Dr. Ladner and the record of university performance during his tenure out of fairness to him, but most of all in fairness to the university and all its stakeholders. This was made more difficult by ambiguous contract issues and blurred boundaries of conduct appropriate to the president on behalf of the university. Notwithstanding vigorous internal debate and too often public disagreement, the board followed the appropriate process of an independent review by its Audit Committee aided by professionals, acceptance of the committee’s report and recommendations, a determination that Dr. Ladner under the circumstances should not continue in his leadership capacity, and ultimately that he should resign his employment or face termination.

Our Decision To End The Controversy

We will not here revisit all the arguments which we fully considered in deciding whether to risk probable litigation between the university and Dr. Ladner or, instead, to resolve all disputes and avoid altogether the risks, costs and delay inherent in litigation.

The board did agree that there had to be a limit to the consideration which might be paid to Dr. Ladner were he to agree to resign and release all claims against the university. The board held two sessions where it heard the strong views from the campus that he not receive a “golden parachute.” We also heard from the campus that it wanted a prompt resolution of the controversy.

Hence, the board debated and decided what its final and best offer would be. We gave Dr. Ladner approximately three days to accept or reject it. That offer had a one-time severance payment and allowed him to retain previously awarded retirement funds which had accrued to his benefit. Had he rejected it, the board was prepared to accept litigation as the only alternative.

In reaching our decision we received and relied on the advice of counsel from two prestigious law firms who were selected specifically for their expertise on tax and litigation matters. These counsel advised us that each issue in the university’s relationship to Dr. Ladner could be contested as part of any litigation, that there could be no guarantee the university would prevail, and that the litigation which would likely ensue would be costly, lengthy, and potentially disruptive of university operations. Finality is something lawyers and the board had to value as an important benefit of a prompt and comprehensive resolution of the controversy.

Moving On and Moving Forward

There are many lessons to be learned from this episode so we can try to prevent history from repeating itself at American University. We haven’t identified them all yet. But, among them:

• The need for the trustees to be less isolated and insulated from the campus and to have a better understanding of the concerns and priorities of all who work and learn here.
• The need for improved and more inclusive governance. To this end, the board has formed a Governance Committee which will reach out to include all university constituencies in its work. The board is supportive of initiatives by the university community to develop and communicate suggestions to meet this need, including principles of governance, board structure and composition, operating procedures, agenda prioritization, and other aspects of governance.
• The need for the board to be more vigilant with respect to financial matters including but not limited to compensation. We have made a good start on this but there is more that needs to be thought about and developed.
• The need for the board to be more transparent in its discussions and decisions. The Governance Committee will involve campus representatives in developing recommendations in this respect as well.
• The need to assure that the board itself, as a matter of leadership, reflects the values of the university in its work and processes.

We are concerned that some donors who identify with Dr. Ladner may withhold their contributions, just as other donors may do in reaction to headlines and emotionally charged statements in the media. We will encourage the trustees who are continuing on the board to do all they can within their means and ability to support the university themselves and to encourage other donors to do likewise.

The campus needs now to come together in conducting a professional search for a new president. We want to be united in our expectations, as well as in our commitment to support whomever emerges as the successful candidate for this most important position. Trustees will be meeting on campus next week with faculty, student, and other campus representatives to consider how such a search should be structured and conducted.

However long that process takes, we want to express our support and appreciation to Neil Kerwin, Ivy Broder, the deans, and other officers and faculty for the continuing strong leadership they have provided to AU throughout this difficult period.

We do not expect to convince all those who have disagreed with the board’s actions that we were right in all that we did. We do ask that you respect that our actions were taken with fidelity to our fiduciary obligation to do what we sincerely believed as a matter of conscience to be best for the university and in its long-term interest. That we were not always unanimous within the board reflects that reasonable people can disagree on these issues and do so on principle as well as practicality.

We respect those who disagree with our actions, but we hope that their disagreement will not prevent them from working with us to avoid any future repetition of the mistakes of the past and, above all, that they will help all of us to keep American University moving forward to achieve its educational mission more fully than ever before.