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Trusteeship Magazine

State Policies and Practices to Improve Board Governance

September/October
2012
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Governance controversies have raised questions among policy makers and the public about how and why trustees are selected for public boards, to whom they are accountable, and whether current problems are just the tip of the iceberg.

Having the right board in place can strengthen the higher education-state government relationship. Appointing effective governing boards, or sustaining existing ones, is critical to a successful higher education system, the pursuit of a successful state strategic agenda, and a successful governorship or legislative session.

Today’s challenges require the best possible boards, made up of leading citizens, selected with care and forethought, and supported with effective orientation and education programs.

The high-profile controversies involving public governing boards—in Texas, Pennsylvania, Virginia, and Illinois—have raised many questions among policy makers, the public, the press, and other stakeholders regarding the selection, education, capacity, and motives of board members. Are public board members selected primarily for their political connections? Do major political donors have an edge with appointing authorities, namely the governor? Do members of the business community with a corporate sense of governance have a misunderstanding of, if not a disdain for, academic governance?

Do board members comply with the wishes of their governors (or legislatures) on higher education issues and not display independence of thought and action? Should presidents serve on the governing board? Should governors? To whom is the board accountable? Are problems at these institutions the tip of an iceberg of failing public governing boards?

The Givens of Public Trusteeship

1. There is an inherent ambiguity in public trusteeship. Governing boards sit at an intersection of state and community needs and institutional aspirations. They must balance those needs and aspirations while leveraging the talent and intellectual resources of the college, university, or system to address community problems and challenges. They must advocate for state and community resources while assuring accountability for results and pushing for productivity and efficiencies. Among several general responsibilities, the individuals chosen for board positions must be flexible, tolerate and work within the ambiguity, and understand the differences between overseeing a college or university and running a corporation or business.

2. Politics cannot be removed from public trusteeship. The role and place of higher education in American society and in state capitals is too large for public trusteeship and governance not to be a part of public policy. The fact that the vast majority of public trustees at senior colleges and universities are appointed by the governor and confirmed by the legislature or elected directly by the legislature or the citizens—and many are chosen in part or in full because of their political connections or perceived political acumen—reflects that. So does the reality that public colleges and universities, despite visible declines in state support, remain state-owned or affiliated entities. Many governors have and do take board appointments seriously and try to minimize political considerations in the selection process, but the governors’ track records are woefully uneven. Furthermore, asking board members to use their political connections on behalf of the university will always inject a level of politics into trusteeship.

3. Board-president (or system head) partnership is still key for institutional change and success. AGB has documented institutional transformation in the recent book, Leading Change, How Boards and Presidents Build Exceptional Institutions (AGB Press, 2011). In the intensive workshops for board leaders and presidents that AGB facilitates, we hear repeatedly that the partnership, in order to be successful, must be based on mutual expectations of candor, trust, respect, communication, and a policy of no surprises. The current environment of rapid change, uncertain revenues, and public skepticism about college costs and the value of a degree requires a new level of board engagement, but that engagement must remain at a policy level.

4. There is an expectation of full transparency. The visibility of higher education and its ties to government create an expectation that the public interest is served by complete openness regarding board meetings, debates, and decisions. Although sunshine laws vary among the states, almost all limit the uses of executive sessions to discussions of legal or personnel issues. One can argue that the public interest is not always served by complete openness and transparency—for example, regarding presidential searches. But such arguments are difficult to make, especially during a time of crisis or heightened public curiosity.

Steps to Solidify and Sustain Effective Public Governance

Even without highly visible challenges at high-profile universities, building and sustaining effective public governing boards and governance structures is challenging. Yet, the truth is, without any change to state statutes or constitutions, state elected leaders could take steps to improve public governance. How?

Governors and legislators can communicate to the public the value of the state’s higher education system to the state’s future, even when there is disagreement about how higher education should effectively fulfill its public purposes. They can also state the importance of good governance and effective governance structures and make it known that they will seek some of the state’s very best talent to assume seats on the governing board(s).

Board selection. Governors should make board selection a priority and not let partisan or ideological considerations outweigh merit criteria when nominating members. (Individual board members must be independent of such interests.) Likewise, legislatures should follow publicly available criteria for confirming new and renominated board members that emphasizes merit and experience and minimizes political or party affiliation.

Those states with several public boards, each with several appointments, can present challenges to governors; the situation is very different than it is in states in which one university governing board oversees an integrated higher education system. In most cases, the flagship institutions of flagship systems will garner the most attention, interest, and high-profile nominees. Presidents, chancellors, and board leaders can play an important role here. Governors should solicit their views when board vacancies are about to occur, and evidence suggests that many governors do.

