By Patricia Sellers
March 25, 2015

When Rolling stone published a 9,000-word article last fall about an alleged gang rape at a University of Virginia fraternity, it plunged the campus into turmoil. The story presented a frightening portrait of a school where sexual assaults were common. It pointed to disturbing deficiencies—going all the way to the top—in the school’s handling of the incident.

How did UVA’s president, Teresa “Terry” Sullivan, respond to the brewing crisis? She left town. Just hours after the story broke and lit up the Internet, she boarded a plane to Amsterdam to attend an education conference. Three days later she suspended social activities at all UVA fraternities and sororities, a move that exposed her to new criticism: that she had swung from underreacting to overreacting. Before a consensus could be reached on her approach in the weeks that followed, she caught a break: Rolling Stone acknowledged that its article was full of holes. Now, a few months later, as Sullivan has taken long-term steps to prevent sexual violence at the school, she is starting to draw praise.

Welcome to managing in the maelstrom.

“We don’t get to choose our adversity,” says Sullivan, who has certainly faced plenty of it. In the five years since she arrived in Charlottesville as the first woman to lead the school founded by Thomas Jefferson, she has grappled with the effects of the Rolling Stone article, two high-profile murders of students, and most recently, demonstrations over the bloody arrest of a 20-year-old black student by white officers outside a local pub.

That’s not even counting the most direct challenge she has faced. In 2012, UVA’s board of visitors ejected her, leaving her out of a job for 18 days until a grassroots rebellion returned her to the presidency. That she is still standing is extraordinary.

Sullivan’s experience is proof that you can’t judge leadership without considering context. No leader aspires to tread water, but if you’re tossed into the Pacific when a tsunami strikes, merely surviving is an achievement. That’s the paradox of Sullivan: Critics, including board members, find her plodding and bureaucratic; even supporters would give her just a “B.” Still, she’d get an “A” if the subject were rebounding from disaster.

There were many skeptics in 2010 when UVA recruited Teresa Sullivan to replace John Casteen, a charismatic fundraising powerhouse with a 20-year tenure. Sullivan, then provost of the University of Michigan, had never run an institution or raised money or reported to a board. She had been an eminent sociologist specializing in labor force demography. (Sullivan has written six books, including two on middle-class debt with Elizabeth Warren, the Harvard professor turned senator.) Today Sullivan is in charge of a $2.8 billion budget, 17,000 employees, and some 21,000 students at 11 schools and a medical center. (I graduated from UVA in 1982.)

At 65, Sullivan comes across more like a grandmother than a chief executive. Welcoming me into her office, she explains that Casteen kept his desk near the door; she put hers in the back corner. “Behind the jungle,” she tells me, pointing to a couple of big, leafy potted plants.

Pleasant and plainspoken, Sullivan acknowledges that she prefers her privacy (though she makes a point of being omnipresent at campus events.) She also discounts the importance of leaders, herself included. “Sociologists are very suspicious of biographical explanations of leadership,” she says. “It’s a mistake to see leadership as a function of the individual.” Americans tend to have a destructive overemphasis on the individuals in charge, she says: “We do too much naming, blaming, and changing.” By contrast, Sullivan aspires to be what she calls “a sustainable leader who builds a team and leads collaboratively.”

Teresa Sullivan, President of the University of Virginia
Photograph by Patrick James Miller for Fortune

Her view has been shaped not only by her time at UVA, but also by her childhood. Sullivan grew up an only child in segregated Little Rock. Her father was a criminal lawyer with many black clients. On weekends he would take her along as he called on clients in rural Pulaski County. “He usually left me with Pop Lloyd, who had been convicted of manslaughter for killing his wife,” Sullivan recalls. Her father led by example, showing her that empathy and trust can unite diverse groups. “Sometimes we’d have Sunday dinner with the Pulaski County jailer. He would let me in the cell with the female prisoners, and they’d braid my hair,” Sullivan says. “Today this would break a million laws.”

Her dad died from a heart attack when Sullivan was 11. She and her mother, a VA hospital nurse, moved to Jackson, Miss.—on the day in 1963 when a white supremacist killed civil rights leader Medgar Evers there. Sullivan went to school a few blocks from the state capitol, where she saw crowds demonstrate for and against integration.

Sullivan graduated first in her high school class, then went to Michigan State, where she fell in love with her future husband, Doug Laycock, and a field of study. Sullivan got a Ph.D. in sociology at the University of Chicago and then a job teaching at the University of Texas, where she later moved into management. “I didn’t have a burning desire to be an administrator,” she says, “but I did have a burning desire to solve problems.”

Analytical and adept at working the system, she quietly pushed for changes, including the creation of a maternity policy when she was pregnant with her second child. At the University of Michigan, where Sullivan moved in 2006, she was provost under then-president Mary Sue Coleman. “Terry is an enormously complex individual and very, very smart,” says Coleman, explaining that she provided a steady hand in helping the school navigate the financial crisis.

