Good governance is especially important in higher education, because a university is, in many ways, a much more complicated organisation than a business, and governance in higher education must provide a framework for a truly variegated group of stakeholders. Nonetheless, the basic principles of corporate governance find application in higher education governance as well.
Having principles that are analogous to those in business does not mean that leadership in higher education should behave like businesspeople. What it does mean is that good governance structures the way in which leadership pursues its objectives – in any organisation.
The objective, for higher education, is knowledge. “Knowledge is higher education’s core business: However broadly or narrowly we define it, knowledge is the material. Research and teaching are the main technologies,” as one commentator puts it. Good governance drives performance in the pursuit of knowledge, and manages the risks involved.
Good Governance Organises Performance
For a company, corporate governance defines the relationship between shareholders and stakeholders (the principal) and management (the agent).
But this opposition is more complicated in higher education, because governance encounters a different stakeholder grouping, as a recent study explains.
“First, the principal (ministry at system level, or leadership within institutions) cannot know in detail what makes good ‘products,’ as education and research are credence goods, whose contribution to the principal’s utility cannot be fully known even afterwards. Second, the ‘production function’ of education and research relies on professionals (teachers and researchers), hence the process is largely under professional control of those professionals, leading to ‘bottom-heavy,’ fragmented organisations.”
In the UK, governance complexity is increased because policy in higher education is evolving. “There is a tension between traditional governance in higher education – in which the academic body played a fuller democratic role – and modern governance, in which smaller boards are preferred (partly for their flexibility) and board members are held to high standards in decision-making, warns the consultancy Farrer & Co. in an October 2019 report.
Good Governance Assures the Quality of Decision-Making
It is the role of good governance to enable universities to manage relations among these stakeholders and to ensure that sustainability is achieved. “Sustainability starts and finishes with governance. A university cannot flourish without adherence to its principles. Good governance informs and facilitates decision-making which, in turn, enables a university to grow and prosper. Coupled with accountability and transparency, governance (as an overarching framework) allows a university to be sustainable in the long-term,” according to a paper presented at the Association of University Administrators (AUA) 2019 Autumn Conference.
These same principles are all the basis of a well-run company:
- Adherence to purpose
- Dedication to the interests of stakeholders
- Robust well-informed decision-making
- Gender and ethnic diversity
Thus, it is not surprising that UK university boards now apply these principles too.
- Adherence to purpose. “Autonomy as the best guarantee of quality and international reputation. Academic freedom and high-quality research, scholarship and teaching.”
- Dedication to the interests of stakeholders. “Protecting the collective student interest.”
- Transparency. “The publication of accurate and transparent information that is publicly accessible.”
- Accountability. “A recognition that accountability for funding derived directly from stakeholders requires Higher Education Institutions to be clear that they are in a contract with stakeholders who pay for their service and expect clarity about what is received. Full and transparent accountability for public funding will be provided.”
- Gender and Ethnic Diversity. “The achievement of equality of opportunity and diversity throughout the institution. The principle that Higher Education should be available to all those who are able to benefit from it.”
The Governing Body, like a corporate board, is also responsible for ensuring that its own composition is diverse, and that its members have the necessary skill-sets to ensure performance.
Again, just as is the case for corporate boards, the University Governing Body makes final decisions for the university, and has collective responsibility for all institutional activities, under the Code. The board delegates ‘quality assurance’ to the Senate or Academic Board but retains responsibility for their actions. ‘Management’ responsibilities, along with controls to ensure continuance and manage risk, are delegated to the Executive.
Debate Around Remuneration of Senior Staff
There has been a fraught debate in the UK and elsewhere over policies for remunerating executives, so it is not surprising that higher education should address this as well. Just as high pay packages for top executives have caused public outrage, so has there been an outcry about high salaries for vice chancellors and other university leaders.
It is the role of good governance to address these issues, and, in 2018, the Committee of University Chairs published the Higher Education Senior Staff Remuneration Code.
The Code addresses three principles for pay: fairness, independence and transparency, according to John Rushforth, executive secretary of the Committee of University Chairs.
- Fairness: The Code sets out the issues that university remuneration committees should consider when deciding the pay of vice chancellors. Factors include external comparisons, levels of experience, and the complexity of the position.
- Transparency: The Code also stipulates that every institution must publish an annual report in which it sets out clearly the salary of its vice chancellor and the pay multiple showing how their remuneration compares with the median earnings of the institution’s whole workforce. If the multiple is significantly above average – which will be published every year – it must explain why.
- Independence: The Code states unequivocally that no vice chancellor should be permitted to be a member of the university’s remuneration committee. While they may be invited to attend meetings, they cannot be present during discussions about their own pay.
The emphasis on fairness, remuneration committee independence and transparency very much echoes proposals from shareholders for boards of directors on executive pay packages.
Addressing the Needs of all Stakeholders
We’ve discussed only a part of all the issues that the governance framework for Higher Education Institutions needs to address. Maintaining the students’ voice in governance continues to be a daunting challenge. Recruiting members for the governing body is still a limited exercise, in which ‘crony’ recruiting must be replaced by open advertisement and modern governance tools.
“Governance never rests,” writes Rushforth. The work for corporate governance is ongoing, and clearly significant progress is being made in governance for higher education as well.