Institutional and board leaders are not of one mind on the practice and wisdom of doing so, however. Some executives will not go near such practice, knowing that they serve at the pleasure of the board. But others welcome the opportunity to be heard on what capacities the board lacks and needs. Ultimately, the governor and the board should be seeking similar qualities in new members.

Disturbingly, governors often fail to reappoint well-deserving members of a board, regardless of their political activity or lack thereof, simply because the board member was appointed by a governor of a different political party. This is an unfortunate precedent in many states, one that can and should be reversed. Staggered terms can prevent major disruption of board stability and leadership, but many public boards are relatively small (averaging 11 members), and the loss of one or two talented members can be disruptive and weaken the board unnecessarily. Again, not all politics can be removed from public trusteeship and governance, but governors must try to reverse this too common practice.

Having the right board in place can strengthen the higher education–state government relationship. Appointing effective governing boards, or sustaining ones already in place, is crucial for a successful higher education system, the pursuit of a successful state strategic agenda, and a successful governorship or legislative session. There is a lesson to be learned from the several states that, over time, have developed a culture or an expectation of good appointments established and sustained from governor to governor, administration to administration.

Board education. As former AGB President Richard T. (Tom) Ingram once observed, most people selected for public governing boards are bright and well-intentioned, but they may lack a clear understanding of what is expected of them. Better and more consistent board orientation and education are needed, but the orientation programs of institutions and systems vary in quality and comprehensiveness. Texas, Kentucky, and West Virginia, for example, conduct annual statewide orientation and education sessions for public board members. Their programs cover best practices in governance and include opportunities to hear from state officials, to learn from one another, and to help give or receive a progress update on the statewide strategic plan or public agenda for higher education. Governors and legislative leaders of all states with multiple boards should bring together board members (and presidents) annually or biennially.

Legislative Solutions

Screening-nominating committees. Six states have created such committees, which evaluate board candidates and recommend names to the governor or the legislature. AGB has supported and encouraged many of these efforts, which work well in some states but have atrophied over time in others. Convincing legislators to pass a bill or governors to issue an executive order to change the manner in which public board members are selected can be more than a little challenging. Conceding appointment authority is seen as surrendering gubernatorial control and influence over higher education. Nevertheless, a screening-nominating committee is still a viable option for some states to consider.

Mandatory board training and education. This practice has been frowned upon as a possible deterrent to the board service of experienced or prominent individuals. Yet such training and education is a statutory requirement in Oklahoma, Texas, and Arkansas, and there is no evidence that individuals reject service because of it. If concerns exist, laws could be tailored to partially or fully exempt certain individuals or recognize others for prior board service.

Self-perpetuating members. As the contribution of state tax dollars to public institutional budgets continues to decline, many are asking whether governors and legislatures should continue to appoint all of the members of public governing boards. It may be unrealistic to expect state governments to surrender this power, and it would probably not be good public policy if they did. But if states continue to disinvest in public higher education, and the finance model continues to change for public colleges and universities, calls will intensify for various aspects of governance to be rethought.

Regarding board selection, a reasonable proposition might be a combination of appointments between self-selected (self-perpetuating) members and gubernatorial-appointed or legislatively elected members. Board leaders and presidents should advocate for a percentage of self-appointed seats (say half of the board) and work with state leaders to see it become a reality. The University of Vermont’s board of trustees has 12 members selected by the governor and legislature and nine selected by the board, and policy makers and university leaders are considering an even greater number of self-perpetuating members as they ponder other changes in the funding process.

The University of Alabama System is the only board in which all members are self-selected, with approval by the state senate. Passing a law to create self-selected seats on a governing board ought not to be for the sole intent to increase fundraising or the numbers of alumni on the board, and preserving half of the seats for appointment by government officials will assure that the state’s needs are being considered and addressed.

Other changes. States could also allow a modest number of out-of-state members on public boards. Expanding the pool of key supporters of the institution who reside outside of the state is not at all unreasonable, and about six states allow such a practice. States should also consider laws to expand the years of board-member terms, if such terms are less than six years and coterminous with state officials holding elected office. Four-year terms create too much unnecessary turnover on boards, do not allow members to become fully acclimated to the board before the term is complete, and confuse board terms with those of elected officials.

Other Lessons

Constituent boards and knowing the industry. Key constituents—namely faculty, staff, alumni, and students—may want a seat at the board table, not only so their voices are heard, but also so they can be full decision makers of the board. A more “representative” or constituent-based board may better represent the broad public interest, or it may not. Students serve on half of all public boards as voting members and on even more boards as non-voting members. Faculty are voting members on only 13 percent of boards; non-voting faculty serve on an additional 9 percent of governing boards. A designated board seat for staff is the law in only two states. Faculty, student, and staff voices are important for boards to hear, but, as AGB has long maintained, if higher education is to remain committed to citizen governance, to the extent a board reserves seats for specific constituent interests, it fails to fully meet the the test of true citizen-based governance. Given recent problems of citizen-based governance, however, one can only expect a renewed push for board membership from faculty, staff, and students.

