The University of Utah has just come up with a policy passed by both the faculty and the administration that prohibits its faculty from collecting royalties if they assign their own books to the classes they are teaching. This policy is supposed to help assure students that s professor has assigned a book because it is the best in the field or covers a topic in a particularly important way, rather than because the prof. can make money from it. Utah Policy Would Restrict Profs' Royalties From Books - The Paper Trail (usnews.com)
During all my time in graduate school, only one professor ever assigned his own books to the class. I never suspected he was doing it for the royalties, but at the same time I never thought the books were particularly ground-breaking. One of my other graduate school professors argued against profs assigning their own books stating that you should be getting the professor's view on subject of the book from lectures/discussion and reading the books written by that same instructor did not expose students enough to varying viewpoints of a topic.
I probably lean toward the profs shouldn't assign their own books camp, but I don't think it is that much of an issues. I do, however, believe that the University of Utah's policy overlooks the fact that profs can make $$ off of their classes without assigning their own books. I remember several years ago a publisher offered some history faculty members around $1500 if they would 'review' a textbook and assign it to their classes so they could get student input as well. So even though the Utah policy cuts down the ability of profs to earn a little more money, at the same time it leaves untouched an entirely different method for profs to each cash off the backs of their students.