Sullivan arrived at UVA three months after 22-year-old student athlete Yeardley Love was killed by George Huguely, her ex-boyfriend and a star on the UVA lacrosse team. So from day one, Sullivan was forced to react to events. She staged a “day of dialogue” that brought more than 1,500 students together to discuss how to prevent violence. She also implemented voluntary sessions on “bystander intervention training.”

But Sullivan was thoroughly unprepared for a different kind of challenge: the hard-driving business types on UVA’s board of visitors. It’s like a company board, except that the members are appointed by Virginia’s governor, typically as a reward for campaign contributions. The members choose the rector, who is equivalent to a board chair. The incoming rector when Sullivan arrived was Helen Dragas, who has a BA and an MBA from the university. Dragas, 53, heads a real estate development company that her father founded. She is, by all accounts, impatient, iron-willed, and used to running her own show.

Sullivan and Dragas are the first women to hold their posts at UVA—which didn’t graduate its first class of female students until 1974. That’s about all they have in common. Opposites in personality, they’ve never found a way to get along. As Dragas fretted that rivals were leaving UVA in the dust in online education and other new potential sources of revenue, she pushed Sullivan to come up with a fresh strategy. Sullivan resisted, failing to deliver anything detailed enough for Dragas and the board. They viewed Sullivan as an able administrator, but worried that she had an awkward public presence and lacked the social finesse critical to courting wealthy donors.

Sullivan sensed the tension, but she had no clue what was coming when Dragas asked for a meeting with her and vice rector Mark Kington on a Friday in June 2012. “They handed me a letter of resignation,” Sullivan recalls. “They said I had lost the confidence of the board. The faculty didn’t like me. The students didn’t think much of me. And I had not developed connections with alumni.” Sullivan disagreed, but she didn’t resist. “They had their minds made up,” she says. “It was not a negotiation.”

In 2012, Helen Dragas and Paul Tudor Jones viewed Sullivan as too passive and not a visionary. They wanted a different president.
Photographs by Mark Gormus — Rrichmond Times-Dispatch/AP; Eduardo Munoz — Reuters

Critics piled on. Hedge fund titan Paul Tudor Jones, an alum and UVA’s biggest living donor, published an op-ed in the Charlottesville Daily Progress, citing a “few alarming facts” including that the university’s rank in U.S. News & World Report had fallen to No. 25 from No. 15 in 1988. “UVA needs proactive leadership to match the pace of change,” Jones wrote.

But the story quickly turned. Dragas had worked behind the scenes to persuade board members to agree to push Sullivan out. The board’s bylaws did not require a formal vote or public disclosure. The sense of secret maneuvering infuriated faculty and other supporters. Ten days after her ouster, as Sullivan went to deliver a farewell address to the board, thousands of people—faculty, parents, alums, townies, students attending summer classes—converged on UVA’s Lawn. As Sullivan walked up the steps of the Rotunda, a woman behind her held a purple umbrella as a signal to clear the way. “The crowd parted like the Red Sea,” recalls Sullivan. She calls the entire experience “weird.”

Sullivan insists she had no desire to ask for her job back. She just wanted to defend her record. “Corporate-style top-down leadership doesn’t work in a great university,” she told the board that day. “Being an incrementalist does not mean I lack vision.” Eight days later, after Virginia’s governor said he’d ask the board members to resign if they didn’t unite on a plan for UVA’s leadership, they unanimously reinstated her. (Dragas says the board wanted “a concrete strategic and financial plan. Had we received even a reasonable approximation of that, the drama of 2012 would never have unfolded.”)

Some people were amazed Sullivan would return after the upheaval. “A lot of people put their jobs on the line for me,” she says, “and I couldn’t turn my back on them.” (There’s also the job’s pay, $675,000, and its prestige.) She showed no hint of public anger. “The most important thing was how I behaved,”
Sullivan says, “not how I felt.”

Her dispassion doesn’t always play well in a social media era when bad news moves around the world instantaneously, and crisis managers are expected to be nimble, bold, and empathetic. “My natural tendency is to shut down,” Sullivan admits. She’s self-conscious about being a woman in charge: “There’s a negative stereotype of women being overemotional and thus not able to lead.” On a deeper level, she says, “I’m inclined toward introspection and not letting the emotion overtake that.”

Her leadership philosophy: “Don’t overreact. Reason my way to a solution. And keep the good of the school in front of me.” Those were her guidelines last November when she read the Rolling Stone article about the alleged gang rape of a student at UVA’s Phi Kappa Psi house. Her initial response, she says, was “numbness.” She acknowledges that leaving the country as the story exploded was “a mistake.”

