Monday, March 03, 2008

The Cal Governance Crisis

By Richard Vedder

By all accounts, the University of California system has had severe issues of university governance, and Doug Lederman's excellent INSIDE HIGHER ED story today details many of the problems. A couple of years ago, a salary scandal broke out that required some outside intervention (my friend Jim Duderstadt, former University of Michigan prez, played a lead role). The problems continue.

The Chair of the Regents is an activist, attending weekly meetings of top staff and issuing mission statements without even full Regent approval. I would agree that is going too far --interfering too much in the day to day operations of a great university. Yet too often I see the opposite --the governing board is sort of a cheerleading society for the President, expected to help raise money and, in state universities, occasionally help politically when the governor or legislature interferes. Too often these trustees get all their information from one source --the President and his top aides, and are not truly performing their fiduciary responsibilities of oversight. This type of wishy-washy pseudo-governance is what my friend Anne Neal's organization, the American Council of Trustees and Alumni, is all about. I have seen it at work at my own university, Ohio University, and I am sickened by the consequences of irresponsible inaction.

A few observations.

First, the root cause of all this is that the ownership of the university is ambiguous in most cases --property rights are ill defined. The faculty believe they should run the university, or, at the minimum, make all academic decisions. The President believes she was hired to run the place and the Trustees should be seen and not heard. The alums believe they are the heart and soul of the place, and often important financial backers, so they should have a key role to play. Students say, "The place is being run for us --we are the consumers and pay a lot of the bills." So they want a role in decision-making. In state universities, Governors and state legislatures on occasion claim ownership. The Trustees are the legal owners and supreme legal authority of the institution, so sometimes they really want to make decisions --lots of them, some initiated by them and not the campus community. The non-profit, no bottom line nature of higher education complicates things. These problems do not exist at the University of Phoenix. Everyone knows who is in charge.

Second, in the specific case of the University of California and some other mega-campus systems, I suspect that decision-making as a whole is far too concentrated in the center --a Soviet style approach of "one size fits all" that is not appropriate. UC Berkeley and UC Santa Cruz may be only 50 miles or so apart geographically, but they are miles apart in other ways. The Cal State system, ably run by the great Charlie Reed, is doubly complex. I am meeting later this year with the Regents at the University of Texas, which I suspect has some of the same problems, as does the SUNY system in New York and perhaps a few others.

Third, if we had a true bottom line --or even two or three measurable goals, many of these problems would disappear. University presidents could be told "deliver on meeting our goals, and we will largely leave you alone." It is the vagueness of measuring our success that allows room for arguments --Prez X is doing a good job one will say, while a second person will disagree. These problems are less prevalent in private enterprise.

Fourth, having said that, however, boards do have to be decisive at times --passive corporate boards are sued for not carrying out their obligations to stockholders. Hence the rate of consequential negative actions taken against CEOs of private corporations is greater, I suspect, then is the case with universities. They do their number one duty --hire and fire CEOs --more vigorously. I am thinking of all the financial tycoons running big New York financial institutions who have bit the dust in the last year or two. By the way, it would be a fascinating study to empirically verify (or refute) this assertion.

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