In this second post of our three-part series on the New Higher Education Governance Model, we discuss the updated board duties in higher ed and how boards can embrace their new roles and responsibilities as they work to meet the challenges facing colleges and universities today. As institutions continue to evolve, so must the way boards operate. Boards are charged with overseeing an institution’s mission, vision, values, strategic direction, financial health, academic quality, student success, community engagement, diversity, inclusion, research, faculty development, campus safety, and more. Evolving with a holistic approach is more important now than it’s ever been.
As the bar for the performance of colleges and universities goes higher, the pressure also builds on the institutional leaders—and that includes institutional boards of trustees. Gone are (or should be) the days when trustees had an easy role where they rubberstamped the president’s recommendations and enjoyed perks of the job, like prime athletic seating.
Increasingly boards are being held responsible for what happens at the university. As we mentioned in Embracing a New Model for Higher Education Governance Part 1: Raising the Bar for College and University Leaders, you only have to see what has happened in recent years at Penn State and Michigan State – as well as what is happening now at the University of North Carolina-Chapel Hill.
Additionally, higher education boards are having to help the institution navigate the tremendous waves of change, whether that’s technology, global issues, the pandemic, the enrollment cliff, or financial instability. As we mentioned in the previous blog, this requires the board to step into a consulting role instead of only an oversight role. In this way, board members’ work broadens to include regular interactions with faculty, students, and alumni and creates more of a partnership to work alongside the administration to guide the institution. This approach also allows the institution to tap specific talents, skills, and knowledge that a board member may have, such as finance, technology, human resources, or marketing.
New Governance Model with a New Mandate for Boards
Again, as we noted in the previous blog, the National Association of Corporate Directors has created a new mandate for boards which we believe helps address the changing environment that higher education finds itself in. These mandates include:
- A new mandate for board leaders that involves a different operating reality that considers the connected and intensifying megatrends of regulation, global competition, climate change and technology.
- The creation of a new board governance model that accounts for how the institution can create and preserve value despite the pace and scale of change.
- A transformation of the board needs to happen, which includes its composition, operations, interaction with the college or university, and accountability.
- This transformation needs to have five shifts: deeper and more proactive board engagement; a more strategic and forward-looking approach to board renewal; more dynamic and flexible board operations and structure; increased internal and external transparency; and more rigorous accountability for the board and individual trustee performance.
- The use of fortitude in leadership to orchestrate these shifts.
The Board’s Standard Fiduciary Responsibilities
Even as the role of the board evolves, it’s important to reiterate that higher education institutions are legal entities and, with that, have legal responsibilities. Those responsibilities do not stop with the university administration. In fact, as underscored by the judgment in the Blue Bell lawsuit, the board shares both the responsibility and the liability in relation the decisions that are made. Trustees, along with the administration, are tasked with ensuring that the college or university fulfills its mission, remains legally compliant, and is financially sound.
A fiduciary is a legal term that is defined as “an individual in whom another has placed the utmost trust and confidence to manage and protect property or money. The relationship wherein one person has an obligation to act for another’s benefit.” As part of the fiduciary duties, each individual trustee is personally responsible and legally liable for actions, errors, and omissions. Therefore, trustees who fall short in their duties when a crisis emerges may be held legally and financially responsible for their action—or their decision to not take any action.
It’s important for each trustee to come prepared for the meeting since the whole board shares responsibility and reliability that the institution fulfills its mission, is legally compliant, and remains financially sound. Each trustee’s voice is needed—and without the combined power of the entire board, faulty decisions can easily be made.
Additionally, each board member is a fiduciary and must act on behalf of the organization’s greatest good and have a higher standard of care than professional staff (including the university president). Additionally, these responsibilities are collective and personal, so they cannot be delegated to others.
These requirements fall under the board’s fiduciary responsibilities, which entail:
- Duty of care, in which the trustee maintains a deep and wide education on institutional matters to bring an informed critical eye in making a business decision. This involves financial oversight, compliance with applicable law, and understanding the university’s mission, rules, bylaws, operating and board policies, and common course of conduct.
- Duty of loyalty, in which the trustee acts in an appropriate manner to avoid personal conflict of interest. This involves putting the university’s interests first, practicing personal integrity and transparency, adhering to the institution’s conflict of interest policy and disclose conflicts, and support final board decisions.
- Duty of obedience, in which the trustee follows the law and applicable governing documents as well as his or her own reasoned judgement to make decisions that are consistent with the institutional mission. This focuses on the university’s compliance with all applicable federal, state, and local laws (including thoughtful reliance on legal advice from the university’s counsel) and ensuring that the university complies with its bylaws and adopted policies.
Ignorance Isn’t Bliss for the Board of Directors
However, most trustees—and some higher education administrators—are unaware of these responsibilities. Yet, if you’re watching the news, you see the ramifications of this ignorance continually cropping up.