She does not, however, regret her decision to suspend social activities in the Greek system. After Phi Kappa Psi was vandalized and threats surfaced, she says, “I was attempting to calm things down.” Discrepancies emerged in the article, and, in late March, the Charlottesville police department announced that it had found no evidence that a gang rape had occurred.

Sullivan hopes to turn the mess to the school’s advantage: “I want the University of Virginia to play a major role on the issue of sexual assault,” she says. Sullivan worked with student leaders on new rules to crack down on binge drinking and frat party excesses. Now at least three fraternity brothers must be “sober and lucid” at all fraternity events, and at least one must be on duty at each point of alcohol distribution and another at the stairs leading to residential rooms. “If I had come up with the rules, everyone would be gaming the system,” Sullivan says. Collaboration “is more successful than Mama Terry calling the shots.” The New York Times praised the code of conduct as “worthy of being used elsewhere.”

Sullivan has made strides on other fronts. She has increased faculty pay and research spending. She’s working to create institutes for professors from across the university to collaborate and teach. The first, an institute for students interested in data analytics and security, opened last fall.

Sullivan has been unspectacular when it comes to fundraising, which is particularly crucial at a time of diminishing state funding. UVA reported $224 million in cash flow (actual money coming in) last fiscal year, which pales next to the $302 million her predecessor delivered in his peak year, 2007. But this year’s cash flow is up 29%, and Sullivan has managed to reel in some big donors. She has even been collaborating with Paul Tudor Jones on his passion project: a new $15 million Contemplative Sciences Center he is funding.

UVA’s board of visitors is now discussing whether to renew Sullivan’s contract, which runs out in July 2016. She would like to stay, but it says something about her that she doesn’t know if she has cemented enough board support to win a new contract.

Meanwhile, Sullivan is managing one more crisis, this one centered on race. In March, Martese Johnson, an African American student and a vice chair of the student-run honor committee, sustained head injuries when white Alcoholic Beverage Control officers tangled with him outside a bar. A cellphone camera caught him struggling and bloodied, yelling, “I go to UVA, you fuckin’ racists. What the fuck? How does this happen?” Johnson has pleaded not guilty to public intoxication and obstruction of justice without force.

Within 24 hours, students began protesting. Frustrations had been rising in the wake of the deaths of black men at the hands of police in Ferguson, Mo., and New York City—just as Sullivan was struggling to deal with student drinking and sexual assault. Today many at UVA see her reaction to the Johnson incident—she called the governor, requested an investigation, and released a bland statement about “seeking the truth”—as inadequate. Incoming student council president Abraham Axler says Sullivan has been a “friend to the student council and accessible” but has “struggled to provide the emotional leadership that the community needs.”

Says Sullivan of the latest episode, “I did my best to get in front of it immediately.” She adds, “If I were highly emotional, I would be criticized for that.” Treading water all the way, Terry Sullivan has created a legacy. And that legacy is now her problem.

Five Years of Crisis

Teresa Sullivan has faced a stream of violence and calamities as President of UVA.

2010: An undergraduate murders a fellow student

In May, only months after Sullivan was named UVA’s president—but three months before she took office—student lacrosse player Yeardley Love was killed by George Huguely V, her former boyfriend and a star on the men’s lacrosse team. Huguely was convicted of murder and is serving a 23-year sentence. Sullivan oversaw new student education on domestic violence and “bystander intervention training.”

2012: A presidential coup is undone after a big protest

On June 8, less than two years into her term, Sullivan was confronted by board rector Helen Dragas and vice rector Mark Kington, who asked for her resignation. By June 18, when Sullivan appeared before the board for a farewell speech, there had been a populist uprising at the university. On June 26 the board, facing a torrent of criticism, voted unanimously to reinstate Sullivan as president.

2014: Another death — plus UVA is scrutinized for sexual assault

In September, sophomore Hannah Graham went missing. After six weeks her remains were found; a 33-year-old local man was later charged with her murder. A media firestorm erupted on Nov. 19, when Rolling Stone published a story about an alleged gang rape at a UVA fraternity. Sullivan left town, then, on Nov. 22, suspended social activities at all UVA fraternities and sororities. On Dec. 5, Rolling Stone apologized for its article.

2015: This time it’s about race: UVA makes headlines again

Sullivan began the year still addressing ways to prevent sexual assault. In January she lifted the suspension on social activities and announced new safety rules. On March 18, 20-year-old black student Martese Johnson was bloodied by white officers during an arrest after Johnson was denied entry to a bar. Student protests erupted within 24 hours of the incident.

This story has been corrected. The original version referred to Hannah Graham, the UVA student who was murdered last year, as a freshman. She was a sophomore.

This story from the April 1, 2015 issue of Fortune.

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