Getting ‘Even’

When David G. Booth enrolled at the University of Chicago’s business school in 1969, he thought he would be leaving the institution with a Ph.D. and a job offer as a professor.

David G. and Suzanne Deal Booth (No. 6) Total committed in 2008: $300-million Recipient: University of Chicago Booth School of Business

Instead, he graduated with a master’s degree and the seeds of an idea for a company that made him so successful it has enabled him to become the school’s biggest donor.

A native of Lawrence, Kan., Mr. Booth took a class during his first semester at the business school in “efficient-market hypothesis,” a theory that says investors cannot consistently beat the market because there is no way for them to know more about a stock than what is already reflected in its price. In 1981, Mr. Booth and a former Chicago classmate started an investment firm based on that principle. The company, Dimensional Fund Advisors, based in Austin, Tex., now manages $110-billion in assets.

To show his appreciation, Mr. Booth and his wife, Suzanne Deal Booth, in November pledged $300-million to the business school, which was renamed the University of Chicago Booth School of Business.

The gift, which will be paid with a cash contribution as well as an ownership stake in and income from Mr. Booth’s company, places the couple in the sixth spot on The Chronicle‘s annual rankings of the 50 biggest donors. Because of the terms of the gift, it could end up being more or less than the amount pledged.

‘Lifelong Help’

Mr. Booth, 62, describes the donation as the school’s “return on investment,” or “partnership distribution.” Not only did the class he took that first semester with Eugene Fama, a finance professor, introduce Mr. Booth to the ideas on which his company is based, but Mr. Fama found his student his first job. Mr. Fama also advised Mr. Booth on the creation of his firm, and has served, along with seven other current and former Chicago business-school professors, on the company’s boards.

“The University of Chicago has been of lifelong help to me professionally, beginning when they offered me a very nice stipend to start the Ph.D. program at the business school, and it enabled me to get out of Kansas and put me on a different trajectory in the investment field,” says Mr. Booth. “I don’t know if anyone has benefited more from the business education than I have.”

Mr. Booth sees himself as part of a “diaspora” of believers in efficient-market hypothesis, a controversial idea in the world of finance. (Mr. Fama estimates that, even today, only about a fifth of investors manage their portfolios passively, rather than trying to pick individual stocks.)

Mr. Booth hopes the gift will help promote that idea, and also help validate the wisdom of the Chicago institution’s approach to business teaching. The school, unlike some other business programs, places a heavy emphasis on research.

“Since it was a different approach, it’s easy to say, ‘Oh, that’s just ivory tower, those are all just a bunch of geeks,’” he says. “So those of us who have achieved some success as a result of that education have to stand up.”

Optimistic Prospects

In addition to their support for the business school, Mr. and Ms. Booth, 54, who is trained as an arts conservator, give smaller amounts (which they declined to specify) to cultural organizations and other charities in Los Angeles and Austin, where they own homes, and worldwide. Together they created a charity in 1998 dedicated to saving endangered art and historic landmarks.

The couple says they plan to maintain, or even increase, their support for those charities, despite the recession. But they will be cautious, they add, about taking on any major new commitments because of the sheer scale of their pledge to the Chicago school.

While Mr. Booth declined to provide his net worth, he says he would not have been able to make the gift as an outright donation. And, while he says he is optimistic about the longer-term prospects for his firm, some of the funds he manages have dropped by 40 and 50 percent over the past year.

The Name Game

The donation to the University of Chicago was the culmination of six years of conversations between the Booths and business-school officials.

Mr. and Ms. Booth had given $10-million to the school in the late 1990s, at which time, Mr. Booth says, he joked with the school’s then-dean about whether he had fulfilled what he considered his obligation to the institution.

“I said, ‘Well, I owe you a lot. Will this make us even?’ And he said yes,” Mr. Booth recalls. But as his firm continued to be successful, he says, he began to contemplate a much larger donation.

Shortly after Edward Snyder, the school’s current dean, took over in 2001, he asked Mr. Booth to donate another $10-million to name a building on the Hyde Park campus.

Mr. Snyder says the two were waiting for a table at a Chicago restaurant when Mr. Booth politely turned him down. But the donor made a comment that stuck.

“He said someday I’d like to try to name the school, or something to that effect,” Mr. Snyder says.

Over the next few years, Mr. Booth, a business-school trustee, and Mr. Snyder saw each other twice a year for board meetings, and the dean and his wife made several visits to the Booths’ Los Angeles home. About 15 months ago, the conversation picked up.

Mr. Booth decided to make an outright cash gift (he declines to say how much) as well as a stake in his firm, and the school hired an outside evaluator to determine how to value the gift. Mr. Snyder says $300-million was a conservative estimate among several values placed on the gift, so he is not concerned, even in this economy, that the gift will not be paid in full. Neither the school nor the donors, meanwhile, would disclose the time in which the gift will be paid. The $300-million pledge is nearly three times as large as the next-biggest donation to a business school, a $105-million gift in 2006 from Philip H. Knight, the co-founder of Nike, to the Stanford Graduate School of Business.

Mr. Snyder says he recommended that the school be named after the couple because of the gift’s size, Mr. Booth’s solid reputation in the business world, and his unusually close relationships with so many people at the school. But Mr. Snyder says he did not make the decision lightly because, as one alumni put it to him, the business school’s name is its “ultimate exhaustible resource.”

Mr. Fama, the professor, says there had long been an informal guessing game among faculty members about how much money it might take to name the school. “We speculated that maybe it would take $100-million,” he says. “No one ever dreamed it would be this.”

