In today's political and econonic environment, universities are being
forced to grapple with significant contemporary challenges, including
uneven public support, surging enrollments, cost containment, and
increased demands to serve as engines of economic growth. Against this
difficult and fast-changing backdrop, boards, presidents, and
chancellors can occasionally overlook governance policies and
legislative statutes and mandates adopted in previous years. Such
oversights can prove to be embarrassing, even damaging, to the
institution.
For example, in the early 1990s, following
controversy about compensation of top administrators, the governing
board of a large and prominent university system adopted policies and
procedures designed to promote fiscal transparency and to prevent any
future abuse. The board’s 1992 policy required that all compensation
arrangements—including not just salaries but also any deferred
compensation, additional pension contributions, housing and car
allowances, and other similar benefits—for hundreds of senior
institutional administrators be identified and presented to the
university’s regents as part of their action agenda when they approved
these administrators’ appointments.
As time moved on,
institutional memory waned. In scores of instances over a number of
years, total compensation for these administrators was not
systematically included in the requests made to the regents to approve
the administrators’ appointments. In 2005, several media outlets
discovered large-scale irregularities in the salaries and compensation
awarded to high-level administrators without formal board approval.
Cumulatively, tens of millions of dollars were involved.
As a
result, the state government and the university system initiated
inquiries. The chairman of the board of regents appointed a task
force—comprised of respected elected officials, internal and external
higher-education leaders, and representatives from business and
journalism—to conduct an independent review of policies and practices on
executive compensation. Audits were conducted by both the state
legislature and an external auditor. The inquiries, reports, and audits
revealed numerous failures in reporting and violations of established
university policies, resulting in legislative reprimands and public
criticism of the university system and its top leaders.
Although
it ultimately was determined that the deviations from the regents’ 1992
policy were unintentional and that the university system did not
deliberately depart from the regents’ requirements and expectations, the
actions taken were, nevertheless, clearly not in compliance with the
1992 policy. Furthermore, while it was discovered that in numerous
instances the total compensation packages were, in fact, reported to the
board, they were reported in background documents on what amounted to a
caseby- case basis, rather than in the regents’ action agenda as the
policy required.
Several factors contributed to this oversight.
First, “institutional memory,” including knowledge of the 1992 policy,
was lost over time as regents and senior university officers changed.
Second, the existing internal audit system failed to screen
administrative actions against existing regents’ policies and did not
flag deviations for the regents and the university system’s president.
Third, there was no systematic review of materials submitted to the
regents by the people specifically charged with verifying adherence to
established policies. Fourth, there was no universally accessible system
for reporting personnel records, including compensation records.
Although
not intentional, the actions of this university system were
significantly in violation of the established requirements. Adding to
the level of exasperation of everyone concerned in this incident was the
fact that the vast majority of these unreported compensation packages
were completely in line with the compensation approved by the board for
other comparable positions within the university system. But—because
institutional memory had faded and the board policies were not strictly
followed—the violations were reported in the media as major
mismanagement and resulted in a significant black eye for the system.
Remedying the oversights has required numerous committees and
commissions—involving scores of people and voluminous reports—all aimed
at creating comprehensive processes and procedures to assure that
policies adopted at any level within the organization are preserved and
understood by persons responsible for implementing them.
A second
example involves a major east coast university. The university’s
hospital, long affiliated with the institution, was separated into a
501(c) 3 entity with its own board by state lawmakers several decades
ago. The original statute mandated that the university’s board of
regents continue to have a significant role in the governance of the
hospital in areas ranging from budget requests to leadership
appointments. This was done to ensure that the hospital would continue
to serve as the clinical arm of a major medical school. Over time, as
new regents were appointed, the hospital board’s membership turned over,
and university presidents departed, these policies, intended to ensure a
close working relationship, were forgotten and the collaborative
relationship began to deteriorate.
The hospital grew into a more
independent system with the addition of several community hospitals
around the state. The focus on the original partnership between a
teaching hospital and a major medical school was diluted all because the
policies that were intended to prevent such a drift were “forgotten.”
The recent “rediscovery” of the governing statute gives the university
an opportunity to try and reestablish its role in the hospital’s
operations and restore the collaborative approach that was intended.
While this is certainly a positive development, the situation could have
been avoided by simply adhering to policies that were already “on the
books.”
While these may seem somewhat extreme examples, I fear
they may be symptomatic of potential problems that lie just beneath the
surface at many universities. At the very least, they underscore the
importance of having a process in place to systematically and regularly
review and update governance policies.
This is precisely the
effort we have launched within the University System of Maryland (USM).
