State Sen. Aisha Wahab, D-Hayward, right, stands with Gov. Gavin Newsom and, from left, Assemblymember Mia Bonta, D-Alameda, and Assemblymember Liz Ortega, D-San Leandro, in March. Wahab is asking lawmakers to approve SB1141, which would to stop companies from doing business with the University of California if UC executives are also on the company’s payroll.
Jessica Christian/S.F. Chronicle
Suresh Gunasekaran earns more than $2 million a year as chief executive of UCSF Health. He also sits on the board of a company that sells software to five UC hospitals and pays him hundreds of thousands of dollars a year in stock and retainers. A Bay Area senator wants to stop companies from contracting with the public university if they have UC executives on their payroll.
Colin Peck/Special to the Chronicle
Johnese Spisso, who earns more than $2 million a year as chief executive of the UCLA Hospital System, also sits on two boards that do business with UC and pay her hundreds of thousands of dollars a year in retainers and stock, or in substantial university donations. A Bay Area senator wants to stop companies from contracting with the public university if UC executives are on their payroll.
Provided by UCLA Health
Kathryn Lybarger is executive vice president of AFSCME 3299, UC’s largest union, which is sponsoring a bill to stop companies from doing business with the University of California if UC executives are also on the company’s payroll.
Provided by AFSCME Local 3299A proposed state bill would bar companies from contracting with the University of California if any executive or their family is paid by the business, including through board service, with violations triggering a 10-year ban.University of California executives have received lucrative compensation for board roles with companies that do business with the system, with some earning hundreds of thousands of dollars a year in stock and retainers.The bill passed its first committee vote and, if enacted, would make California the first state to impose such a restriction on university-industry board relationships.
University of California executives routinely sit on the boards of companies that do business with the system — a common arrangement around the country that helps connect schools with industry.
But they are also lucrative moonlighting deals that raise questions about influence and access, and a Bay Area state senator wants those relationships to end at UC.
Article continues below this ad
Sen. Aisha Wahab, D-Hayward, is asking fellow lawmakers to prohibit companies from contracting with UC if any university executive or family member is paid by the business — including sitting on their board of directors — and to extend the ban for at least one year after payment ends.
Violations would trigger a 10-year ban on business ties between that company and UC.
If Senate Bill 1141 becomes law, California would be the first state to prevent companies from engaging in such alliances.
San Francisco Chronicle Logo
Make us a Preferred Source to get more of our news when you search.
Add Preferred Source
“This is a simple bill that literally prevents corruption,” Wahab told the Senate Education Committee last week at a hearing on the legislation. “As a publicly funded institution, UC has a legal obligation to ensure that contracting decisions are made solely in the best interests of the university and the public it serves.”
Article continues below this ad
UC’s lobbyist argued at the hearing that such a law would trigger an “immediate operational and instructional crisis” across the university, and that no conflicts of interest occur because rules require executives to recuse themselves when faced with decisions that would personally benefit them.
The committee approved the bill by a vote of 4-2 and sent it to the Senate Judiciary Committee.
Neither Wahab nor the bill’s sponsor, UC’s largest employee union, Local 3299 of the American Federation of State, County and Municipal Employees, flagged any actual conflicts of interest resulting from the executives’ secondary jobs. They said it was impossible to know if such conflicts exist.
But even the appearance of a conflict of interest is a problem, they said, adding that executives working for vendors also raises questions about whether other companies that don’t have university leaders on their boards can get a fair shot at working with UC.
Also tainting the arrangement is that so much money changes hands, they said.
Article continues below this ad
Lucrative board roles draw scrutiny
UCSF Health’s chief executive, Suresh Gunasekaran, for example, sits on the board of CareDX, a Bay Area company that sells software to five UC hospitals. The company gave Gunasekaran $400,000 in company stock, and each year pays him additional stock worth $225,000 and a $50,000 retainer.
Johnese Spisso, chief executive of the UCLA Hospital System, sits on two boards that do business with UCLA Health: Welltower, which leases space to UC, and Vizient, which sources supplies. In return for Spisso’s service, Vizient has donated to the UCLA Foundation, including $240,000 in 2022, records for that year show. Welltower pays its non-employee board members an annual retainer of $110,000 and $200,000 a year in deferred stock.
From 2019 to 2021, Spisso also sat on the board of Douglas Emmett, a commercial real estate company that leases buildings to UCLA and whose chairman is a large donor to UCLA Law. That company pays non-employee board member directors $220,000 in equity each year. Dorene Dominguez, appointed to the UC Regents last month, serves on that board. But as a regent, rather than an employee, her service would not trigger a prohibition under the bill.
