CASE 4.1Sweet Briar College

Founded in 1901, Sweet Briar College, in Virginia, had provided higher education to generations of women by 2015. With a campus of 3,250 acres in the foothills of the Blue Ridge Mountains, complete with a stable, boathouse, and 18 miles of trails, the college long had enjoyed strong loyalty among its alumni (Stolberg, 2015).

Members of the Sweet Briar community were shocked when the Board of Trustees announced abruptly in March 2015 that the college would be closed at the end of the academic year. Although the college had an $84-million endowment, the board explained that it would not be sufficient to meet the institution's future financial needs (Anderson & Svrluga, 2015). Enrollment had declined to just 532 students on campus. Much of the endowment was restricted to specific purposes and could not be accessed to meet general operating expenses. The board said there was no other decision that could be reached (Stolberg, 2015).

Opposition to the board's decision came swiftly from students, faculty, and alumnae. A group of alumnae created a group called Saving Sweet Briar, demanding that the college remain open and that the board and president step down. Some challenged the integrity of the board's decision, noting that it had amended its bylaws just days before the closure vote to permit a smaller number of trustees to make decisions ("More Scrutiny of Decision to Close Sweet Briar," 2015). The attorney for the county in which the college was located asked the court to block the closure and appoint a special fiduciary to prevent the existing board and president from misusing the college's remaining assets (McCambridge, 2015a).

The college had been founded through the will of Indiana Fletcher Williams. Those opposing the closure argued that the board was violating its fiduciary responsibilities under the terms of his will. One court ruled against them on that point, saying that Sweet Briar was in fact a corporation, so the law governing trusts did not apply. That decision was quickly overturned by the Virginia Supreme Court, which ruled that trust law could indeed be applied and sent the case back down to the lower court to handle. However, the Supreme Court's decision did not resolve the underlying question of whether the board could close Sweet Briar. Meanwhile, what might have been the last commencement had taken place, it was the beginning of summer, and time was running out. Sweet Briar's faculty and current students did not know whether the college would reopen in the fall or not and no freshmen class had been enrolled for the new academic year (Svrluga, 2015).

The Attorney General of Virginia initiated an effort to negotiate a solution, which the court approved in late June 2015. Under the terms of the court order, all of the current board members resigned and were replaced. Phillip Stone, who had successfully led another college through financial difficulties, was selected to become the new president at Sweet Briar. The court permitted the new board to use $16 million of restricted endowment funds to meet operating costs for the next year (Stolberg, 2015). Alumni pledged $12 million in new resources and announced a campaign to raise an additional $120 million (Stolberg, 2015). Sweet Briar would live at least for one more year.

The college's advocates cheered the agreement and the court ruling. The hashtag #SaveSweetBriar was replaced with #WeSavedSweetBriar. But many of the 87 professors had accepted jobs elsewhere and many students also had transferred to other institutions. Some former board members remained convinced that they had made the right decision (Stolberg, 2015). The college's future remained perilous.

Only 240 students enrolled for the fall 2015 semester and the 2015-2016 academic year was one of budgetary constraint and rebuilding. The efforts to close had been costly, requiring the college to spend $30 million on severance payments to faculty and staff and to meet other obligations. Alumni gave over $10 million in unrestricted gifts, the largest amount in the college's history, helping to meet the additional costs and permitting the restricted endowment funds to remain untapped (Svrluga, 2016). But there were significant remaining challenges. The curriculum would need to be restructured, in order to better address student and donor interests. Increased fundraising would be essential. And the enrollment would need to grow substantially to make Sweet Briar financially viable over the long run (Locke, 2015). In 2016, one year after the college's near death, President Stone observed that some people called the saving of the college a "miracle." He credited the work of alumnae, but also noted that more hard choices would lie ahead (Stone, 2016). Meredith Woo was appointed as president of Sweet Briar in 2017, replacing Stone, and the college announced a significant restructuring of its curriculum and tuition pricing (Biemiller, 2017).

Reflecting on the near closing, lawyer Michael Peregrine notes that the Sweet Briar board was not found to have done anything illegal. Indeed, the court had praised the board's "principled determination" in reaching its decision to close the college (Peregrine, 2015). Nevertheless, despite the board's legal actions, "everything blew up" (Peregrine, 2015). What lessons can be learned from that experience by other nonprofit boards? Peregrine (2015) offers several. For one, due diligence matters. The board must be able to prove that it followed a well-structured process in reaching its decisions and it is important for the board to "document everything" (Peregrine, 2015). Boards need to be clear about the law that applies to them, a point illustrated by the confusion about whether trust or corporate law was relevant to the responsibilities of Sweet Briar's board. Perhaps most significantly, boards cannot expect that their deliberations and decisions will remain within the boardroom. If they make controversial decisions, they will "feel the heat" from stakeholders. Social media will amplify the criticism and quickly engage many more people. Public officials and the courts will not be reluctant to become involved. Given this new environment and the example of Sweet Briar, this likely will not be the last in which a board's decisions are challenged from outside (Peregrine, 2015).

Question: Although the Sweet Briar College board was not found to have acted illegally, which of the legal responsibilities of boards discussed in this chapter were most relevant to its actions in deciding to close the college?