Trusteeship springs into spring with its March/April issue, featuring a special insert of AGB’s Statement on Institutional Governance, an important document whose eight principles are intended to guide boards in the governance of colleges, universities, and systems, inform them of their roles and responsibilities, and clarify their relationships with presidents, administration, faculty, and others involved in the governance process.
In our continued coverage of the economy, William Jarvis asks whether the endowment model is still working, based on this year’s NACUBO-Commonfund Study of Endowments. Stephen Pelletier follows up with a consideration of whether it’s time, from a business perspective, to put money into “green” initiatives. A group of experts discuss the perspective provided by strategic finance and making connections among the institution’s strategic plan, long-range financial plan and annual budget. Former university president Clara Lovett makes the case for strategic thinking as a driver of transformational change. And St. Norbert College’s President, Thomas Kunkel, gives readers a primer on what it means to be a first-time leader.
Strategic finance is aligning financial decisions—regarding revenues, creating and maintaining institutional assets, and using those assets—with the institution’s mission and strategic plan.
The concept known as “strategic finance” increasingly is being seen as a useful perspective for helping boards and presidents develop a sustainable long-term strategy to align an institution’s revenues and expenditures with fulfillment of its mission, assurance of its educational quality, and preservation and enhancement of its assets. The approach especially helps governing boards grapple with the long-range issues of staying true to institutional mission in difficult economic times, a challenge that governing bodies often do not have—or do not take—the time to focus on.
Service on a college or university board of trustees has always been an honor, and still is. It has always entailed significant responsibilities, and still does. But in the past 20 years, board service has become more complex and demanding of time and, oftentimes, of treasure than it used to be. The customary challenges, especially fiduciary accountability, the hiring and firing of CEOs, and overall good stewardship, are difficult enough. At a time of rising expectations and diminishing resources, of profound demographic and cultural change, of global opportunities and global competition, trustees are also called to think strategically about their institutions.
When Commonfund and the National Association of College and University Business Officers (NACUBO) announced in late 2008 that we would join forces to combine our two endowment studies, which had historically been fielded and reported separately, we had high hopes for the venture, but those hopes were tempered with caution. The financial markets were already in the throes of what would prove to be the steepest and most broadly based decline in decades, and some observers feared that the “endowment model” of highlydiversified portfolio investing that had produced outstanding average returns for educational institutions during the 1990s and much of the 2000s would be abandoned in favor of a return to more cautious, “traditional” approaches to managing perpetual investment pools.
Like hockey players chasing a puck, investors don’t focus on where the market is or was, but on where they think it’s going to go. That’s certainly true of managers of university endowments. Everyone wants in early on the next best thing—as long as the risk isn’t too high. The fact that endowment returns were down an average of 18.7 percent in fiscal 2009 might make money managers all the more eager to buy into emerging industries with lots of promise.
With that in mind, endowment managers at universities may wonder whether “cleantech” holds tomorrow’s big opportunities. Given a recent spate of conference sessions, media stories, and reports from investment advisors on the topic, university money managers can hardly avoid the buzz that’s building about green investing. Cleantech has varying definitions, but generally refers to companies involved in “green” energy production or storage (think wind and solar), renewable fuels (biofuels), energy efficiency, and greener approaches to traditional fuels (e.g., nuclear power or “clean” coal).
As a freshman president at St. Norbert College, Thomas Kunkel learned that college presidents must juggle many roles—and that which ones and when are often entirely out of the president’s control.
In recent years, higher education has been confronted with uncertainties—about levels of state support and endowment returns, student enrollment and institutional capacity, stimulus funds and research dollars. Some institutions face uncertainties about the future—about the academic programs they should add or drop, the nature and extent of external partnerships, putting resources into growth, or focusing on maintaining fiscal health. In a time of such uncertainty, the breadth of the board’s responsibilities increases palpably.
Morningside College in Sioux City, Iowa, has fared quite well throughout the recent national economic turmoil. Yet in an effort to be prudent and reduce administrative costs, I suggested that we cancel our board retreat this year. To my surprise, our board members, who cover their own expenses, implored us to spare the February retreat.
International-educational programs receive much attention as many colleges and universities race to establish formal collaborations abroad. But much closer to home—just a state away—you may be operating educational and related programs that create many unknown risks. Common activities are employees telecommuting from other states, affiliation agreements with out-of-state educational or health-care institutions, out-of-state research collaborations, alumni and development activities, or student recruiting programs. What legal issues arise when operating a domestic program out of state?
Conversations about “job creation” seem to dominate today’s political landscape. At the same time, institutions of higher education and their trustees are working hard to make a compelling case for sustained public and private support. Taking hold of the current interest in new and better jobs for American workers, universities must herald the job-generating benefits of academic research and development.
Higher education today brings to mind the old Johnny Mercer song: “When an irresistible force … meets an old immovable object … something’s gotta give.” Colleges and universities face irresistible forces that require profound change, but they are designed to be “immovable objects” that rebuff top-down efforts to alter them. Historically, this rooted stability, nourished by traditions of faculty independence and academic freedom, has served society well. However, when times call for “nimbleness,” such strengths can become weaknesses.
AGB's recent publication, Effective Governing Boards: A Guide for Members of Governing Boards of Public Colleges, Universities and Systems, is designed to provide an overview and clarify the fiduciary responsibilities for which boards are held accountable. It reminds board members that while the formal authority of a governing board lies within the corporate body, how individual members comport themselves contributes to a board’s overall effectiveness. The guide is intended to aid both experienced and new board members.
Shortly after taking office, Chancellor Holden Thorp commissioned an efficiency study to streamline the University of North Carolina at Chapel Hill’s administrative operations. A global business consulting firm identified savings of more than $150 million annually. Now the university is reinventing campus operations.
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