When Trustees Blunder – Harvard Prof's article

When Trustees Blunder

Is inept governance contagious? Has the germ that infected corporate America contaminated colleges and universities, too? For every Enron, Tyco, and WorldCom, we seem to have an academic equivalent.

But there is both less and more to the story.

There's less because novelty is always newsworthy. “Board bites college” articles are still the exception, not the rule. The most egregious errors make the news, and the news frequently makes trustees look foolish. In reality nearly all board members work diligently and contribute constructively, especially at independent colleges, where partisan politics rarely affects the appointment or motivation of trustees. Those efforts, however invisible to people on the campus or to the public, are hardly insignificant. No one can make a credible case that academe has an epidemic of outright ineptitude in the boardroom.

Nor should we conflate unpardonable behavior and unlawful behavior. The conduct of some college governing boards lately has been troublesome, even disgraceful, but not criminal. Indefensible decisions and irresponsible actions are one thing; indictments and convictions are quite another.

Yet there is more to the story because the manifestations and permutations of dysfunctional governance are so plentiful. Most recently, at American University, and a decade earlier, at Adelphi University, a subset of trustees approved excessive compensation packages and lavish expense accounts that, once revealed, helped trigger the president's dismissal. At Boston University, the board rescinded the appointment of the president-designate — who had been championed by a powerful faction — at a cost of nearly $2-million to disengage from the contract. By some accounts, a handful of trustees at Cornell University decided to negotiate the departure of a president popular among faculty members without the views, and apparently without the foreknowledge, of many other board members. At the University of Medicine and Dentistry of New Jersey, investigations of financial misconduct and Medicaid fraud prompted federal prosecutors to appoint an outside monitor to oversee management of the institution's finances. Trustees of similar bent at George Mason University and at the State University of New York have pressed to determine the content of the curriculum and even particular courses.

There is also more to the story because those well-known cases obscure a far more pervasive and corrosive problem: mediocre governance. Too many college boards add too little value too much of the time, micromonitor rather than macrogovern, and mistake misgovernance for mismanagement. Apparently it's easier for a board to remove and replace an allegedly incompetent president than to do likewise to demonstrably incompetent trustees.

If those are the symptoms of ineffective governance, then what are its root causes? Like the flu, there are many variations. However, substandard governance can almost always be traced to one of two culprits, or both:

Most boards are orchestras of soloists. Each trustee is a prominent or self-proclaimed talent. (The latter tend to blow their own horns.) Some enjoy duets and quartets, others will join an ensemble now and then, but most want to be more than mere members of a phil-harmonic. The majority want to be principal players, and some undoubtedly hanker to be the conductor. But most trustees are not symphonists — and, to compound the problem, few boards rehearse.

Accustomed at work to the role of decision maker or power broker, many trustees act alone or as part of a subset of the board, sometimes driven by admirable motives, sometimes by parochial passions. Some trustees, like investigative journalists, cultivate unnamed sources, chase rumors, and collect information. Others, like surrogate managers, analyze data, assess market conditions, and advance strategic initiatives. And still others, like lobbyists, advocate particular priorities, policies, and programs. At the extreme, a single board member or a small band of trustees has negotiated and approved contracts; arranged strategic alliances; directed management to appoint, promote, or remove personnel; or even secured the passage of legislation, all without the board's authorization. Other trustees learn about these back-channel initiatives after the fact and after the damage has been done.

In the main, boards are far less apt than a single trustee, a self-anointed posse, or a potent inner circle to act recklessly or decide rashly. A plurality of perspectives on the board provides a counterbalance to the impulses of an individual or a like-minded bloc. In fact, renegades and cliques often circumvent established procedures precisely because the prospects are bleak that the majority of the board will concur with them.

What are the circumstances that conspire to favor freelance governance? First, explicitly stated and reliably enforced norms to govern trustee conduct are rare. For instance, few boards provide guidelines about whether trustees may contact any employee at any time for any information, direct staff members to pursue a particular course of action, intercede directly on behalf of a constituency or ideology, or stake out a public position, either before management proffers a recommendation or after the board reaches a decision contrary to one's personal position. Instead, boards wrongly presume that trustees are perceptive enough and experienced enough to discern and adopt the appropriate behavior. Without rules of engagement and posted limits, some trustees speed headlong and headstrong toward personalized, not institutionalized, governance. Difficulties ensue notbecause trustees think independently, a hallmark of effective boards, but because trustees proceed independently, based on a self-declared role and a self-determined scope of authority.

In addition, the renegades are rarely held accountable by the board. At considerable risk, the president may express displeasure. On occasion the board chairman — when not the offender — may issue a gentle rebuke. Hardly ever does the board or the governance committee consider whether a person or a group has violated stated norms or preferred protocols. With little or no enforcement, rule breakers continue to break the rules (a pattern ironically reminiscent of certain tenured professors).

Bystanders on the board are hardly blameless. Even in these litigious and tumultuous times, some board members still view trusteeship as largely honorific and governance as largely ceremonial. Many believe that good will, coupled with philanthropy, offsets the obligations of due diligence and shared responsibility. Once, board members could seek safety and anonymity on the sidelines, but today governance is no longer a spectator sport, and the majority of the board can no longer allow mavericks free rein.

Many boards tend to either lionize or trivialize the president. Trustees of private colleges incline toward the former, public-college trustees toward the latter. Both extremes beget problematic boards.

