Most governing boards devoted time over the last months to planning for various scenarios: What happens if ... the value of our endowment continues to drop, retention and philanthropy decline, financial-aid demands escalate, the state cuts our budget again, enrollment is lower--or higher--than we expect? This helps boards anticipate possible disruptions to institutional stability and plan reasonable responses.
As daunting as the fiscal challenges are, governance challenges also loom. The environment for higher-education governance started to heat up when Enron's problems became public, and the temperature has climbed steadily since. The Internal Revenue Service, the Senate Finance Committee, and the public question processes and decisions, demanding more accountability and transparency, especially around matters of cost, compensation, and endowments.
This double whammy of heightened financial worry and heightened scrutiny places governing boards in an "interesting" situation. Not only must they determine how best to address some of the most perplexing financial challenges in memory, in doing so they must also be more accountable and transparent than ever before. The governance of colleges and universities, once treated on some campuses as largely honorific, now demands a professional commitment and steady nerve.
This issue of Trusteeship provides a picture of the current environment for campus governance, as well as some guidance. William Freund, chief economist emeritus of the New York Stock Exchange, offers his reflections on the economy and the "slow, gradual, and tedious" recovery before us. State legislators Geanie Morrison and Denise Merrill suggest that now is the time for state legislatures to engage more directly with higher education to accomplish state goals. The challenge, they argue, is finding new ways to address the educational needs of states and citizens, even in this new turbulent economy.
Tom Hyatt offers guidance on the new IRS Form 990, the implementation of which is affecting boards of all independent institutions, as well as the foundations of public colleges and universities. Part of the new focus on board and institutional accountability, this "new report card" is sure to have more public audiences than the previous form, but it also offers a way to verify "use of best practices in governing policies and procedures."
Governance guru Dick Chait does what he does best--he questions "common knowledge" about governance. Instead of focusing so much on policies and procedures, he would have boards pay attention to their culture to avoid being "lawfully mediocre."
As the "interesting times" continue, board members should take heart from the knowledge that the quality of their governance today can strengthen their institutions' reputations and financial stability for years to come.