Board service is often lucrative for university executives, who are typically well paid already. As of 2024, UC was compensating Gunasekaran and Spisso each about $2.4 million a year, records show.
Article continues below this ad
Another advantage to being on a company board is that university leaders can connect with industry trends and “innovation pipelines,” said Lynn Pasquerella, president of the Association of American Colleges and Universities.
Such relationships are seen as mutually beneficial, with companies gaining expertise from university leaders, “especially in areas like healthcare, artificial intelligence, and life sciences,” she said.
No companies showed up in Sacramento on March 25 to oppose SB1141. But UC did.
UC warns of operational fallout
If the bill becomes law, it “would trigger an immediate operational and instructional crisis across the UC’s 10 campuses and five medical centers,” Tyler Aguilar, a UC lobbyist, told the education committee.
Article continues below this ad
The bill defines compensation as anything worth $500 or more. So if a UC executive earned even a $500 dividend from a company doing business with UC, the violation would mean that company could not contract with UC for 10 years, he said.
“If we can’t renew our contract with Microsoft, our students and faculty can’t do their work,” he said, offering that vendor as an example. He said board service also helps ensure that products are consistent with UC’s needs.
Aguilar said UC is already governed by a “robust suite” of conflict-of-interest protections. These include state laws that bar employees from having a financial interest in certain activities; UC’s Conflict of Interest Code,which requires officials to disclose private economic interests and recuse themselves from making decisions in which they have a stake; and other UC policies aimed at reining in conflicts.
UC also has a specific policy covering executives’ “outside professional activities,” like board service. If the executive receives at least $2,500 for the work, Policy 7707 requires yearly approval from the executive’s manager. Serving on more than one board requires approval from the regents.
UC told the Chronicle it could not say whether an executive’s request to serve on a board had ever been denied.
Protecting against conflicts boils down to “recusal,” Aguilar told the Senate committee. If executives have a conflict, they can’t participate in the decision.
But Kathryn Lybarger, executive vice president of the union sponsoring the bill, said relying on executives to recuse themselves is no real protection.
“Decisions are made behind closed doors. There aren’t public votes,” she told the committee. SB1141 “fills a gap in existing law” by preventing the need for the executives to recuse themselves in the first place, she said.
Wahab, the bill’s author, said UC has never disclosed how many executives have recused themselves from decisions where they had a conflict. (UC told the Chronicle the university does not collect that information.)
UC’s policy on board service mentions “actual or perceived” conflict six times, and says the executives decide for themselves if such a perception exists.
That’s a problem, said Ann Skeet, senior director of leadership ethics at Santa Clara University’s Markkula Center for Applied Ethics.
“Even the appearance of a conflict of interest undermines the public trust,” Skeet said. “The UC system is a public organization, and people need to have confidence that it is serving the interests of the people and the students who go there.”
The mutual relationships also raise questions about whether other companies have a fair shot at doing business with UC, she added.
“Maybe there hasn’t been a competitive process awarding the contract. Or maybe choices have been made with vendors because of relationships,” Skeet said.
Critics of the system say SB1141 would eliminate those concerns.
Debate over conflicts and consequences
The issue is not unique to UC, said Pasquerella of the American Association of Colleges and Universities.
“Universities today operate within a complex ecosystem that increasingly overlaps with industry, health care systems and private-sector partners,” she said.
“The concerns that motivate SB 1141 are legitimate,” Pasquerella said. “Closed-door board meetings can heighten the appearance of a conflict of interest even when officials are technically complying with disclosure and recusal rules.”
But she warned that excluding UC leaders altogether from corporate boards doing business with the university risks “overcorrecting” the problem.
A ban could reduce the “flow of knowledge between industry and academia in fast-moving sectors like AI, biotech and digital health,” she said, and could limit UC’s ability to “shape industry standards and practices.” Ultimately, a ban could put UC at a “competitive disadvantage with institutions operating under less restrictive rules.”
Wahab said she is willing to work with UC on modifying the bill. But she said the risks of continuing to let UC executives gain financially from companies doing business with the university outweigh any potential loss.
The practice “has created opportunities for conflicts of interest, self-dealing and steering contracts to companies that compensate officials directly or indirectly,” she told the committee.
Sen. Lena Gonzalez, D-Long Beach, agreed.
“Serving on the board, how is that not viewed as a conflict?” she said.
Sen. Christopher Cabaldon, D-West Sacramento, spoke against the bill.
“I don’t want a chilling environment where it’s just too much trouble to contract with UC,” said Cabaldon, the only committee member who did not cast a vote.
The Senate Judiciary Committee has not yet scheduled a hearing.