Harvard’s governance dilemma

What the Harvard drama says about DEI

Yesterday’s resignation of Claudine Gay, Harvard’s first black president and the second woman to lead the university, was linked to a growing crisis over plagiarism allegations. But she has also been under fire for months for what critics say was an inadequate response to the October 7 Hamas attacks on Israel.

Her departure, weeks after Liz Magill stepped down as president of the University of Pennsylvania, shines a spotlight on the increasingly rocky landscape for the policy known as DEI — diversity, equity and inclusion — and raises questions about donors’ power over schools .

Gay’s position became increasingly fraught. This weakened her credibility her congressional testimony last month about universities’ responses to anti-Semitism on campus. Her troubles were compounded after conservative activists published a growing litany of plagiarism allegations.

Alumni were also stunned in recent days to learn that applications for early admission to Harvard this year fell 17 percent to the lowest level in four years.

Gay has become a lightning rod in the debate over DEI She took office six months ago, just as the Supreme Court rejected the use of race-conscious admissions at Harvard and other universities. Political clashes came to dominate her term — the shortest of any Harvard president — with some conservatives claiming she was unqualified for the position, a charge her supporters rejected as racist.

Christopher Rufo, a conservative education activist who helped publicize the plagiarism allegations, celebrated her dismissal on X as “the beginning of the end for DEI in American institutions.”

Companies have been reducing their DEI initiatives last year because conservative politicians have targeted such programs. Some on Wall Street have suggested that DEI programs were flawed because they did not include a counterbalance to anti-Semitism.

Others criticized the treatment of gays. “This is an attack on every black woman in this country who has put a crack in the glass ceiling.” Rev. Al Sharpton told CNNadding that he would occupy the New York offices of Bill Ackman, the billionaire financier who had repeatedly criticized Gay.

Harvard’s board of directors is also being closely watched. The Harvard Corporation, led by billionaire and former Obama administration official Penny Pritzker, had initially supported Gay after the congressional hearing. In its statement supporting Gay last month, the company acknowledged that it had been made aware of allegations of plagiarism starting in October.

although many Harvard faculty members Some expressed dismay at Gay’s decision and called for a shake-up of the board. “We need several new independent members at the Harvard Corporation who are unaffected by recent events and failures,” Frank Laukien, a visiting chemistry scholar, told The Times, adding that Pritzker should resign immediately.

And the debate over who should lead universities has been reopened. Alan Garber, Harvard’s provost, will serve as the school’s interim president. But the process for choosing full-time leaders at Harvard and Penn is likely to become heated, especially as more outspoken alumni come on board.

Ackman blasted Sally Kornbluth, the MIT president who also testified at the House anti-Semitism hearing in December and remains in office. “And then Sally?” he posted on X.

HERE’S WHAT’S HAPPENING

Wall Street is waiting for a big Fed release. At 2 p.m. Eastern, the central bank will release minutes from last month’s rate-setting meeting, when it stunned markets by suggesting a trio of cuts were planned this year. The Fed’s message sparked a big rally at the end of the year, but stocks are off to a lackluster start in 2024 as investors wonder whether the bank will start cutting back. as soon as March.

Donald Trump is suing to get his name back on the Republican primary ballot in Maine. The former president accused Secretary of State Shenna Bellows of being “biased” after Maine became the second state to ban him from the ballot. Challenges to Trump’s candidacy have been filed in at least 33 states.

Maersk extends a pause on its journey through the Red Sea after missile attacks. The Danish shipping giant said so would continue to avoid the area and the Suez Canal after Yemen-based Houthi militants tried to board one of its ships over the weekend, leading to a firefight with U.S. forces that left 10 of the attackers dead. Concerns are growing that the war between Israel and Hamas could spread into a wider regional conflict after a Hamas leader was killed in Lebanon.

Disney gains a remarkable ally

As the entertainment giant faces renewed pressure from billionaire Nelson Peltz (and from the two disgruntled former executives joining him in his proxy fight), it has gained the support of another notable activist investor: ValueAct Capital.

ValueAct will support Disney board nominees, the entertainment giant said in a statement on Wednesday. Disney added that it would enter into an agreement to consult with the $16 billion hedge fund, including through meetings with the board.

“ValueAct Capital has a track record of working with the companies it invests in,” said Disney CEO Bob Iger. “We welcome their input as long-term shareholders.”

