While the seven-figure compensation packages of an increasing number of college and university presidents attract critics, the most worrisome aspect of the push toward inflationary university compensation is the growing number of presidents who not only sit on corporate boards but are drawing huge fees for doing so. This trend has dangerous implications for both the colleges and universities and the CEOs involved.
Are college and university chiefs spending too much of their time on corporate business and too little on the institutions they are entrusted to run? Are there potential or actual conflicts of interest between the priorities of corporations and those of colleges and universities? Will academic leaders draw a clear line between their loyalties to their universities and the corporations on whose boards they sit? Can the reputations of their institutions be harmed by the decisions they have made as corporate trustees?
Such questions were very recently raised by the revelation in The New York Times that Ruth Simmons, president of Brown University, has been a trustee at Goldman Sachs for 10 years, during which time she participated in the decisions to award the firm’s top executives huge, publicly contentious bonuses. For her board work as a trustee in 2009, she was paid $323,539, an enormous sum amounting to more than half of her salary at Brown. She will leave Goldman Sachs later this year with a stock portfolio worth about $4.3 million, a perk granted to board members.
It turns out that Dr. Simmons also sat on two other corporate boards: Pfizer, from which she resigned three years ago, and Texas Instruments, where she remains a trustee. For her service at these two other corporations, she received substantial trustee fees and, presumably, stock or stock options. The chair of Brown University’s board was quoted in the Times as saying that the board of the university did not see any conflicts of interest with Dr. Simmons’ role at Goldman Sachs. Nor, doubtlessly, did they perceive any problems with Dr. Simmons’ two other corporate memberships. That insouciance says a lot about university governance.
While Dr. Simmons did cite the time commitment required for sitting on the Goldman Sachs board as a reason for ending her tenure as a trustee, she did not explain why it took her 10 years to come to this conclusion. The notoriety of Goldman Sachs undoubtedly led to the publicity -- as well as faculty and student displeasure at Brown – about Dr. Simmons’ board membership. But this should not obscure the fact that all corporate board memberships require a great deal of time.
Did it not concern the Brown board that its president was spending an inordinate amount of time and attention helping to direct and oversee three major corporations at a time when universities and colleges are themselves under increased financial stress, experiencing a crisis in financial aid and facing serious questions about systemic faculty and staff inequities? Corporate board and committee meetings, frequent phone consultations, reading and interpreting complex financial material and keeping up with the financial environment are all responsibilities of corporate trustees; for those who take this job seriously it involves a major commitment of time and concentration. Put simply, Dr. Simmons did not have the focus and time to do both jobs really well.
Nor has she been alone in facing this dilemma. Many of her university and college CEO colleagues are also juggling their responsibilities of running a major institution with being on corporate boards … some on three or four boards.
Why do university presidents join corporate boards? Is it greed? Aren’t skyrocketing compensation packages, including deferred compensation, free housing, special benefits and other perks sufficient to meet the needs of aspiring educational CEOs? Is it a belief that corporate board memberships lead to useful relationships with other businesses and wealthy people that can increase the coffers of the university? Yet it is questionable whether this strategy is essential to good fund raising.
Or is it a desire to broaden their perspectives and experiences? But there are other means of doing this, such as joining nonprofit boards, campaigning for national and state policies or being actively involved in their campus communities. However, such efforts need to be limited, so that CEOs can devote the preponderance of their time to college business.
For their part, college and university trustees should insist that their presidents focus on the major challenges confronting their universities and colleges. The rising cost of tuition and the need for financial aid for needy students is one such issue. So are the financial plights and disgraceful working conditions of the part-time adjunct faculty who teach more than 50 percent of the courses in higher education while being denied benefits and academic freedom. Another challenge is the provision of a living wage to the blue collar workers on campus who are the mainstays of university life. The lack of community involvement by many universities and colleges is yet another problem that requires immediate attention.
These are tough challenges, problems that don’t lend themselves to quick resolutions. But if university and college presidents were to spend more time in conversing with faculty and students, in attending a few classes and in actually teaching the occasional course, they would be better armed with the skills they need to manage their institutions effectively.
By and large, university and college trustees are not selected to focus on the major concerns cited above. Their primary, often only, responsibility is to help raise money. It is increasingly the norm that the majority of university and college board members come from corporate America; they are people often not attuned to the niceties of conflicts of interest, the reasonable limits of nonprofit salaries or the challenges of systemic inequities. They frequently fail to keep their institutions and CEOs accountable, as was the case at American University and Stevens Institute of Technology.
Yet, if they want to strengthen their institutions and assure public accountability, they should begin to insist that their presidents have only one master: the university or college itself. They should introduce policies that prohibit their chief executives from serving on any corporate board for pay and on more than one corporate board on a pro bono basis. It’s about time that university chief executives get back to doing what they were hired to do… run their institutions.