People outside the institution who are familiar with the “industry,” and who have had valuable experiences in higher education leadership, should be strongly considered for board appointment. Former presidents, provosts, and deans have much to offer as trustees. That appears to be one objective of Virginia Governor Robert McDonnell’s recent appointments following the problems at the University of Virginia. It likely makes sense, if such leaders have had valuable experiences in higher education leadership.

But governors should be careful about appointing recent former employees to the boards of the institutions that employed them. And the appointment of individuals with industry expertise must be balanced with other capacity needs on the board.

Aspects of corporate governance. Just as there are some business practices from the corporate sector that are transferrable to higher education, elements and lessons of corporate governance are also adaptable to university governance. To say that corporate-style governance has no place in higher education is shortsighted. Governing boards often function like corporate boards and appropriately so: delegating authority, expecting strong leadership, and setting strategic goals and holding executives accountable for reaching them. But university boards also have a responsibility to be a “citizen board,” one that listens to and is a bridge to the community. Successful university boards operate both as a corporate and a citizen board, sometimes simultaneously, other times alternately.

A shortcoming of a pure corporate governance approach in higher education is a lack of appreciation for shared governance. In a recent speech to the National Governors Association on revitalizing American manufacturing, Alan Mulally, CEO and president of Ford Motor Company, stressed the need for corporate leaders to involve all of a company’s stakeholders, from top to bottom, if corporate restructuring is to be successful. The same holds true for restructuring higher education. Those who laud the merits of corporate governance must not forget several recent failures, including Enron, Lehman Brothers, and Bank of America, or the approval of exorbitant corporate salaries. Regular employee input may have prevented such situations.

Board accountability. Board troubles or missteps inevitably lead to questions about board accountability. According to AGB’s 2007 “Statement on Board Accountability,” boards are accountable to the mission and heritage of their institutions, to the transcendent values that guide and shape higher education (self-regulation, shared governance, educational quality, fiscal integrity, and academic freedom), to the public interest and public trust, and to the legitimate and relevant interest that various internal and external constituencies represent. Public boards are not fulfilling the public interest if they feel that they must be accountable to elected leaders. It is important for boards and state officials to appreciate that public boards are surrogates for the state and the citizenry; they are responsible to do what state government cannot, should not, and does not do itself. Ultimately, to be effective, boards must be responsive and communicative, while never surrendering their independent judgment on matters before the institution.

In sum, today’s challenges require the best possible boards, made up of leading citizens, selected with care and forethought, and supported with effective orientation and education programs. If states and their public higher education systems are going to make progress on issues of the public agenda—an agenda that will differ among the states but will likely include better college completion, cutting-edge research and innovation, K–12 school improvement, community and economic development, and workforce preparation—they and their institutions will need board members who can help develop, understand, support, and articulate that agenda. Sustaining strong institutions and university systems given today’s fiscal challenges requires public governing boards that are engaged in the strategic work of the institution in partnership with their chief executives.

Enlightened state leaders can make several positive changes by instituting some thoughtful practices that minimize counterproductive and unnecessary politics Sustained changes may require legislation—effective public policies that will better align governing-board capacity with institutional and state needs.

Governors and Other Special Board Members

According to AGB’s 2010 study, Policies, Practices, and Composition of Governing Boards of Public Colleges, Universities, and Systems, governors serve as ex-officio members on governing boards at 17 percent of all public institutions or university systems, yet most do not attend meetings and at best send a staff member in their place. Having the governor, or any other statewide elected leader on the board, blurs the separation between the governing board and the state. Governors already have considerable authority and influence in their states and consequently over colleges and universities; they can set the agenda for higher education at any time, including through the authority of the executive budget. Governors should desire some distance from the boardroom when sensitive or legal issues arise, and they have many other opportunities to have a “voice” with the board to share any concerns or ideas.

Presidents serve on 27.5 percent of all public governing boards, according to the same study. The vast majority do so as non-voting members. It is best, however, if the chief executive is not on the board because, again, the president serves at the board’s pleasure. Many also feel that there should be a distinction in the public’s mind between administration and governance, proving that the board and the president are separate entities. Not including the president in no way precludes a strong and effective working relationship with the board.

AGB’s 2010 Policies, Practices, and Composition report shows that alumni comprise half of all public board members and well over half at public research universities and university systems. Alumni make important contributions as board members, but public governing boards do not need more of them, and likely need less.

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