Solving Higher Education’s Crisis of Governance Means Changing How We Choose Governors

Elections may be the lifeblood of free and functional societies, but they can also be fun. My wife is a member of a union – the Writers Guild of America – that held a hotly contested election over the summer. The issue was that the Guild had instructed all members to fire their agents due to a clear conflict of interest (and because they obstreperously continued to drive fancier cars than their clients). Over the summer, the agencies assembled an insurgent slate of Quisling writers for the board election scheduled for September. Unfortunately for the agents in a campaign conducted largely on social media, the top of the Vichy ticket was Phyllis Nagy, a screenwriter with no history of union service and a knack for social media malapropisms that kept Guild members alternatively enraged and entertained for two months.

Despite having a publicist (likely paid for by the agencies), Phyllis painted herself into corner after corner on Facebook and Twitter, comparing the Guild’s leadership to North Korea and how she was being treated to the Inquisition and Salem Witch Trials. The topper came when she summarized the rationale for her campaign by tweeting the following “quote” from Benjamin Franklin: “It is the first responsibility of every citizen to question authority.” Well, dozens of writers soon figured out that Franklin never said any such thing, and began making up fake quotes about Phyllis Nagy. My favorite was:

Phyllis Nagy is good at Twitter.
– Winston Churchill

The Writers Guild election went the right way: a highly engaged and informed electorate ensured that the agents of the agents were trounced. But I can’t say the same for every election or organization – and not just because someone’s invited a foreign power to interfere. College and university boards are a prime example.

When it comes to selecting their governors, overseers, regents, directors, and trustees, higher education institutions follow one of four models. Trustees of public universities are either: (1) majority appointed by the governor (e.g., Indiana with a minority elected by alumni, California with a minority ex officio, or New Jersey with a minority self-perpetuating i.e., selected by incumbent trustees); (2) majority selected by the members of the state legislature (North Carolina); or (3) elected statewide (Michigan, many community college districts). As a result, selecting trustees for state universities tends to be highly political, rarely hinging on matters of institutional performance and – with the possible exception of free speech (a political issue) – whether the university is achieving its mission.

Private universities select door number 4: majority self-perpetuating – primarily based on who’s willing to donate the most money – with a minority elected by alumni. The few elected seats are contested by candidates handpicked by the administration and incumbent trustees. When an unwelcome candidate attempts to crash this cozy party – as Georgetown Law professor and Yale alum Nicholas Rosenkranz is currently attempting at Yale with a campaign focused on reducing bureaucracy (and naturally free speech) – it’s a big deal. But the cranky Rosenkranzs of the world have no chance to constitute a majority because a majority of trustees are elected in only one of the four models. And here, the statewide electorate is a wild overreaction to the fundamental problem of who should have a say: alumni (sure), faculty (why not?), staff (really?), students (OK boomer), and townies (fuggedaboutit). The upshot is that – unlike the Writers Guild – college and university trustees aren’t directly selected by those closest to and most concerned with the welfare and performance of their institutions.

Why should we care about democratic governance in American higher education? Because the current system of indirect, political, and self-perpetuating (i.e., bought and paid for) governance is broken. Much of what plagues our colleges and universities boils down to a failure of governance. Trustees – primarily political appointees and wealthy donors – are falling far short of meeting their fiduciary obligations to oversee tuition and fees, finances, admissions, teaching and learning, completion, and employment outcomes. According to Wallace Hall, a former member of the University of Texas System Board of Regents commenting on the Varsity Blues admissions scandal, “The real cause… is failure of university trustees to meet their fiduciary obligations… Weak boards allow university administrators to limit oversight of admissions… It is also the reason for unrelenting tuition inflation, [and] $1.6 trillion in national student debt.”

USC – the institution most implicated in Varsity Blues – has belatedly come to terms with its failed governance. According to the Board Chair, an alumnus and wealthy L.A. developer of festival shopping malls, in the past, board members – including Steven Spielberg and L.A. Lakers owner Jeanie Buss – would “gather every quarter for a two-hour meeting of good news and go home.” So after a new “Special Committee on Governance Reform” spent 14 months studying the issue, USC announced it will reduce the size of its board from 60 to 35 – not all at once mind you, but “over the next few years mainly through attrition and new term limits.” If the many scandals USC has faced in the past decade can be compared a five-alarm fire, it’s taken 14 months for the engine to arrive, and it will take many more years to put the fire out.

