A Primary Loyalty

Higher education leadership is taking a beating these days. College and university presidents are in the spotlight with high-profile interrogations and frequent calls for resignation coming from legislators, faculty, students and major donors. At the same time, the role and primary allegiance of governing boards continue to be debated. A recent opinion from Virginia’s attorney general took the position that the “primary duty” of the Board of Visitors for each of Virginia’s public institutions of higher education is to the Commonwealth.

In response, a new bill passed by the Virginia legislature and currently awaiting action by the governor provides that the governing board of each public institution of higher education shall act in accordance with a duty of loyalty owed primarily to the institution and secondarily to the citizens of the Commonwealth, consistent with the conventional interpretation of fiduciary duty and to whom such duties are owed. The proposed legislation goes on to mandate that public trustees stay informed on developments in their institutions in order to make educated decisions and to exercise individual best judgment in carrying out the powers and duties of the governing board.

This debate between elected officials and lawmakers in Virginia exemplifies an ongoing conversation in many quarters across the country about the purposes and responsibilities of higher education governing boards, particularly in a public context. It speaks to a lack of understanding around the legal duties and fiduciary expectations that form the bedrock of college and university governance.

The American system of higher education board governance has empowered institutions to grow, evolve and prosper since before the country’s founding for two essential reasons. First, college and university boards primarily comprise volunteer citizen trustees, individuals outside of government who bring independence, expertise and external perspectives to the stewardship of their institutions. Second, these citizen trustees individually and collectively adhere to carefully crafted duties, imposed by law, that guide and ground the important decisions they make on behalf of their institutions. These duties, which are unique to trustees in their role as fiduciaries, are:

• The Duty of Care: This fiduciary duty requires board members to carry out their responsibilities in good faith and with the level of diligence, care and skill that a reasonably prudent person would exercise under similar circumstances. Commonly translated as a duty to read up, show up and speak up, the duty of care expects board members to be informed and to actively participate in decision-making, using their best judgment to act in the institution’s best interests.

• The Duty of Loyalty: The duty of loyalty also obligates board members to act in good faith and to put the interests of the institution they serve above their own personal or private interests. Fiduciaries must avoid conflicts of interest and make decisions that are best for the institution, not for individual gain.

• The Duty of Obedience: This fiduciary duty obligates governing board members to ensure that the institution adheres to its purpose and mission, and operates in compliance with the law and the institution’s governing documents. In practice, this also means ensuring that the institution has effective internal controls in place to maintain compliance and address problems.

These principles of fiduciary duty are embedded in statutory and common law in every state, are frequently taught at mandatory education programs for public trustees, and have been at the center of thought leadership by the Association of Governing Boards of Universities and Colleges since its founding more than 100 years ago. And yet the interpretation and application of the fiduciary duties of higher education governing board members remain points of contention, especially during election years.

Higher education institutional accreditors also require boards to follow these principles. For example, the Higher Learning Commission’s accreditation criteria state that the college or university governing board must be “autonomous to make decisions in the best interest of the institution;” the criteria also require that a board “meets its legal and fiduciary responsibilities.” Failing to adhere to the duties of care, loyalty and obedience can trigger accreditation sanctions or even result in a loss of federal funding.

Compromising fidelity to fiduciary duty—such as by failing to be fully engaged, neglecting to exercise appropriate diligence, acting inconsistently with the North Stars of purpose and mission, or allowing external voices to override the board’s sound judgment—is at the root of most failures of board governance. Securing and sharing a common understanding and application of these essential principles that have long fueled the success of American colleges and universities ought to be an imperative for all concerned parties.

At a time when trust in higher education leadership is frayed, we must renew our collective efforts to restore that trust. It is essential that governing board members fulfill their fiduciary duties with clarity and commonality as they lead our colleges and universities toward excellence.