It’s a kind of symbolic victory as ValueAct’s stake in Disney is believed to be much smaller than the 33 million shares Peltz controls. But ValueAct is highly regarded on Wall Street as a constructive partnership with boards of directors.

And it remains unclear what exactly Peltz and his allies are – Ike Perlmutter, the irascible former chairman of Marvel Entertainment; and Jay Rasulo, the former CFO of Disney, argue for this.

Tesla’s Chinese problem

Investors are ignoring news that Elon Musk’s automaker has lost its crown as the world’s largest seller of electric vehicles, ceding that position to BYD, a Chinese rival backed by Warren Buffett. But industry watchers say the changing of the guard is a potentially key moment.

Tesla shares fell in premarket trading on Wednesday after the last sales update yesterday. The company sold a record 1.8 million vehicles last year, supported by discounts. That included sales of nearly 485,000 cars last quarter – about 41,000 fewer than BYD in the same period.

BYD is the dominant EV maker in the largest car market in the world. The company initially focused on making batteries before turning to manufacturing its own cars. It sells cheaper vehicles than Tesla, but its profit margins have persistedpartly because the company owns its battery supply chain and sources cheaper raw materials.

BYD is now looking abroad, putting even more pressure on Tesla. The Chinese market comprises approximately 90 percent of BYD’s sales. But BYD’s international operations — the company focuses on Europe, Japan and Brazil, and has largely avoided the U.S. amid trade tensions between Beijing and Washington — have launched in the United States. second half of last year.

Whether BYD can translate its domestic success “to a global stage is one of the big questions of 2024,” Matthias Schmidt, an industry analyst and director of Schmidt Automotive Research, told DealBook. BYD announced plans last month to build an electric vehicle factory in Hungary, as the European Union, the world’s second-largest EV market, examines Chinese companies for illegal subsidies.

The market is changing dramatically. Federal tax credits and other incentives are drying up in Europe and the US, and governments are considering more protectionist measures. The growth comes from more price-conscious consumers.

These shifts could be visible in Tesla’s future numbers. “The growth locomotive appears to be going off the rails despite deep discounts, increasingly characterizing it as a traditional automaker chasing volume over profit,” Schmidt said.

Crypto Rises Despite a Legal Loss

The big crypto rally of 2023 still seems to have enough firepower. Bitcoin hit the $45,000 mark this week, its highest level since April 2022, with crypto bulls driving up the price of bets that regulators will approve the first Bitcoin exchange-traded fund, or ETF, as soon as this month.

The increase came amid a broader crackdown by regulators. The second achieved a big victory against crypto firm Terraform Labs last week, which could have major implications for other digital asset cases. A federal judge concluded that the company — which caused a market collapse in 2022 that sent its trash-talking co-founder, Do Kwon, on the run for months — sold crypto tokens that were unregistered securities.

This has become an existential issue for the industry. Gary Gensler, the chairman of the SEC, states that most crypto tokens qualify as securities. The industry has fought back against this approach in court and on Capitol Hill, spending millions fighting lawsuits and lobbying for an alternative regulatory structure.

The latest ruling strengthens the agency’s position, just a few months after it became a… separate lawsuit against Ripple, which was found to have complied with SEC rules in the way it sold its XRP token.

Old laws apply to a new industry. In his ruling, Judge Jed Rakoff of the Southern District of New York rejected Terraform’s claim that a 1946 Supreme Court case describing a test for effects was irrelevant because it was from a “bygone era.” In that case, the court said that “a contract, transaction or arrangement whereby a person invests his money in a common venture and is led to expect profit” from the efforts of the promoter is covered by securities law.

Judge Rakoff ruled that the test applied to crypto tokens, adding that Terraform and Kwon “made specific, repeated statements” that would lead a reasonable investor to expect a profit based on their efforts.

Kwon is in prison in Montenegro on charges of forged documents and faces charges in multiple countries. He fled his native South Korea after Terraform’s epic crash can be delivered to the US or South Korea to be prosecuted.

READING THE SPEED

Offers

• Fisher Investments, the money manager founded by Ken Fisher, said this is the case was not in sales calls, and denied a report that it was in negotiations with Advent International. (Reuters)

• Fidelity has the value of his interest in X, Elon Musk’s social network, with 72 percent. (Bloomberg)

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