No Limits

The Booths also pleased university officials by deciding against putting restrictions on the gift. When Mr. Snyder announced the pledge at an assembly held just two hours after the school’s trustees voted to rename the institution, he paraphrased lines from a Bob Dylan song: “They aren’t looking to dissect us or inspect us, they aren’t looking to confine us, define us, or design us. No, they offer nothing except hope for us.”

Mr. Booth says he doesn’t believe in placing stipulations on donations and that he does not envision playing too great a role in overseeing how the money is used.

“We wouldn’t have given the money to the place if we were worried about their ability to make decisions,” he says. “They’ll never do it exactly the way I would do it, but that’s kind of beside the point.”

Mr. Snyder and the school’s trustees have determined that they will use some of the money to recruit new faculty members, a boon in an environment in which many institutions have frozen hiring. They might also expand the school’s international programs, and create a magazine or other publication along the lines of the Harvard Business Review.

Tough Sell

The announcement of the gift in November, one of the most volatile months in stock-market history, “just made it more dramatic,” says Mr. Snyder. It comes as the Chicago institution, like nearly every other nonprofit organization, is having a difficult time raising money.

The school’s annual fund is down by 30 percent compared with the same period in 2007.

John J. Fernandes, president of AACSB International, the Association to Advance Collegiate Schools of Business, in Tampa, Fla., says that business schools will be a particularly tough sell to donors during the recession because their needs do not seem as pressing, perhaps, as those of social-service organizations that are helping to feed people.

“You’re going to see an emerging era of caring for one’s community, and donations are more likely to be higher to organizations that provide those services than for those that are simply trying to improve their performance. And that’s going to make it harder for business schools to raise money,” Mr. Fernandes says.

At least one undergraduate student, meanwhile, raised similar concerns in a letter in The Chicago Maroon, the university’s student newspaper. “The idea of going to school to learn best how to squeeze money out of other people offends me to begin with, but to amass millions of dollars and put it back into that cause is closed-minded, ignorant, and inhumane,” wrote Eliza Behlen, Class of 2011.

Mr. Snyder says among his biggest fund-raising challenges will be to remind donors that the Booth gift did not take care of all the school’s needs. To that end, he announced a $100-million matching-gift program, unrelated to the Booth donation, at the November assembly, to help raise money from other donors.

Says Mr. Snyder: “We’re trying to signal that there are plenty of other things that we need, to help donors help us.”

Support for Culture

The Booths’ support for higher education — including Mr. Booth’s alma maters, the Universities of Kansas and Chicago, as well as Ms. Booth’s, Rice and New York Universities — far eclipses their giving to other causes in financial terms. But they speak as passionately about the many cultural organizations they support. In the living room of their Los Angeles home, where they lived full time until recently, Ms. Booth tells how she became interested in creating her own nonprofit arts organization.

After working for years in arts education at the J. Paul Getty Trust, in Los Angeles, she grew frustrated at how much money was spent lobbying Congress compared with how little went to museums.

“There was a dribble-down effect of what would eventually go to museums,” she says. “David, he’s a big-idea kind of guy, and so we had a conversation in which we said what would really make a difference is to start something ourselves.”

Friends of Heritage Preservation, which they created in 1998, has worked on dozens o projects around the globe. Most recently the group, which raised about $250,000 last year from the Booths and about a dozen of their friends, has repaired a Buddhist monastery in India, sculptures by the contemporary artist Donald Judd, and Jewish marriage contracts dating from the 17th century.

Ms. Booth says she is worried about the fate of cultural institutions during the recession, especially those without white knights such as Eli Broad, the real-estate mogul tied for No. 17 on The Chronicle’s list of top donors, whose foundation just promised $30-million to help rescue the beleaguered Museum of Contemporary Art, in Los Angeles. “MOCA is big enough so people are talking about it, but some of these smaller arts groups could fold overnight and no one would know,” she says.

In addition to their own group, the Booths support the Los Angeles County Museum of Art; the Geffen Broad Stage in Los Angeles; the Broad Stage, in Santa Monica; the World Monuments Fund; Children’s Hospital Los Angeles; and other organizations.

Modest Upbringing

As a supporter of the arts and higher education, Mr. Booth balks at suggestions by Congress that too much philanthropy is going to those causes in comparison with others, or that legislators should play a greater role in encouraging donors on the direction of their gifts.

“Charitable giving in the U.S. swamps any other country in the world, and to stand up and say, ‘I don’t like the way you give it away,’ is somewhere between disingenuous and offensive,” he says.

He says that education, meanwhile, is as compelling a solution to poverty and society’s other big problems as any cause.

Next to the University of Chicago, Mr. Booth’s undergraduate institution, University of Kansas, has received the family’s biggest donations. Mr. Booth had planned to return to the university as a business professor before deciding against that path while at Chicago.

In 2004, Mr. Booth and his family, along with his two siblings and their families, gave $4-million to the University of Kansas for an addition to the athletic field house. The gift is in honor of their late parents.

Mr. Booth says his parents lived a middle-class life in a modest house a few blocks from the field house. His father worked in circulation for The Kansas City Star, and his mother was a sixth-grade teacher. While neither attended the university, they enjoyed going to sports events and were proud parents of three alumni.

Mr. Booth says he hopes that his own children, a fifth-grader and a college freshman who is studying art history at Georgetown University, will themselves get involved in philanthropy at some point. He offers a simple plan to ensure they do so.

“The first thing you want to make sure is that you’re a top-notch person,” he says, “And giving back to charities will follow that.”