Wednesday, October 31, 2007

Naming Rights at the UW Business School

Tony Palmeri is among the many in Wisconsin who have noted the arrangement to keep the state's public business school named after the Badger state. Most seem happy with the fact that no one individual was able to use the school to coddle an already over-sized ego, but there is a considerable financial advantage to not selling naming rights for the time being (recall that the gift only keeps the school unnamed for the next 20 years):

Why would a school want to keep open the opportunity to name itself? The answer seems to be that the price tags for naming business schools are going up faster than just about anything, including the returns to university-managed endowments. Perhaps this is because naming schools is the province of the ultra-rich, who get where they are because they can build wealth faster than conventionally managed funds. So if the school sells the name today and invests the money, it gives up the opportunity to sell the name for a higher current value later on. Wisconsin's solution is to rent the name for 20 years. It allows the school to use a large gift today, without foreclosing the possibility of a much larger naming gift in the future. To really determine how much value it adds, we would have to make assumptions about what the giving behavior of the members of the partnership would have been over that period in the absence of this gift (with or without a conventional naming gift).

No comments: