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06/02/92

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Faculty question bookstore lease

STANFORD -- Negotiating a fair lease with the university puts faculty members serving as directors of the Stanford Bookstore in an uncomfortable and ambiguous position, two directors told colleagues at the Faculty Senate meeting on Thursday, May 28.

Profs. Peter Stansky, history, and Robert Weisberg, law, came to the senate prepared to answer questions about a two-inch thick report on allegations of inappropriate perquisites for bookstore managers (see Campus Report, May 20).

Instead, colleagues seemed more interested in why the independent corporation paid the university less than $40,000 in 1990-91 to lease land for the flagship store at the heart of campus. The Stanford Daily has reported that, according to industry sources, a lease of $3 million or more would be reasonable.

(The Daily reported that the bookstore paid $120,000 in 1990-91 to operate the convenience store at Tresidder Union and $44,000 for the Track House clothing outlet near the stadium.)

In an apparent reference to the recent $5 million budget cut in the School of Humanities and Sciences, Prof. Mary Pratt, Spanish and Portuguese, asked with a touch of sarcasm if the university could transfer faculty billets to the bookstore.

Stansky, who is president of the bookstore board, said he found the lease arrangement "acceptable." Weisberg, who recently was named the board's secretary/treasurer, implied that after current problems are resolved, the store's board might be willing to reopen negotiations on a higher-priced lease. The current lease runs through the year 2000.

Acknowledging that the lease probably pleased them in their roles as bookstore directors, Prof. Al Elsen, art, asked Stansky and Weisberg if they found it acceptable as faculty members.

"That is the ambiguity of our situation," Stansky responded.

"It is not easy to have it both ways," Weisberg said of his desire as a bookstore director to ensure good bookstore profits and as a faculty member to enhance university income.

Kennedy defends existing lease

While Weisberg left open the door to renegotiation, President Donald Kennedy told the senate that the lease terms are "reasonable in terms of the university's interests."

Kennedy said the university grants leases that "harmonize objectives," sometimes accepting low rent to fulfill program-related purposes. Contracts with the bookstore, the Carnegie Institution of Plant Biology and faculty members living in the campus residential area fall in this category, he said.

Trying to spare Stansky and Weisberg, Kennedy added that trustees, not faculty members, are responsible for whatever rents are negotiated.

In response to a question from English Prof. Ron Rebholz about bookstore profits, Weisberg said he could not remember exact figures but that net profits are "several million" annually.

A long-term concern of the board will be what do to with that, Weisberg said. In addition to higher rent, the board could consider larger rebates, but that presents "significant redistribution problems." Another option is price reductions, but that could lead to competition problems with other bookstores, he said.

Weisberg said it was premature to make decisions on disposition of profits until legal questions are resolved with the state Attorney General's Office. That process may take another "couple of months," he said.

Board not an administrative panel

Stansky began the presentation, which was requested by the senate, with a statement tracing the history of the bookstore and describing the roots of the current controversy.

The bookstore, which is legally separate from the university, for many years served the "needs of the Stanford community adequately but with no particular distinction," Stansky said.

It then expanded dramatically during the 1970s and 1980s, he said, under the leadership of manager Eldon Speed, assistant manager Philip Chiaramonte and long-time board president Prof. Jack Friedenthal, who left Stanford in 1988 to become dean of law at George Washington University.

Stansky admitted that the store's governance structure did not keep up with that expansion. Except for Friedenthal, "members of the board did not have a true sense of their tasks - nor the time and the expertise that their fulfillment would require," he said.

"We thought of ourselves, inaccurately, as members of a university committee whose obligation was to reflect the concerns of the community, and to set general policy," Stansky said. "We were not, as we should have been, an administrative board."

He said board members "were not - nor was I, for one, interested or willing to be - businesspeople." He said that "if I had had my wits about me I would have stopped at my appropriate level -- vice president," and he offered Pratt his "billet" as bookstore board president.

Board members set salaries of the top managers and participated in decisions to expand to 200,000 the number of titles in the store, he said. They were unaware of perks other than the house in Twain Harte, "which we shouldn't have allowed."

"There were excesses and mistakes made by management, and sins of omission and failures of oversight made by the directors," he said. "We are now in the process of constructing a far more elaborate and expensive structure of governance, which should certainly prevent any such mistakes in the future."

Expanding on Stansky's remarks, Weisberg referred to actions taken by the bookstore board on May 14 after an investigation by auditors and lawyers directed by an independent three-member audit committee. The board terminated the store's program of providing cars to top managers, directed managers to disentangle the bookstore from the Twain Harte vacation home, and established several committees to review compensation, investments and governance structure.

Weisberg said that the board's investigators are still looking into several technical matters relating to tax issues.

Prof. Edward Harris, medicine, asked why indiscretions detailed in the report by the bookstore's independent audit committee do not amount to fraud.

Weisberg responded that fraud is intent to deceive, and there has been no finding of such intent.

Bookstore governance

In the area of governance, Weisberg said the board will be expanded from seven to at least 11 members and perhaps 15.

"We are trying to identify people who can help us," he said, explaining that the board needed members, both internal and external to the university, with business expertise. He said he hoped to recruit help from the Graduate School of Business.

Serving with Weisberg and Stansky on the bookstore board are Agnes Peterson, vice president, of the Hoover Institution; Nancy Padgett of the School of Humanities and Sciences; and student Kevin Murakami. Student Sammie Speigner and sociology Prof. Sanford Dornbusch recently resigned their positions.

Whether the bookstore should continue to be technically owned by the association of 40 "members" who each pay $1 for the privilege is open to question, Weisberg said.

The association is an organization with only vague responsibilities and no authority or control, he said. In addition to selecting board members, it is intended to serve as a voice of the community in influencing bookstore operations, but there may be better ways of performing those functions, Weisberg said.

Prof. Mark Wolfson, business, warned Weisberg and Stansky that increasing the board size carries a danger of watering down governance by spreading it too broadly.

Prof. Ray Levitt, civil engineering, praised the breadth of the collection at the bookstore and noted that the board has acknowledged lax oversight. He warned that it would be "easy to overreact" to the problems uncovered by the Daily. The board should not "chase away talented managers" and risk ending up with dull, bureaucratic replacements, he said.

Kennedy closed the discussion by telling the senate that Weisberg "undertook to be the main solver of a problem he didn't create" during a year in which he also has served as a resident fellow and played a large role on budget-cutting committees. Weisberg was a member of the Faculty Senate Committee on Education and Scholarship at Stanford.

"I think he has performed magnificently," Kennedy said as senators applauded Weisberg.

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