Take duty of loyalty, for example. Arkansas State University Chancellor Tim Hudson was forced to resign when an audit identified issues with ASU’s study abroad program, which was administered by Hudson’s wife. These audits found that the chancellor tried to hire his wife for the full-time study abroad director but was precluded from doing so due to state law. Instead, Hudson refused to move forward in hiring a full-time director so that his wife could continue to work in the position of interim director. Additionally, the chancellor received free trips abroad and allocated money for student assistance to a company where he had served as a board member.
As a result of the audits, Hudson resigned in and the case was taken to a grand jury, which although it didn’t find enough evidence to charge him with a crime, it was a public relations mess for the University. In this case, ASU’s board members had a duty of loyalty to the university, not the chancellor, and should have done everything in their power to protect the institution’s good name.
Another example of this involved the chancellor’s search at the University of Mississippi. The State Board, all of whom had been appointed by the governor, unanimously selected the consultant on the search committee. However, the consultant—while well-qualified having served as commissioner of higher education, associate commissioner for academic and student affairs for the Institutions of Higher Learning, and a community college president–had never formally applied as a candidate and his name wasn’t presented publicly as one of the eight candidates. This was a flagrant dereliction of duty of loyalty by the board, who opted to negate the search process and go with the expedient choice.
The latest (and perhaps largest and perhaps most visible) of these involves the University of North Carolina – Chapel Hill, which seems to be in the news about governance yet again. First there was this incident with “Silent Sam,” which ultimately resulted in Margaret Spelling leaving as UNC System’s chancellor after less than three years into a five-year contract.
Then it was the Nikole Hannah-Jones debacle, in which the Board considered and (finally) approved her application for tenure, six weeks after it was formally presented. However, this was after a major donor had objected to her being granted tenure, which resulted in its delay. In an interview on CBS This Morning she stated: “It’s pretty clear that my tenure was not taken up because of political opposition, because of discriminatory views against my viewpoints, and I believe my race and my gender…. My peers in academia said that I was deserving of tenure. These board members are political appointees who decided that I wasn’t.”
In addition to Hannah-Jones and another Black scholar going to Howard, two other prominent Black scholars–all women–turned down positions at UNC. Many Black and Brown faculty have expressed their displeasure and begun looking for positions elsewhere.
Then the UNC Board of Governors’ University Governance Committee refused to reappoint UNC law Professor Eric Muller to the UNC Press Board of Governors. Muller, who has served two five-year terms and had been unanimously reelected chair last year, had been outspoken about how UNC System had handled the Silent Sam Confederate monument and UNC’s failure to deal with issues around race and history. According to NC Policy Watch, conservatives on the board thwarted his reappointment.
These types of decisions come with significant ramifications. For example,
- UNC’s accreditor (SACSCOC) is now investigating UNC for racism and corruption, according to Nuria Cuevas, vice president of SACSCOC. Her comment: “[we are] monitoring the situation.”
- Iowa State University lost nearly $1.5 in grants because of a research scandal.
- The University of Minnesota’s ethicist had to write a letter criticizing the university on how it handled medical research, a volunteer patient’s injuries, and investigator misconduct.
And there are others. One institution whose board did not maintain enough independence from their president was put on probation by their accreditor two times; the institution was told after the latest afront that it had to bring on a new president or lose its accreditation.
Steps for Creating a Well-Functioning Board Model
Higher education leadership needs to be proactive in avoiding the types of issues discussed above. There are several steps that can go a long way toward creating a well-functioning board:
- The nomination process should recruit a diverse Board that brings a range of expertise, and none of them should be beholden to the president, only the university.
- Board orientation for new members should detail duties described in the university’s governing documents and general duties expected of board members.
- Boards should have annual trainings that include fiduciary duties and responsibilities.
- Complete and understandable board materials should be distributed sufficiently prior to the meeting so trustees have adequate time to prepare.
- Board meetings should be organized so trustees have ample time to have substantive discussions on agenda items as well as important ideas, issues, and concerns.
- Board committees should be actively involved in the institution’s affairs (while not micromanaging).
- The board culture should be respectful, collaborative, transparent, ethical, and loyal to the college or university vision, mission, and values.
Higher education is in the midst of rapid and significant changes that require a new type of leadership. While many would think of leadership as being the providence of university or college presidents and administrators, the need for improved leadership also extends to the board of trustees. These directors no longer can see their role as primarily serving as rubber stamps for administrative recommendations. Instead, they need to understand and embrace their fiduciary responsibilities, including duty of loyalty, duty of care, and duty of obedience. Furthermore, it is critical that boards regularly review these duties and that training on these responsibilities is included in the orientation for new board members.
Without this understanding, boards are setting themselves and the institution up to face issues that can, at the very least, hamper the college of university’s efficiency. However, in today’s turbulent work, board members who do not truly comprehend these roles can make decisions that can lead to significant damage to the institution’s finances and brand, and result in the loss of accreditation, or even closure.
Our last in this three-part series will address board leadership – the new and changing role of trustees, and how their leadership and engagement is critical for the health and well-being of their institutions going forward.
The Change Leader offers governance consulting services to help colleges and universities implement these new models. In addition to being a higher education consultant, Dr. McNaughton is an active independent board member, with 15+ years of board experience in multiple industries.