Holding Trustees Accountable
This has been a challenging couple of years for university and other nonprofit governing boards. The Enron-style corporate governance scandals have undoubtedly had a spillover effect into the nonprofit world, even if the Sarbanes-Oxley law designed to clean up those problem doesn't technically apply to most colleges and universities. Nonprofit groups and colleges in particular have had their own set of governance and conflict-of-interest controversies as well, prompting a Congressional review into American University's compensation for its former president. And all of this has come at a time when the performance and effectiveness of higher education as a whole is under scrutiny of its own, from governments and the public.
To try to guide trustees in such a turbulent climate -- and, its leaders hope, to send a reassuring signal to the public and to policy makers -- the Association of Governing Boards of Universities and Colleges has released a statement aimed at better defining to whom, and for what, board members are accountable. In broad strokes, the areas on which the "AGB Statement on Board Accountability" seeks to focus trustees' responsibilities may seem unsurprising: the fiscal integrity of their institutions, how boards conduct their own business, the educational quality of the institutions, and oversight of the president.
But in fleshing out those responsibilities and recommending how boards might carry them out, the AGB statement makes suggestions that would, if adopted, result in fairly significant change on many campuses, particularly in the area of transparency.
It says, for instance, that general information about a president's compensation package should be shared with all board members, rather than limited to the board chairman or a compensation committee, and that any trustee who seeks detailed information the president's pay should receive it. The report suggests that boards should consider applying relevant provisions of the Sarbanes-Oxley Act to their own activities, even though the 2002 law formally applies only to corporate governance. And the statement urges boards at private colleges to operate in as much sunlight as their counterparts at public institutions do.
"There can be no assurance that governing boards, by adopting the foregoing recommendations, will be spared questions and concerns about accountability," the AGB statement concludes. But "the soundest path to sustaining institutional independence is to achieve a level of confidence and trust in the way the governing board oversees the affairs of the institution and meets its fiduciary responsibilities. The goal of this statement is to motivate boards to commit themselves to model policies and practices that warrant the public trust."
It is inarguable that that trust has waned in recent years, for boards particularly and higher education in general. Intense controversy over the compensation for and oversight of the former president of American University, on the heels of governance concerns at the American Red Cross and other nonprofit entities, led the then-head of the U.S. Senate Finance Committee, Sen. Charles E. Grassley (R-Iowa), to begin an investigation in late 2005.
Along with the scrutiny of academic governance has come continuing rigorous reviews of the overall state and performance of American higher education, including significant demands, from the Secretary of Education's Commission on the Future of Higher Education and others, for heightened accountability.
In that context, says Richard D. Legon, president of AGB, the primary association representing college and university trustees, "it was clear we needed to do something -- we felt these issues were not going to go away."
Springboarding from the work of an AGB task force last year on the academic presidency, which called for a formal statement on board accountability, association officials set about both to lay out a common set of expectations for trustees.
"The AGB Board of Directors believes that though the overall performance of the governing boards of America's colleges and universities remains commendable, documenting certain policies and practices will foster confidence among presidents and chancellors, trustees and regents, and the general public that these boards are performing responsibly, effectively and accountably," says the statement, which the board approved Wednesday.
The statement highlights four key arenas in which boards are being held increasingly accountable:
Fiscal integrity. Boards have always been seen as the ultimate fiduciary officers of their institutions, but the statement defines what that means in ways that resonate with current times. It notes, for example, that boards bear "special responsibility" to prepare their institutions for natural or man-made disasters or crises, ensuring the existence of emergency preparedness plans. And it states that one of trustees' primary concerns should be the "cost, price and quality of education offered by the institution" -- language that could have come right out of the Spellings report. That requires trustees to be responsible for academic quality as well as fiscal integrity, and fiscal integrity, it notes, means more than abiding by the required laws. It is in this section that the statement urges boards to consider how they comply with Sarbanes-Oxley guidelines on auditor independence, whistleblower protection, transparency in governance, and financial disclosure, among others.
Board performance. The statement calls for boards to develop codes of trustee conduct, and says that "board proceedings and communications should be as accessible as applicable practices and policies permit." While boards at state-supported institutions must operate in the open, the AGB statement says, those at independent institutions should. Boards of private colleges should "conduct their business and record their deliberations" as though they operated under the same legal obligations as public college boards, it says.
Educational quality. The AGB statement seeks to walk a careful line on the question of the board's role in an institution's academic endeavors, both urging greater scrutiny yet still recognizing the role of the faculty. While administrators and professors remain responsible for how subjects are taught, who teaches them, and how their success is measured, the trustees are "ultimately accountable for the quality of the learning experience," the AGB statement says. In an era in which demands for measuring student learning are growing by the day, notably from the Spellings commission, board members must assure themselves that "systematic and rigorous assessments of the quality of all educational programs are conducted periodically, and board members should receive the results of such assessments," according to the AGB document.
"We have a responsibility to demonstrate to public policy makers that this part of the leadership of higher education 'gets it,' that we take accountability seriously," Legon said.
Presidential search, assessment and compensation. Elements of the statement's recommendations in this area -- particularly its calls for all trustees to have access to information about presidents' pay -- were clearly influenced by the situation at American University, where only a select group of trustees were said to be aware of a compensation plan renegotiated by board leaders and then-president Benjamin A. Ladner. Especially in an era when the Internal Revenue Service can fine board members if administrators are found to be overcompensated, "legal authority for setting presidential compensation ultimately resides in the full board, not in a subset of members," the AGB statement says. The statement also says that boards should base a president's compensation on "explicit and justifiable benchmarks from within and outside the institution as well as on the marketplace for chief executives," and that the board "must remain sensitive to the perceptions of stakeholders and the public."
That last recommendation, along with several others, pushes the boundaries of what is commonly done now in higher education, said Robert M. O'Neil, former president of the University of Virginia and now head of the Thomas Jefferson Center for the Protection of Free Expression, who helped draft the statement. "Our view of the determination of presidential compensation would not have been universally accepted before this statement comes out," O'Neil said.
The AGB statement elicited mixed reactions. Anne D. Neal, president of the American Council of Trustees and Alumni, which has taken a much more aggressive stance than AGB in encouraging board members to hold administrators and professors accountable for their performance, praised the statement's emphasis on ensuring general education, among other things. But she criticized its "essentially passive" approach, and for failing to "call upon boards to cast a wide net to find innovative leaders who are not afraid to question the status quo."
B. Robert Kreiser, associate secretary for academic freedom, tenure and governance at the American Association of University Professors, said that even as it calls for boards to step up their vigilance, the statement from AGB is "appreciative of the nature of the academic enterprise, recognizing that there are responsibilities that the various constituencies at academic institutions share."
In contrast to Neal's group, he said, AGB has recognized that trustees can be more accountable without gutting the principle of shared governance. "This is a call to responsibility," he said, "but it's a call for mutual responsibility, and for respect and communication."