Unwrapping Major Gifts

Under the high, Gothic Revival ceiling of the Sterling Memorial Library Lecture Hall, Chinese real estate mogul Zhang Xin speaks to a packed audience of students, professors, and university administrators on the afternoon of November 9, 2016. She is dressed in the stylish business attire that The New Yorker once called “a kind of Shanghai-Tang chic.” Before a large projector displaying photos of shiny office buildings in Shanghai, she describes the newest projects of her multi-billion dollar prime office real estate company, SOHO China. Her career trajectory—from teenage factory worker in Hong Kong to Master’s student at the University of Cambridge to renowned entrepreneur with 10 million followers on Weibo (the Chinese version of Twitter)—is emblematic of “the Chinese dream.” However, Zhang Xin is not here just to talk about her success. She is here because fourteen undergraduates in the audience — the Yale SOHO China Scholars — are reaping the benefits of her wealth: scholarships for low-income Chinese students.

Two years before this presentation, these scholarships were still just ideas. In January 2014, Yale President Peter Salovey flew to Beijing for a fundraising meeting arranged by Lei Zhang SOM ’02, a Chinese hedge fund manager and friend of Zhang and her husband and business partner Pan Shiyi. The Chief of Staff of the SOHO Foundation passed Salovey a message: The couple was funding a ten million dollar scholarship for low-income Chinese students to study at American universities. Would Yale like to be a part of it?

How have universities like Yale had to adapt when increasing portions of significant donations come from international donors – in particular, from wealthy Chinese philanthropists?

The SOHO Foundation is part of an expanding network of Chinese philanthropists interested in donating to American institutions of higher education. In the last five years, in addition to the ten million dollars from SOHO, Yale has received a gift of 8.9 million dollars from Lei (who currently serves as a board member of the Yale Corporation) to the School of Management and a sixteen million dollar donation from Chinese entrepreneurs Neil Shen SOM ’92, Brad Huang SOM ’90, and Bob Xu to establish the Yale Center of Beijing. Joseph Tsai, co-founder of Chinese e-commerce giant Alibaba, donated thirty million dollars to rename the Yale China Law Center the Paul Tsai Center, in honor of his father, and made another large donation for the Tsai Center for Innovative Thinking at Yale.

Although money appears to be dropping from the sky, the process behind these donations is complex. What happens when ten million dollars is shuttled from a wealthy donor to an institution like Yale? How are relationships with international donors cultivated? And most importantly, how have universities like Yale had to adapt when increasing portions of significant donations come from international donors – in particular, from wealthy Chinese philanthropists?

Yale’s financial enterprise operates apart from the stone-carved spires of Yale’s campus. The 180-person Office of Development is housed on floors eight and nine of the tall, gray office building on 157 Church Street, just off of the Green. Few students are privy to the intricate fundraising initiatives that take place in those rooms.

Fundraising for universities is a multi-layered process involving different types of solicitation. The first two levels are annual giving and corporate fundraising, explained C.J. Menard, an independent development consultant at CJM Consulting, who has worked in the past for Harvard University and Boston University, and who currently serves as an administrative dean for Deerfield Academy in Massachusetts. Annual giving — what Menard calls the “scatter-bombing of fundraising” — is typically solicited from alumni en masse through electronic communication and social media appeals. Corporate funds are obtained through more specialized interactions with companies and foundations.

Then there are the big donations from individuals — major gifts. Defined by Yale as a donation of one hundred thousand dollars over the course of no more than five years, these donations are raised through highly personalized interactions with donors. Major gifts officers must “think every day about a very small group of people, about what they can do to help their relationship with the university, and make the donor feel good about their donations,” said Menard. In recent years, as major gifts have become an increasingly important part of university fundraising efforts, development offices have “evolved into highly proactive, and highly customer-service oriented teams,” said Sarah Jackson, an independent major gift consultant based in Boston. Major gifts do not simply materialize out of thin air. They’re the product of years of donor cultivation, screening, and negotiations.

The first meeting between Salovey and the Chief of Staff of the SOHO Foundation was orchestrated through an intricate web of relationships in the form of the Yale Asia Development Council. Established in 2014, the Council consists of a group of sixty-four influential men and women, including Zhang and Pan, interested in strengthening strategic partnerships between Yale and Asia. According to a private document, the membership consists mostly of CEOs of investment banks, hedge funds, and private equity firms — from Bank of America to Morgan Stanley to the Lenovo Group — and founders of some of the largest start-up organizations in China, such as e-commerce giant Alibaba and internet provider Tencent. The council is a microcosm of the new economic elite of Asia: more than fifty of the sixty-four members work in the financial and real estate sectors, and fifty-seven come from Hong Kong or China, with the rest coming from India, Japan, and Korea. Most members are either alumni of Yale or have children currently attending the university.

