University governance and ideological risk

Years ago, I was asked to assemble a governance expert team to pitch ideas for needed board and practice reforms for a major U.S. university that was reeling from a globally publicized crisis.?

In preparing for that pitch to a majority-disinterested board, I noticed several potentially profound conflicts of interest that could affect how trustees might (mis)manage crises.?

One risk I noted is that corporate CEOs and senior executives often serve as university trustees. In most cases, they likely add value to the university by sharing experiences, networks, career opportunities, and wealth.

The risk, however, arises when a university enters crisis that draws considerable global media attention to the university and to prior judgements made by the board of trustees and senior leadership. In these moments, these executives likely face conflicts between their fiduciary duty to the university's stakeholders and their fiduciary duty to their corporate stakeholders. How they navigate a university crisis, for example, can affect their corporate stock price. Owen McCarthy 's September 2024 article in the The State News helps color some of the tension, conflict, and trustee moves to protect reputation when Michigan State University faced its Larry Nassar crisis. When faced with conflict, it would seem rational for a trustee to lean in on their corporate duty, which might mean suboptimal decisions for the university, given the financial and reputational tradeoffs.

The reform-pitch exercise inspired some colleagues and me to collect board structure and bylaws data for major U.S. universities to get a sense for how well they appear to address strategic advising, independent oversight, academic independence, and stakeholder representation needs. We were also interested in assessing whether commonly-structured institutions, like large land-grant state universities, deploy similar structures (answer: no. See, e.g., Penn State vs. Michigan State).

Importantly, I noticed that a serious potential conflict of interest was “ideological risk,” which I define as the risk that an idealogue may leverage financial or political power to interfere with academic freedom. Interference might arise as disproportionate influence over tenure, research funding, or teaching content and pedagogy decisions.

We have not studied these risks directly, so I am not speaking to empirical evidence of interference. However, some board structures seem to afford opportunities, such as in the states of TX, CA, NY, and VA where most trustees are governor appointed. In today's geopolitical environment, it is reasonable to predict that several states will host governors who have relatively extreme beliefs that can spillover into their selection of trustees for their flagship universities or downstream decisions such as the selection of university presidents. Even the process for selecting university presidents is under threat of ideological risk, such as concerns in FL over added secrecy to the hiring process.

Former U.S. Labor Secretary and Professor of Public Policy at the 美国加州大学伯克利分校 Robert Reich also suggests, in a December 2023 article in The Guardian that ideological risk seems tied to Universities’ reliance on donor funding.?

Despite being the size of Fortune 500 corporations [University of Michigan 2023 revenues $10.929B, Williams Corporation ranked 370 in the Forbes 500 with 2023 revenues $10.965B], almost none of the U.S. universities I’ve studied have board structures that look similar to those we might see in SEC proxy filings. Some also do not seem to map well to my assessment of needs to somewhat proportionately represent stakeholders' interests [e.g., Penn State selects 16% of its 38 board members from agricultural societies and associations in the Commonwealth of Pennsylvania, despite placing roughly only 4% of its graduates into agricultural careers].

Today I hear deafening silence from the corpus of senior University administrators and trustees in the States, in the face of what appears to be an aggressive assault on scientific inquiry and independence. It has made me reflect on potential conflicts I have seen over the years in the data and in crisis cases.

It suggests to me that there is a need for a holistic review of governance for these institutions, assuming they survive the waves of blunt force trauma that may arise in next dozen of months.?

#corpgov #corporategovernance #highered #academicindependence