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August 19, 2020

As we begin classes at three of our five schools this week, I would like to share in this memorandum some initial thoughts about my vision for this new academic year, which I will expand upon at our upcoming Founder's Day celebration on August 26. I will also provide below updates on (i) the status of government guidance affecting our campuses in Southern California due to the COVID-19 pandemic, and (ii) our decision regarding potential furloughs and layoffs to address our COVID-induced budget shortfalls.

Our Vision and Values

The first words on our website are our Mission Statement:

ÂÒÂ×ÊÓƵ is a Christian university committed to the highest standards of academic excellence and Christian values, where students are strengthened for lives of purpose, service, and leadership.

Few universities seek to live this mission, and fewer still can say that they embody academic excellence in an authentic Christian community that promotes and seeks to live by Christian values. ÂÒÂ×ÊÓƵ is quite distinctive in this respect and, as such, we have a rare opportunity to be a global leader and light to the world.

Likewise, Pepperdine's Affirmation Statement asserts that the student, as a person of infinite dignity, is the heart of the educational enterprise. Everything we do and every decision we make starts with the question, "What is in the best interest of our students?" This question is motivated by our deep love and respect for every student in our community and our desire that each one feels authentic belonging to this family.

Our primary objective as an institution is to build brilliant leaders of faith, character, courage, and creativity and to send them out fully equipped to bring hope and light to a world in need. This is a high and honorable calling, and I am grateful to work alongside each of you to fulfill it with excellence.

When we began this COVID journey together, I laid out five principles that would guide our decision-making during the pandemic.

1. Our faith informs our decisions. Our community can be confident in the fact that our University leadership is in constant prayer over every decision we make. We are seeking God's wisdom and discernment at all times, and we appreciate your prayers for our Steering Team.
2. Our people come first. Our students, faculty, and staff make us who we are. They make us distinctive from all other institutions of higher learning. Our intent is, to the greatest extent possible, to take care of the physical and economic health of our people first, especially those most vulnerable.
3. Our mission is our priority. As our resources become increasingly limited, it is critical that we focus those resources on the core elements of our mission. We must remain focused on providing a world-class academic education and a life-changing transformative experience for our students.
4. Our University must stand on solid financial ground. Our decisions must contribute to the continued, strategic long-term financial stability that is sustaining us through this unprecedented disruption. We also believe that thoughtful stewardship of the personnel and resources with which we have been entrusted should be a primary consideration.
5. Our communications are direct and transparent. At all times, and especially in times like these, our community must trust its leadership. We intend to earn and keep your trust by communicating decisions when they are made, with an explanation of why they are made, as well as the process of how they were made. Our goal is to always communicate in a direct and transparent manner. These five principles continue to guide our path as we begin a new academic year together as a community. Though we are physically apart, we remain united by our common faith, vision, and values.

A Community of Belonging and Action

As a Christian university, we are committed to building and sustaining a different kind of community. This commitment applies to our faculty, staff, and students alike. I dream for our community to be one of belonging where every person is welcomed and valued as a child of God, made in God's image.

As we listen and learn from one another, and as we identify areas where Pepperdine's culture is not fully aligned with our values, taking action together is critically important. We began this listening process when I started my presidency a year ago, beginning with the vision last fall to hire a chief diversity officer to lead our collective passion to build a diverse and inclusive community. Now, the search for our chief diversity officer is well underway as a key action step toward strengthening our entire community's sense belonging at Pepperdine.

Later in the fall and through the winter, we held several dinner conversations with student leaders from Seaver College to have open and honest conversations about our campus community. In my view, sitting down together over a meal is one of the first and best steps toward initiating meaningful and sustainable changes. As you know, earlier this summer I established a Presidential Action Advisory Team (PAAT) to solicit and review suggestions from our entire global community and make recommendations for improvements so that we can more fully embody the community we are called to be. I am pleased to report that the PAAT is working diligently to provide its first recommendations in the next few weeks. In response to those recommendations, I intend to announce specific action steps that we plan to implement.

This vision, this dream, requires everyone in our community (i) to buy in and commit to doing our part to make it happen, (ii) to interact differently with each other, (iii) to learn the art of civil discourse, (iv) not only to hold each other accountable, but also to forgive each other, (v) to seek to understand each other, (vi) to speak respectfully to one another and engage in benevolent assumptions about each other's motives and intent, (vii) to give each other the benefit of the doubt, rather than the other way around, (viii) to sacrifice cynicism and replace it with enduring hope, and (ix) to build each other up, not tear each other down. Because we are a Christian community, we listen, we seek to understand, and we act.

This is who we are at Pepperdine, and we must not settle for anything less. I trust that those who participated in Monday's President's Briefing saw these commitments reflected as I explained our decision-making process for possible furloughs and layoffs. These decisions are also outlined below, and as I have previously promised, I will always endeavor to be transparent with you so that you understand how and why we arrive at these decisions.

