The director of the London School of Economics (LSE) has resigned over the university’s links to the family of Libyan dictator Colonel Muammar Gaddafi.
Sir Howard Davies said in a statement that he recognised that LSE’s reputation had “suffered”, meaning he must step down.
He has described how the decision to accept £300,000 research funding from a foundation controlled by Gaddafi’s son Saif “backfired” and expressed regret that he had visited Libya to advise the regime about how it could modernise its financial institutions.
The LSE council has commissioned an independent inquiry into the university’s relationship with Libya and Saif Gaddafi.
Sir Howard admitted making a “personal error of judgment” in travelling to Libya himself.
He said: “I have concluded that it would be right for me to step down even though I know that this will cause difficulty for the institution I have come to love. The short point is that I am responsible for the school’s reputation, and that has suffered.
“I advised the council that it was reasonable to accept the money and that has turned out to be a mistake. There were risks involved in taking funding from sources associated with Libya and they should have been weighed more heavily in the balance.
“Also, I made a personal error of judgment in accepting the British Government’s invitation to be an economic envoy and the consequent Libyan invitation to advise their sovereign wealth fund. There was nothing substantive to be ashamed of in that work and I disclosed it fully, but the consequence has been to make it more difficult for me to defend the institution.”
Sir Howard, a former head of the Financial Services Authority and deputy governor of the Bank of England, will remain as the head of LSE until a successor has been found.
Peter Sutherland, chairman of the court of governors at LSE, said: “Howard has been an outstanding director of the LSE these past eight years and his achievements here will endure long after the current controversy has died away. We accept his resignation with great regret and reluctance but understand that he has taken an honourable course in the best interests of the school.”