“It’s more like the Yale Council of Potential Donors,” joked one council member who asked to remain anonymous. Currently, Lei serves as Chair of the Council, and former Secretary of State Henry Kissinger as its Honorary Chair. “Looking around the room, I found that I mostly recognized everyone — lawyers, bankers, successful entrepreneurs,” said the same council member, describing the inaugural meeting in March 2014, held in a gilded conference space at The Conrad, a luxury hotel in Hong Kong.

At that first meeting, Salovey and Lei, seated at the front of the room, introduced the council’s purpose: to “advance Yale’s involvement in Asia on a country-by-country basis” and “identify opportunities for new strategic and fundraising alliances.” Over lunch, each member received a blue binder with Yale’s new initiatives in Asia, and lunch was served.

“We all kind of knew that the main reason we were together was to encourage us to donate,” the anonymous council member claimed. “But there was never a point where they asked, ‘Please give to the school.’ There was never a solicitation of a donation. It was very subtly and tactfully done.” To follow up, James McDonald, the Senior Director of International Fundraising at Yale at the time, sent email updates and council meeting invitations. “This Jim McDonald guy has kept in touch with me for three years,” said the council member. “But there was never a suggestion that I should be giving, even though you know that his key job is to solicit money.”

The members of the council, like all potential donors, were carefully researched beforehand. The Yale Development Office has a team that researches all top-level donors, hires external consultants, brings in lawyers from the Yale general council office, and consults trusted friends in the Yale network, like Lei, to weigh in. In the case of the SOHO Scholarship donations, Zhang and Pan had Lei’s seal of approval.

In spite of the growing influx of donations from China, giving money to universities is still a uniquely American concept. Within the U.S., the job of soliciting donations is a “well-choreographed routine where everyone knows what to expect,” said Menard. The U.S. has a widespread culture of philanthropy. “Everyone donates,” explained Menard, “regardless if it’s a multi-million-dollar donation or five dollars to your local Audubon Society.” But, outside of the U.S., the concept of donating to an alma mater is novel. Menard remembers how an international alumnus at Boston University once compared donations to universities to buying a sweater at a store and then receiving a letter from the store five years later, saying, “‘Hey look, you bought a sweater from us once, and now we’re expanding the store, do you think you could give us hand?’ The guy thought, ‘I got a diploma at BU and I paid for it,’” recounted Menard. “‘So why are you asking me for money years later?’”

Conducting international fundraising from China is therefore not for the faint of heart or budget: travel is hard, outreach efforts are costly, and success is ultimately unpredictable. “In China,” Menard says, “all the things we know how to do go flying out of the window.”

After three years of emails from McDonald, the council member with whom I spoke never ended up donating to Yale. “I would guess that 90 percent of the people at the meeting do not give money,” he speculated. But when the other 10 percent, donors like Pan and Zhang, do decide to donate, they give ten million dollars.

“Who knows?” the council member asked. “If Jim keeps this up for ten years, maybe I’ll start to feel like I have an obligation to donate too.”

Solicitation is only the first part of the game. The second, harder part comes next: negotiation. Today, according to Terry Holcombe ’64, a development consultant who worked as the Vice President for Alumni Affairs and Development at Yale from 1981 to 1998, this process has grown more challenging. “When I began, gifts were simply given. Now they’re almost always negotiated,” Holcombe told the Yale Alumni Magazine in 2001. “Donors have become more inquisitive, more assertive, and more specific about what they give money for.”

“Gone are the days of unrestricted philanthropy in which donors give and explicitly trust the institution to use their funds widely,” echoed consultant Sarah Jackson. This paradigm shift has given rise to what development professionals have called “venture philanthropy” in American universities. An increasing number of donors see their gifts as a form of investment and expect to be involved in the way their money is used.

“Donors have become more inquisitive, more assertive, and more specific about what they give money for.”

In the case of the SOHO scholarships, Zhang and Pan had explicitly articulated intentions: to provide American education — what they perceived as a crucial path to greater social mobility — to young, low-income Chinese students. Zhang attributes her own transformation from a factory girl to a billionaire entrepreneur to the scholarships she received from Sussex University and Cambridge. Because she wants to replicate this opportunity for students like her, the SOHO donations come with clear stipulations. The scholarship guarantees that the income from the donations will always go to students from China that have need, regardless of any external economic changes. In the event of is an economic recession, such a stipulation would act as a kind of shield against market forces that could affect Yale’s endowment and its ability to support the education of low-income Chinese students. The Yale Development Office has also had to prove to SOHO that they would make a more targeted effort to recruit students from rural Chinese provinces, regions from which the university has not admitted many students in the past.