Working with our partners in the Office of the Attorney General (AG), we
have established a team to begin a systematic examination of hundreds
of specific policy requirements and statutory obligations on the books
governing the operations of the system. This was launched as a year-long
process to review, identify, and correct any instances in which the
system is failing to adhere to existing board policies and
state-reporting obligations.
With the support of the USM Board of
Regents, this process was initiated in January. A joint USM-AG team is
currently going over every policy and identifying specific
responsibilities to determine exactly who is responsible for ensuring
compliance. Thus far, for the most part, the system is in compliance
with all substantive requirements, but some issues have emerged. These
problematic areas fall into two basic categories.
First, there
are a number of minor, “technical” violations of established USM policy,
such as position titles that are no longer operative, institutional
names that have been changed, or required-reporting policies that are no
longer necessary. For example, there is a USM policy that requires the
“Vice Chancellor for Agriculture and Natural Resources” to approve
certificate of merit awards in agriculture. There is no such vice
chancellor and no such award any more. In addition, there are dozens of
policies requiring the institutions to submit procedures, internal
policies, and reports to the chancellor, who serves as head of the
system, to be kept on file.
These policies pre-date routine
electronic communications, and we’re looking at streamlining the flow of
paper with a new or amended policy that will allow for submission of
Web links, rather than reams of paper, to meet these requirements. Later
this year, the compliance review team will take these internal issues
to the board of regents in order to make the technical revisions
necessary to bring USM into compliance or to remove outdated
requirements.
Second, along with these minor concerns, there are a
few substantive areas where the passage of time and changes in
leadership—on the board of regents, in the system office, on our
campuses, and in the state legislature—have resulted in a lapse in
compliance. For example, the compliance team has discovered a USM policy
that mandated creation of a systemwide intellectual-property committee
five years ago. However, the individual who proposed this policy and
championed its approval departed the system shortly thereafter, with no
committee having been established. In this instance, we must either
eliminate the requirement or establish such a committee.
Another
example that came to light is the fact that some years ago, our system’s
board of regents issued a mandate that required our institutions to
publish plans that projected an entering student’s tuition over four
years. However, over the last several years state support for the
system, which plays a key role—if not the key role—in determining
tuition levels, has been very uneven. A half-dozen years ago, state
support was being reduced significantly, leading to double-digit tuition
increases. For the last three years, however, we have received state
support at a level that has allowed us to keep tuition flat. Given this
level of uncertain state support, the idea of four-year published
tuition projections was deemed impractical. The requirement,
nevertheless, remains in place, meaning we must either respond to it,
revise it, or remove it.
Next year, the team will work through
the appropriate channels (the Board of Regents for internal requirements
and the Maryland General Assembly for statutory requirements) to
modernize or revise these mandates and bring us into strict compliance.
The flow chart above captures the essence of our process.
While
the initial review will be timeconsuming and difficult, this step will
position the university system’s leadership to regularly and
systematically maintain alignment between board policies and
administrative actions. The benefits of this effort (both initiating it
and maintaining it) are threefold:
- First and foremost, we will have confidence that our policies and practices are in compliance with board policies and state mandates. If this were the only benefit, the effort would be worthwhile.
- Second, the review affords us the opportunity to streamline operations, eliminate duplicative efforts, and redirect our precious human resources to more productive activities.
- Finally, finding and reporting the areas of non-compliance ourselves, as opposed to having them revealed in the media, puts us in a far better position to initiate corrective action and avoid potentially embarrassing public criticism.
Obviously, once the initial review process is complete and the
necessary internal and external changes have been made, it is simply
common sense to implement a mechanism that monitors these issues on an
ongoing basis. USM is considering options ranging from a computerized
database that houses all policies pertaining to the USM, to the
establishment of a standing committee that meets on a regular basis to
analyze requirements and compliance. In either case—high-tech or
low-tech—the reliance on “institutional memory,” which has proven itself
to be an ineffective method for regulating compliance, will no longer
be necessary.
Higher education today faces several significant—
and interwoven—issues, from the twin challenges of access and
affordability, to questions of how to enhance quality in a time of
constrained resources, to the increasing expectations for public
accountability. As we address these vital issues, it is imperative that
we maintain the public’s trust in the integrity of our operations. Few
things can do more to damage that trust than when we fail, even if
inadvertently, to adhere to our established policies and practices. We
have an obligation to take the steps necessary to make certain the
public support for—and trust in—higher education is well placed.
Maintaining, monitoring, and updating our governance policies are
important ways to sustain recognition of higher education as a “public
good” worthy of public investment.
