Universities are in many ways the worst run institutions in our society, with basically lousy governance.We see this in the way administrative bloat drives university tuition increases at well above inflation rates. We see it in the way the inmates are all too often allowed to run the asylum. We see it in how hiring emphasizes every kind of diversity except for ideological and intellectual diversity.
Maybe the answer has been staring us in the face; namely, bringing corporate governance reform to the university.
In today's Wall Street Journal, Paul S. Ivey explains that he resigned from the University of Pennsylvania's board of trustees mainly because it turned out that the board was a powerless, toothless watchdog. It sounds like administrators treated Penn's board the way farmers treat mushrooms (keep them in the dark and covered with manure).
Trustees and donors candidly admit in private that they do not want to jeopardize their children’s chances for admission. Many serve out of genuine interest and affection for their alma mater, although they also enjoy the prestige, influence and perks, like access to the university’s medical system, that go with the positions. There’s no incentive to rock the boat, and universities make sure they don’t get much opportunity. At the trustee level, the board is large and its formal meetings are entirely show and tell, with discussion severely limited and vote outcomes never in doubt. Penn Law overseers do not vote on anything. One Penn medical school board member told me he was dropped because he had asked too many questions.
The corporate world offers a parallel to trustees’ abdication of their fiduciary duties. Reformers of the 1980s argued correctly that the interests of shareholders were too often subjugated to personal interest and small-group social dynamics on boards that compel unanimity. Just as the resulting realignment of interests between corporate boards and shareholders unleashed spectacular value for American investors, an activist response by the governing bodies of America’s universities is now essential.
The problem is pervasive, as Michael DeBow explains:
On August 19 [2014] the intrepid American Council of Trustees and Alumni (ACTA) released a timely report on the governance of colleges and universities. “Governance for a New Era: A Blueprint for Higher Education Trustees” was the work of a blue-chip 22-member committee chaired by Benno Schmidt, a former president of Yale.
The 16-page report is available online, and deserves a wide readership, since most Americans have some stake in higher ed – as taxpayers, even if not as parents or students or employers.
As a matter of legal formality, the ultimate responsibility for a college or university is almost always in the hands of a board of trustees, responsible for selecting the institution’s president, monitoring his or her performance, and making broad policy decisions. As a practical matter, however, the trustees’ actual input into university governance is usually much less than that of the faculty – who call the shots as to the curriculum and other matters of academic policy, and the president and senior administrators – who run virtually everything else. This status quo is sometimes referred to, approvingly, as “shared governance.”
Obviously, I'm not calling for the sort of Wild West activism we see in the corporate world. All I am saying is that higher education reform really ought to start with reforming the board of trustees so as to give them real power:
- New board members should be selected by a committee of independent board members.
- Board members should have the power to hire and fire the University President.
- The University President's compensation should be set by the board.
- Board members should be subject to term limits.
- Board members should be committed to fostering a learning environment rather than safe spaces.
- Board members should meet in executive session periodically without the presence of any university employees.
- If the board chairman is a university employee, the board should appoint a lead independent member with power to call board meetings.
- It should be made clear that the university's outside auditors work for the Board not the President.
Some of these reforms go beyond what I think is appropriate for corporations, but the reason should be obvious. Firms operate in host of markets that constrain managers and discipline poor ones. Imperfectly, to be sure, which is why governance is important, but surely better than the virtual absence of market constraints on universities.
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