Bill Ackman to Harvard: When A University Becomes A "Political Advocacy Organization," It Doesn't Deserve Nonprofit Status

Hedge fund manager Bill Ackman advised Harvard to treat President Trump's demands with respect and said the president is fair to challenge the university's tax-exempt status if there aren't major changes.

"If taxpayer money is going to an institution, the institution cannot have massive amounts of administrative bloat, waste, or bureaucracy," he said Monday morning on CNBC's "Squawk Box."

"Acknowledge the areas where the President is absolutely correct," and make a deal, he said.


"Harvard became, over time, a political advocacy organization for one party. When a university goes from being a university to becoming a political advocacy organization, it doesn’t deserve nonprofit status," Ackman said. "It shouldn’t be a place that is allowing pro-terrorist organizations on campus, that only allows certain kinds of thinking and speech on campus."

KERNAN, CNBC: Not in a political angle, you’re an alumnus. What should Harvard do, to get back in your good graces, what does the university need to do at this point?

BILL ACKMAN: The wrong thing to do is to receive a letter from the administration and write back saying, “We’re doing nothing. In fact, we’re going to sue you." That’s what Harvard did.

What Harvard should have done was to say, “You know, President Trump, you make some good points. Taxpayer money coming to Harvard—that’s a privilege, not a right. And if taxpayer money is going to an institution, the institution cannot have massive amounts of administrative bloat, waste, or bureaucracy. We’re going to eliminate it. We’re going to hire AlixPartners or a restructuring firm. We’re going to take a 3G zero-based budgeting approach to the way we run our administration. Inefficiency is causing harm, and we’re wasting taxpayer money."

"Mr. President, you’re right. Harvard has become — there is not viewpoint diversity at Harvard. Students are self-censoring their remarks in classrooms. Faculty are doing the same because people are afraid to have real conversations."

You can’t learn. You go to college to be exposed to a broad array of ideas, and you’re not, that’s not happening at Harvard. Free speech is not happening at Harvard. So, you acknowledge the areas where the President is absolutely correct, and you say, “Look, we’re going to fix those areas, okay? We want to make a deal, Mr. President."

What have we seen from Trump? He asks for the moon, kind of shock and awe. Okay, same thing is true for Harvard. That most recent letter—you could argue it’s certainly overreaching in some of the elements, but he wants to make a deal.

Make a deal with the President, commit to fix these things, which, by the way, your alumni want you to fix. It’s in the best interest of Harvard, and treat shareholder and taxpayer money like a fiduciary. And they’re not doing that.

And Harvard is not in a good financial position. This is something I think is not well appreciated. They nominally have a $53 billion endowment. I don’t believe the carrying values of their endowment. 80% of the assets are invested in real estate, private equity, and venture capital.

SORKIN, CNBC: It’s not liquid.

BILL ACKMAN: It’s not liquid. And they’re apparently selling a $1 billion slice of their private equity. Watch where that gets priced relative to the carrying value of the portfolio. My guess is it could be 30-40% below the current carrying value to get a bid. In my business, if I owned a slice of something, I sold a piece of it at a 30-40% discount, I’d have to remark my entire portfolio. So, one, the endowment, in my view, is massively overstated in terms of what it’s really worth.

The second thing is, no one talks about the fact that Harvard now has $8 billion of debt. I read the prospectus for the recent bond issue. They have $53 billion of overstated assets that are illiquid, and you have $7.9 billion of debt, which you owe. As a donor, do you want to give money to a nonprofit, an institution, which is going to go into the institution, going to go out the door to pay interest to bondholders? My experience is nonprofits that borrow money—it doesn’t end well.

And then you have—what do they rely on for current funding? Money every year from the U.S. government, money every year from donations. Donations—I don’t know, I have to believe they’re down meaningfully. And tax-exempt status, you know, another reason that induces people to give money to their university is they get a tax deduction.

SORKIN, CNBC: Fair or unfair to try to take the tax-exempt status away?

BILL ACKMAN: I think it’s fair. Again, Harvard became, over time, a political advocacy organization for one party. When a university goes from being a university to affecting, you know, becoming a political advocacy organization, it doesn’t deserve nonprofit status. I mean, Harvard should be a place where students go to learn and the best research gets done. It shouldn’t be a place that is allowing pro-terrorist organizations on campus, that only allows certain kinds of thinking and speech on campus. That’s a political advocacy organization; it’s not a university.

So, I don’t think we’re going to end up there where Harvard loses its tax-exempt status. I want Harvard to succeed. You know, it’s been very important to me over time, but really, it got itself to a very bad place. Alan Garber is a good president, but he’s not managing--

The mismanagement here is Penny Pritzker. If this were any other kind of corporation, the notion that she’s still chairman of Harvard, leading the charge here, and in terms of how Harvard managed everything from COVID -- I know we have to go, but it’s an important topic -- to endowment management, to waste, to free speech, to who they hired as president of the university. It’s time for a change in leadership in the board at Harvard.