Given cultural differences between American and Chinese philanthropy, the process of negotiation is not always comfortable. An example of such a difference is the Chinese emphasis on efficiency. “Development officers from the U.S. are used to the long, drawn-out cultivation process,” said Menard. “I get to know you and you get to know me. You know I am a fundraiser, but it is a while before we actually start a serious conversation about the big gift.” In China, the process is accelerated. “China is a place where two strangers will meet over dinner and halfway through they will have told each other how much they earn,” explained Menard, who often dealt with Chinese donors in his work. “The Chinese are not squeamish about their money.”

Speed is not unique to China: it also characterizes the major gifts negotiations of many rapidly developing nations across the globe, such as the United Arab Emirates, Russia, and India. Boston University, where Menard used to work as a development officer, once sent out a questionnaire to alumni asking them to share their net worth. “Some rich guy in Dubai checked the highest category, of fifty million dollars plus,” said Menard. “Twenty-six months later, he signed the largest gift in the history of the university, having had zero contact before and having made zero previous gifts. This was incredible, but when we are talking about international gifts —from places like China — it is not that uncommon anymore.”

One point of contention, though, is that Chinese philanthropists may have an agenda that does not match the ethos of American universities. In China, “donors tend to be more transactional,” said Menard. “There is an expectation of quid pro quo.” Admissions is particularly sticky territory for international donors. “Throughout my years of doing this, I have certainly fielded calls from representatives of families that go along the lines of: this family has a son or daughter, the father would like to write a check, how big a check?”
Tom Tseng, Vice President of Development at the University of Hawaii, has had many similar experiences. “Some people might have gotten well-meaning but erroneous advice that if one gave a large sum of money, that one’s child or children would be guaranteed admissions to the desired institution,” he said.

Universities strive make clear at every step of the conversation that there is no quid pro quo, particularly with regards to the admission process. Admissions decisions by Yale in theory are always made before negotiations about donations begin.

Yale, however, is rich. Not all universities have the luxury and the financial means to adhere to such principles. Donations in exchange for admissions are not unheard of among less well-endowed universities. According to a Kaplan Test Prep survey, one hundred admissions officers from four hundred top colleges and universities said that they have “felt pressured to accept an applicant who didn’t meet the school’s admissions requirements because of who that applicant was connected to.”

Regardless of the messy motivations attached to these donations, major gifts from China will only continue to pour into American universities thanks to a combination of powerful, historical forces at work: a deep-rooted, century-long Confucian education tradition, the growing international appeal of the American model of the liberal arts college, and most crucially, China’s rapid economic growth.

The nation’s economic boom in the last three decades has resulted in an explosion of highly concentrated wealth holders (there are now 335 billionaires in China) similar to those in the United States in the late nineteenth century. “We once had our robber barons, Carnegies and Mellons. What did they do with all their new money? They built yachts, huge mansions and sent their kids to the finest schools,” explained Menard. “But at some point, after spending all this money, they had to sit back and think — what next? What do I do with all this great wealth? The next, natural step was philanthropy.”

Many young Chinese investors and entrepreneurs, having gone through a similar thought process, directed their philanthropic efforts to education. According to a study done by the China Philanthropy Project, a research effort established in 2015 at the Harvard Ash Center to identify trends in charitable giving among China’s wealthy, more than two-thirds of the hundred philanthropists surveyed cited education as one of the causes that they support. They are also increasingly choosing to direct their efforts abroad. “As their personal experience becomes more global, their children are educated abroad and they tend to acquire foreign property,” said Edward Cunningham, Director of the Ash Center China Programs, in an interview published on the Ash Center’s website. “The social network of these newly wealthy will tend to globalize.” In the last two years alone, Hong Kong investor Gerald Chan donated two hundred fifty million dollars to the Harvard School of Public Health, and Columbia University received five million dollars to establish the Tang Center for Early China. And those are just the big gifts.

“Word of mouth spreads fast. A Chinese parent will send a kid to Yale, become familiar with the American concept of donating, tell their friends, who’ll start to donate too,” explained Menard. “It’s a snowball that just keeps growing.”

As Chinese philanthropy matures and globalizes, fundraising teams across the United States are quick to adapt. “When I first started this profession in 1987, other development officers were always like, don’t waste your time outside of the United States, don’t bother with international donors,” said Menard. “A day in New York will beat a month anywhere else outside of this country.”