A few years back, a survey of college and university trustees by Public Agenda and the Lumina Foundation revealed that only a small minority of trustees ever took positions that were critical of administrators and a majority of trustees said their primary source of information was the administration. As one trustee noted: “It’s an honor to be on the… board, but it’s an honor that tends to accrue to people in the later stages of life, after they’ve already achieved some kind of prominence at some usually unrelated discipline… Trustees don’t really want to spend the substantial time it takes to get up to speed on issues to the point where they can actually debate with an officer at the college.” In short, trustees aren’t asking the fundamental questions fiduciaries should ask. Might the level of motivation and sense of responsibility increase if most were elected? Alumni concerned about tuition, debt, completion, and employability at their alma mater should have an outlet more consequential than a quixotic protest campaign.

For all their many challenges, private and public corporations don’t have this governance problem: Company directors are elected directly by shareholders (if not always proportionally). (To be fair to higher education, corporations have the advantage of much clearer constituents i.e., shareholders. But even if Elizabeth Warren mandated that 40% of board seats go to employees, they’d still be directly elected and light years ahead of colleges and universities.) In the corporate world, if shareholders are unhappy about a company’s direction, they can run a slate of new directors, win a proxy battle, and take control of the board. This threat is the bread and butter of activist investors and – despite many examples of poor corporate governance in recent years – has generally proven effective at keeping leadership from completely falling asleep at the switch as we’ve seen at far too many colleges and universities.

But even if we could snap our fingers and say henceforth all trustees will be directly elected, college and university governance would still be at a huge disadvantage to the private sector. Because even if every trustee were voted in, alumni and other constituents wouldn’t be properly informed.

For public companies, the largest shareholders are institutional investors like mutual funds that hold shares in thousands of companies. Prior to the 1980s, investors almost always voted the way management wanted them to vote; dispersed and diversified investors aren’t well-positioned to assess whether the directors of a given company are doing a good job and deserve to be re-elected. Then in 1988 the Department of Labor decreed that pension plans had a fiduciary duty to make informed decisions about how they voted their shares. This spawned the creation of proxy advisory services like ISS (Institutional Shareholder Services) and Glass Lewis, which institutional investors pay to provide recommendations on governance. Should the CEO get a raise? Should the current directors be re-elected or should the slate proposed by Activist Investor Fund be entrusted with the opportunity to lead? Institutional investors now look to the recommendations of proxy advisory services and almost always vote accordingly.

Higher education’s crisis of governance will only be solved by expertise. As Jeff Selingo recently tweeted of trustees: “they know so little about #highered. So they don’t know the right questions, focus on the wrong thing, and meet too infrequently to have real impact.” Clearly, the goal should be for every trustee to be an expert fiduciary, capable and motivated to make the decisions that will allow their institution to best achieve its mission within the constraints of available resources (and reasonable financial demands on its constituents). Why not harness the power of democracy to get there? But as recent elections have shown, democracy is only reliable when voters are informed. Improving college and university governance requires direct elections powered by informed voters.

Last month I wrote a white paper about HEA reauthorization and how it could be a key vehicle to close America’s skills gap. Now here’s another idea for HEA reauthorization: require that all Title IV institutions have a board that is majority elected by alumni and any other constituents determined by the institution. States could continue to appoint political hacks and clowns to their state university boards, but in recognition of the fact that states no longer provide anywhere close to majority of their budgets (while federal grants, subsidized student loans, and research dollars often constitute a majority), they would be limited to a minority. Second, the Department of Education (ED) should require colleges and universities to engage a qualified (i.e., ED-approved) independent voter advisory service to evaluate candidates and any and all matters submitted directly to voters and distribute recommendations with ballots.

The vast majority of college and university trustees aren’t elected, motivated, expert, or informed. They enjoy returning to campus a few days a year, having read the board materials assembled for them by administrators, seeing the sparkling new buildings with their name on the front, ensuring that their political causes are being addressed, and little more. They’re definitely not wasting their valuable time reading this article or thinking hard about how to improve the governance of their institution. Direct election of directors and proxy advisory services have improved corporate governance. College and university boards need a comparable boost.