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Trusteeship Magazine

Penn State and Principles of Institutional Governance

By Lawrence White

The editors of this magazine allot 650 words to this column, which is one one-hundredth the length of former FBI Director Louis Freeh’s 267-page July 12 report to the Pennsylvania State University’s Board of Trustees. It is impossible in a column this short to do justice to the Freeh Report or the issues it raises. I will content myself with one high-level takeaway, and a recommended reading list.

The Freeh Report has lessons for every higher education stratum: board members, presidents, faculty members, athletic directors, student life officials, alumni, students, coaches, janitors. I offer only my perspective: that of a university lawyer who counsels a board and individual trustees.

To board members everywhere: You are fiduciaries. Your first obligation is to the institution you serve.

In a venerable and widely cited encapsulation of the law of fiduciary duty, a federal court ruled almost 40 years ago that fiduciaries must discharge the duties of their office “honestly, in good faith, and with a reasonable amount of diligence and care.” The duty of honesty is self-explanatory. The duty to act in good faith means that a trustee cannot engage in self-dealing or other conduct that would constitute a conflict of interest. Most important for our purposes, the duty to act with a reasonable amount of diligence and care means that trustees must exercise independence of judgment. They cannot be swayed by the special needs or desires of particular departments, officials, or constituencies. They must bring detachment and even measured skepticism to their work, and they must insist on candor and transparency from senior university officials; in the words of the Freeh Report, they must “[e]nsure that the University President, General Counsel and relevant members of senior staff thoroughly and forthrightly brief the Board of Trustees at each meeting on significant issues facing the University.”

Trustees, like all people who engage in lifelong learning, need to be reminded periodically of their duties, lest they forget. The surest way to accomplish that end is by assigning some required reading.

My short reading list starts with the Freeh Report, available online. The report consists of a six-page executive summary, a 12-page timeline, almost 100 pages of factual findings, more than 100 recommendations (21 of which relate to board operations and responsibilities), and more than 100 pages of documentary exhibits. One colleague said to me it would be educational malpractice not to read it, think about it, and discuss it.

Next on the list is AGB’s “Statement on Board Responsibility for Institutional Governance,” revised most recently in 2010. The statement offers, in the form of eight bedrock principles of board governance glossed by explanatory text, a precise, useful distillation of trustees’ fiduciary and operational obligations.

The last items come from your own shelf (or, more likely, your institution’s Web site). As tedious as it may be, you should review your institution’s articles of incorporation, bylaws, faculty handbook, and other governance documents. You should approach your reading with the goal of understanding the function of the governing board; its powers and duties; and the coordinated roles played by the board, the president, the faculty, and other constituencies with a voice in shared governance. Are the duties of the board collectively and trustees individually explained with sufficient clarity in the articles and bylaws? If not, should the board adopt a statement of its own that parallels the AGB “Statement on Board Responsibility for Institutional Governance”?

Many institutional boards have done so, including those of the State University of New York and Dartmouth College.

As we approach our 650th word together, let me end where I started. You are fiduciaries. You cannot discharge your fiduciary obligations without understanding your duties and performing them honestly, in good faith, diligently, and carefully. You should approach the Freeh Report from that starting point.



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