The epic presidency starts with an overemphasized adage, “The board's most important role is to hire and fire the president,” as if the board's role as steward of organizational purpose, strategy, resources, and performance were all somehow secondary. The canonization continues with an advertisement for a superhero and an elaborate search process, guided by a brand-name headhunter, that eerily resembles American Idol. Candidates perform, and, in effect, audiences vote to eliminate contestants until only the winner remains. Loath to lose the front-runner, the board's leaders and the candidate's lawyer negotiate a persuasive, even munificent, presidential package, often unbeknownst to the trustees at large. The process culminates with a majestic coronation.

That sequence of events leads trustees to a dangerous conclusion: If we have the right president, we can do no wrong. Indeed, we need do little more than watch the miracle worker work miracles. Gradually the board's attention shifts from the health of the institution to the welfare of the president — or, worse, trustees mistake the latter for the former. Well-intentioned board officers lavish the CEO with more and more praise, prerogatives, and perquisites, as the executive or compensation committee bestows the bonuses and raises that eventually become the object of public interest and faculty scorn.

As sensational as the exposés about presidential lifestyle have been, the more consequential impact of larger-than-life presidents concerns shared governance. If presidential packages are out of kilter, chances are that the balance of power is, too, posing a far greater threat to the institution over the long run. When a board perceives a president as an indispensable, heroic leader, then trustees disengage from governance or accord the CEO undue deference — tendencies that some presidents are keen to reinforce. Rather than discern and frame the crucial challenges and opportunities that the president should tackle, the board simply reviews the plans and tactics that the president presents to solve the problems that he or she determines to be worthy of board attention. The board becomes less a source of leadership and intellectual capital and more a source of technical assistance and financial support. In short order, the trustees' overestimation of presidential importance leads to overdependence on the CEO and underperformance by the board.

The opposite syndrome, most visible at state universities, produces a similar outcome. In that scenario, certain trustees view campus presidents not as brilliant leaders but as civil servants with limited appreciation for the “real world” of politics and commerce. As a result, trustees see no recourse other than to assume the hero's mantle from time to time, either to rescue the president — and the college — from an imminent mistake or to steer the president to an overlooked opportunity.

The results are more often setbacks than successes. For example: Board leaders expressed more support for an offensive mascot or basketball coach than an able leader, the story lines at the University of Illinois at Urbana-Champaign and Indiana University at Bloomington, respectively. A self-anointed delegation of trustees at Auburn University, president in tow, embarked on a furtive, and ultimately abortive, mission to recruit a new football coach. An outspoken trustee at the University of Minnesota (where I served as a consultant to the regents) launched a re-examination of tenure that preoccupied the board, convulsed the faculty, and eventually yielded mostly cosmetic changes. At the University of Colorado, board members doggedly pursued a controversial professor and crippled the system's president along the way. Troubled by the sexually explicit substance of an academic conference on the New Paltz campus, SUNY regents threatened academic freedom and the campus president, who not coincidentally was later appointed general secretary of the American Association of University Professors.

Whenever such substantive decisions backfire, the board most likely discounted or bypassed the president's professional judgment. Sometimes a board assigns more weight to surefire “solutions,” ardently advocated by a few trustees, than to complex, nuanced positions that the president and senior administrators have articulated. After all, “Who knows better — a handful of worldly and wealthy trustees, or a lifelong academic on the public payroll?”

If undue deference anesthetizes some trustees, undue arrogance emboldens others. Both responses are recipes for disaster.

To avoid such pitfalls of governance, trustees must assume responsibility for their collective performance. A board need only adhere to a concept that trustees regularly commend to management: benchmarking. The best practices of boards that function effectively as a team include periodic self-evaluations by the board, trustee committees, and individual board members that also elicit confidential comments from the CEO and senior staff members; an external review of the board's performance every five years or so; regular executive sessions to discuss the board's effectiveness and comportment; forums on topical subjects with stakeholders, such as a discussion with students about diversity or tuition, or a conversation with faculty members about shared governance or educational outcomes; a yearly report on the board's aims, activities, and accomplishments; and the adoption and enforcement of a statement of mutual expectations among board members.

Another means to the same end is to ask whether trustees, individually or collectively, conform to the expectations of top-drawer corporate boards. The analogy is not far-fetched; many research universities are as vast and complex as Fortune 500 companies. Suppose a director was concerned, for instance, about disgruntled employees, disaffected shareholders, environmental damage, or insufficient profits. What would a responsible director do? What conduct would the rest of the board condemn or condone? And what's the argument for university trustees to behave differently?

In addition, to strike a sensible balance in the board's relationship with the CEO — one that enables the trustees to both bolster and balance presidential authority — all board members should be involved in presidential performance reviews. They should have the opportunity to discuss the criteria and the process as well as to contribute to the content and conclusions. A composite picture prevents distortions by trustees too close to the president, too close to the action, or both. If most trustees perceive the president as the solution to all problems or, alternatively, the source of all problems, then almost certainly the board has a much greater problem: weak governance.

Viewed within the overall context of higher education, governance scandals remain relatively scarce. Yet each one should remind boards that a relatively thin membrane separates chronic risk from occasionally catastrophic results. Every time maverick trustees practice freelance governance, or a board overvalues or undermines the president, the odds tip a little more toward calamity. Trustees disposed to play Russian roulette with the board's reputation and integrity must be disarmed by their colleagues. When a college can no longer trust the trustees as a group to act responsibly, the entire institution usually takes the bullet.

Richard P. Chait is a professor of higher education at the Harvard Graduate School of Education.

Section: The Chronicle Review
Volume 52, Issue 24, Page B6


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