County Guidance Update

Following issuance of the state's guidance on August 7, Los Angeles County issued late last week protocols for institutes of higher education. These protocols prohibit colleges and universities from resuming in-person academic instruction at this time. While not indicating a specific threshold for when in-person instruction may resume, the county mentioned positivity rates and hospitalization rates are important factors in any potential reopening.

Of note, the county's protocols specify on-campus housing is only available for students with no alternative housing options, and housing assignments may be no more than one student per bedroom. At this time, absent an exception, students living off campus in the area are prohibited from coming to campus by the county. On-campus events also remain prohibited by the county, with a potential exception for worship services. As we receive further clarification in this area, the University will send out additional communications. As I previously announced, the West Coast Conference has suspended conference competitions for fall sports.

Faculty and staff should continue to work remotely to the greatest extent possible but may come to campus to facilitate distance learning or to maintain minimum basic University operations. Very few visitors are allowed on campus—only registered essential visitors. County regulations even prohibit volunteers from coming to our campuses. As always, we expect faculty, staff, and students to exercise good judgment and comply with state and local regulations.

Budget Decisions

As the school year starts, and as we are learning more about the enrollments at each of our five schools, the Steering Team has been addressing our projected COVID-induced deficit. Last week, I outlined for you a number of steps we have already implemented to backfill this deficit, and I am enormously grateful to our community for instituting the expense optimization measures we have developed. This University-wide effort has made a tremendous contribution to the FY20 budget cycle (which ended on July 31), as well as the FY21 budget.

In addition to the continuation of the general expense optimization measures, we announced last week several specific steps we have taken to help address our deficit. These included deferring certain strategic allocations made in the annual budgeting process, deferring certain capital maintenance and improvement projects, and realigning the telecom allowance. Also included was a one-year suspension of the University's retirement matching program for all employees. This decision, which was approved by the University Benefits Committee, leaves in place the four percent contribution the University makes to employee 403(b) retirement accounts, but suspends the University's match of up to an additional six percent of what employees contribute to their own retirement accounts.

Because this projected deficit is so significant, however, and because personnel costs make up more than 60 percent of our total annual budget, I informed the community at last week's President's Briefing that we would need to go through a due diligence exercise to determine whether furloughs and layoffs would be needed to fulfill our commitment to balance the University's budget.

Furloughs and Layoffs Decision

As Pepperdine's leadership deliberated on this decision, two of the values referenced above came into sharp focus for us, making this a very difficult decision. Those competing values are 1) taking care of our people, our greatest asset, and 2) being good stewards of the resources God has provided for us to fulfill our mission.

We are aware that some employees in our community are unable to perform their work remotely, in full or in part, through no fault of their own due to current COVID-induced restrictions. Shortly after we closed campus last spring, we made the commitment to our community, consistent with our principles above, that we would not furlough or lay off members of our workforce through July 31, 2020, because of these workload reductions.

After careful consideration, we have decided to extend this decision to not furlough or lay off members of our workforce due to COVID-related workload reductions through at least December 31, 2020. This decision applies to all domestic employees. With respect to our international program employees, we are working with the Office of International Programs to evaluate how the social services and labor laws in each country will allow us to provide similar protections. We will re-evaluate the status of the pandemic and our budget condition toward the end of the year to determine whether we need to change our approach in calendar year 2021. Our desire is to take care of our people. Sometimes that will be expressed through avoiding layoffs and furloughs. Other times we may be required to implement reductions in our workforce. If that day comes, our desire will be to do it in a way that takes care of our people.

Stewarding our Resources

Following our diligent review of University expenses, we discovered that if we had implemented a furlough or layoff of those who cannot, in part or in full, perform their work remotely, we would have realized some budgetary savings. In this case, however, rather than implementing the furlough, we instead decided to create those same savings through a reduction in executive compensation. This reduction is in addition to the salary freeze and the retirement matching suspension that the Steering Team also has experienced along with other Pepperdine employees. This decision allows us to fulfill our commitment to steward well the resources entrusted to us. As a result, we will not furlough through December 31, but we will still capture the savings that a furlough would have otherwise produced.

Strategic Redeployment

For employees who are unable to work remotely, in part or in full, we intend to first redeploy them within their department or school. If there are no compatible projects within their department or school, they will enter a pool of employees for placement around the University to assist with strategic projects that will advance Pepperdine during this challenging time. Human Resources will be communicating more details about the redeployment process in the coming days.

As you can see, the heart of ÂÒÂ×ÊÓƵ is to confront every challenge we face with a response that will make our community stronger and bring us together. That is my great hope for the academic year 2020-21.

May God bless the work of our hands and the passion in our hearts as we stand together to make Pepperdine shine.