Twenty years later, as donations roll in from China, international fundraising can no longer be an afterthought. Go to a fundraising conference today, and it is hard to walk into any part of the room and not overhear a conversation in Chinese. “In the last ten years, I have seen a visible shift in not only front-line fundraisers who are either Chinese or Chinese-Americans [or] who are fluent in Mandarin, but also non-Asians who are proficient in Chinese,” said Tseng, the VP at the University of Hawaii. The Council for the Advancement and Support of Education, a nonprofit association of educational institutions headquartered in Washington, D.C., opened an Asia-Pacific branch in Singapore ten years ago and started to offer training conferences in Chinese in 2011. “To me, this shows a greater recognition that more cross-pollination, training, and better understanding between the East and the West has become imperative,” Tseng said.

This growing Chinese influence is not always welcomed with open arms. Under a 1992 revision to the Higher Education Act of 1965, colleges and universities must annually report foreign gifts and contracts of two hundred fifty thousand dollars or more to the U.S. Department of Education, a move intended to monitor influence from foreign donors. However, the type of influential Chinese donor that the United States once feared even a few years ago — one hoping to buy influence for personal gain — may look very different from a Chinese donor today. According to Tseng, Chinese donors have evolved from “mere givers to philanthropists,” he said. “Many are now partnering with institutions with specific goals for the betterment of the future as opposed to simply having a leverage.”

Tseng cited the one hundred fifteen million dollar gift made last year by Chinese businesspeople Tianqiao Chen and Chrissy Luo to the California Institute of Technology to establish a new institute funding interdisciplinary brain research. Chen and Luo founded Shanda Interactive, the largest Internet entertainment developer in China. “We believe that uncovering how the brain perceives, interprets, and interacts with the world can shape groundbreaking industries, play a critical role in addressing social issues such as aging and behavioral deficiencies,” said Chen in an interview conducted by Caltech. “And even help answer ultimate questions about life.”

Another example is Chen Yidan, founder of Chinese Internet giant Tencent, who is known in China as “the First Philanthropist in the Internet Industry.” Chen is attempting to import models of American education back home to China. One of his most significant undertakings has been to single-handedly establish and endow Wuhan College, the first private non-profit school in central China. “There are many things that Chinese universities can learn from their American counterparts,” said Chen, “from residential college structures, to fostering a culture of alumni giving, to developing a liberal arts curriculum that teaches the whole person and not just a particular skill.”

As donations roll in from China, international fundraising can no longer be an afterthought.

Shortly after his donation to the Yale China Law Center, Joe Tsai made another donation to support the construction and launch of the Tsai Center for Innovative Thinking at Yale (Tsai CITY). The Center will be located at the southern stretch of Prospect Street and Hillhouse Avenue, adjacent to the Center for Engineering Innovation and Design. “For me, it is especially vital that young people in the world today gain comfort with taking risks — with framing the problem, thinking in an interdisciplinary way, and trying ‘out-of-the-box’ approaches,” said Tsai, paying tribute to the role that innovative thinking has played on his own life and career trajectory as the co-founder of e-commerce giant Alibaba.

Like the American nouveau riche of the late nineteenth century, wealthy Chinese like Tsai are preoccupied with more than just questions of power, influence, and how to get their children into Ivy League universities. They are grappling with familiar questions that accompany economic excess: How should I give back to my community? How can I create meaningful change?

After her talk at Sterling Memorial Library last November, Zhang met with the fourteen SOHO scholars to discuss their experiences at Yale. When discussion veered into the still-fresh Trump victory, Zhang was struck by the thoughtfulness of the students’ comments. Most of the scholars had been in the U.S. for less than a year, yet they had become intensely invested in the nuances of American politics and the future of democracy. “I think that our conversation made her even more committed to donate to American universities,” said Barkley Dai ’20, one of the SOHO Scholars. “Trump campaigned on a platform of anti-globalization and Zhang sees the scholarship as a force to counteract that.”

Fundraising for universities is messy and complex. Any process that deals with hunting down and securing large, unpredictable quantities of money requires an intricate array of moving parts — committees and relationships and luncheons and negotiations and sweet-talking fundraising officers and whispers about tit for tat — that grease the wheels of the system. And there is still some element of self-interest in major gifts, albeit not the sort of sinister leverage feared in the past. Menard remembers a time at an education conference in Boston when somebody heard that he was an advancement officer and joked to the people nearby: “Stand back folks, and hold onto your wallets!”

“It was a joke, but words like that can be frustrating, because they do not seem to realize that people give when they want to,” said Menard. “At the end of the day, they give to feel good.”

But the projects undertaken and funded by major gifts from Chinese donors seem to show that there are goals bigger than personal interests that are driving this financial machinery. At stake is not just large sums of money, but educational goals and the future of U.S.-China relations. As the Yale Asia Development Council member put it, “It is like elephant hunting. You have to play the long game.”

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