Comment by mrmaddog | Hacker News Reader

Comment by mrmaddog | Hacker News Reader

Well this is silly. Stanford graduation rates have been increasing over the past 10 years: (http://ucomm.stanford.edu/cds/2012 - search for point B11). 1998-2003 were all in the 90-93% range. This last year had a graduation rate of 95%. This doesn't support the opinion that students are dropping out 'en masse.' As for "professors having a financial stake in their student's work" – since when was this not the case? Professors have been dependent on grant money based on the work of their student researchers for decades; only previously, the students had no way of making money off of the work themselves.

I do think that it would be good to establish and maintain a set of ethics for professors who have a financial stake in companies, but it seems like this piece was more of a ranting projection built for page views than a thoughtful criticism on the state of the university.

Edit: And I should have researched a little more: Stanford does have a policy regarding faculty investments: http://doresearch.stanford.edu/policies/research-policy-hand.... Points 3 & 4 seem particularly applicably as a response:

   3. Faculty must foster an atmosphere of academic freedom by 
   promoting the open and timely exchange of results of 
   scholarly activities, and ensuring that their advising of 
   students (defined for this policy to include postdoctoral 
   scholars and other trainees) and their supervision of staff 
   are independent of personal financial interests. Faculty 
   should inform students and colleagues about outside 
   obligations that might influence the free exchange of 
   scholarly information between them and the faculty member.
   
   4. Faculty may not use University resources or personnel, 
   including facilities, staff, students or other trainees, 
   equipment, or confidential information, except in a purely 
   incidental way, as part of their outside consulting or 
   business activities or for any other purposes that are 
   unrelated to the education, research, scholarship, and public 
   service missions of the University.

Is Stanford still a university?

You're missing the point of the question. The real question is, is stanford legitimately a non-profit institution? That's not a 'silly' question, and it has material implications.

American universities are for profit entities (corporations).

http://en.wikipedia.org/wiki/Bayh%E2%80%93Dole_Act

Before the Bayh–Dole Act, federal research funding contracts and grants obligated inventors (where ever they worked) to assign inventions they made using federal funding to the federal government.[3] Bayh-Dole permits a university, small business, or non-profit institution to elect to pursue ownership of an invention in preference to the government.[4]

Stanford, further, is a private institution. See, for example, their investment company: http://www.smc.stanford.edu/ which is part of the university and is overseen by the Board.

They certainly don't qualify (nor do public universities like UC) as non-profits; they don't reinvest all their earnings into their operating budget. Investors in Stanford receive a return on the growth of the endowment.

The University is a tax-exempt institution under section 501(c)(3) of the Internal Revenue Code.

https://ogc.stanford.edu/stanford-legal-facts#q1

A 501(c) organization, also known colloquially as a... "nonprofit", is an American tax-exempt nonprofit organization.

Yes, following on to 001sky, for-profit American universities do exist -- they're things like University of Phoenix or DeVry. All of the traditional residential big-name universities that you're probably thinking of, however, are not-for-profits.

Please see my reply on the other thread. I have demonstrated that the IRS found compliance issues in 503c universities which is clear demonstration of my point.

Yes, yes, of course they are a 501c3.

However, reality demonstrates that Universities are most definitely for profit. This is embedded in their operating principles. Have you worked with the Office of Technology Licensing?

This includes that you would call "nonprofit" according to IRS, but this is actually an issue that has been debated since Bayh Dole by people who understand the subtlety of what I'm talking about. In short, the very definition of nonprofit itself is inadequate the span the nature of corporations which are under 501c3.

> However, reality demonstrates that Universities are most definitely for profit.

They certainly don't return profit to investors, which is what 501c3 and several related-but-different "nonprofit" designations refer to.

I'm not sure in what other sense you could be meaning that they are "for profit".

> Have you worked with the Office of Technology Licensing?

Certainly, Universities have parts of their operations devoted to generating revenue; all nonprofits necessarily do, since if they don't generate revenue that meets expenses, they can't continue to operate. Revenue is not the same thing as profits.

> people who understand the subtlety of what I'm talking about

If you have a coherent idea, perhaps you can explain it rather than making implications that anyone who hasn't read your mind is intellectually defective.

> In short, the very definition of nonprofit itself is inadequate the span the nature of corporations which are under 501c3

Since the relevant definition of nonprofit comes from 501c3, it is, necessarily, sufficient to span the entities which fall under 501c3, since anything it doesn't span doesn't, ipso facto, fall under 501c3.

Universities collect funds. The excess of these funds, which are not required for the costs of maintaining the university, are distributed to professors and students (this is profit returned to investor; the professors invest time and opportunity cost while the students invest labor) in the form of internal grants. These professors and students then use the grants to develop technology, which they then use university funds to develop into companies (while also getting patent royalties from the OTL for having patented the tech and licensed it), which tend to then hire employees and donate funds back to the universities that fostered them.

This activity has caused many to question the tax-exempt status of universities. The purpose of tax exemption for universities is to promote education, not prevent universities in acting as for-profit institutions.

Some examples: the (complex and unique) example of Cooper Union.

Also: http://www.irs.gov/uac/Newsroom/IRS-Releases-Final-Report-on...

The audits identified some significant compliance issues at the colleges and universities examined,” said Lois Lerner, Director, Exempt Organizations division. “Because these issues may well be present elsewhere across the tax-exempt sector, all exempt organizations need to be aware of the importance of accurately reporting unrelated business income and providing appropriate executive compensation.”

Note the discussion of unrelated business income.

There is an active lawsuit against Princeton on similar grounds: http://www.nj.com/mercer/index.ssf/2013/06/lawsuit_challengi...

from article: "The school’s policy of sharing patent royalties with faculty could cost the university an additional $20 to 30 million in taxes a year."

Please, do not ever tell somebody they are intellectually defective; it weakens your argument. Further, as I've demonstrated everything to support my case, in showing that there are 501c3 unviersity organizations which have been cited by the IRS for having violating the terms of that.

> The excess of these funds, which are not required for the costs of maintaining the university, are distributed to professors and students (this is profit returned to investor; the professors invest time and opportunity cost while the students invest labor) in the form of internal grants.

Internal grants are not a redistribution of profits, they are an internal budget allocation. The funds don't become personal funds.

> This activity has caused many to question the tax-exempt status of universities.

People question lots of things on bases which are not legitimate.

> The purpose of tax exemption for universities is to promote education, not prevent universities in acting as for-profit institutions.

Its actually both, as is obvious from the tax code. Tax exemption under 501c3 requires both not being operated for profit and operating a specific form or function of entity (educational, in the case relevant to universities.)

> Note the discussion of unrelated business income.

Unrelated business income is a separate requirement of tax-exemption from not operating for profit; income from unrelated (to the tax-exempt purpose) business income is taxable to protect for-profit business from not-for-profit institutions. The fact that the IRS found some issues with some colleges and universities regarding proper reporting of unrelated business income does not mean those colleges and universities (much less universities in general) are operated for profit.

> There is an active lawsuit against Princeton on similar grounds

The existence of an active lawsuit isn't proof of anything except the existence of someone with a sufficient interest in the legal effects of the finding that the lawsuit seeks.

> Please, do not ever tell somebody they are intellectually defective

I criticized your rhetoric, not your intellect.

Non-profit just means the organization has to use its profits for the operation of the organization or give it to other non-profits not that it cannot make a profit.

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