The Compact, Institutional Autonomy, Fiduciary Duties, and Academic Freedom

College and university governing boards find themselves in an increasingly difficult environment. Federal proposals, especially those that condition economic benefits on their endorsement of a political agenda, have profound implications for institutional autonomy and academic freedom. The Compact for Academic Excellence in Higher Education¹ (“Compact”) appears to be one such proposal.² Trustees should view it not through the prism of partisan politics, but rather in light of their fiduciary duties; specifically,

• The duty of care, which requires them to make informed decisions in the best interests of the institution;
• The duty of loyalty, which mandates that they place the interests of the institution above their own personal interests, as well as the interests of any third party; and
• The duty of obedience, which calls for compliance with applicable laws and regulations, as well as faithfulness to the mission of the institution.

Because these duties are founded in the law, they represent legal obligations. According to judicial precedent,³ they are owed to the institution, not to any internal or external actor, including the federal government. Thus arises the question, Does fulfilling their fiduciary duties to the institution require governing boards to endorse what is arguably the political agenda of the federal government?

In addressing this question, trustees should consider not only their fiduciary duties, but also their ethical responsibilities, as set forth in the AGB Statement on External Influences on Universities and Colleges.⁴ Among these responsibilities are the dual obligations to preserve institutional autonomy and safeguard academic freedom.

What aspects of the Compact are “positive”?

Let’s examine the “positive” aspects of the Compact, which is positive in the sense that they are aligned with trustee fiduciary duties and ethical responsibilities. In general, the Compact affirms two fundamental aims of American higher education: intellectual enlightenment and the pursuit of the truth.⁵ In addition, it professes support for many of its core values, including the following:

• Academic freedom
• Civil discourse
• Ideological diversity
• Integrity in academic assessment
• Student equality
• Norms of acceptable conduct

These affirmations are salutary because they comport with the ethical obligation of governing boards to foster a campus environment that is safe, inclusive, and conducive to learning.⁶ They also highlight factors that distinguish “institutions of higher learning” from other types of institutions.

Intellectual enlightenment and the pursuit of the truth are the highest calling of a college or university. The former presupposes an environment that is safe, inclusive, and conducive to learning; the latter, the existence of objective facts, which are both discoverable and universally recognized as valid. Academic freedom is a precondition for intellectual progress. Without it, faculty and students could not challenge conventional wisdom, discuss controversial issues, or pursue the truth, unconstrained by political or ideological considerations. As a social protocol, civil discourse contributes to such progress. Besides preparing students for life in a democratic society, it facilitates constructive debate, which often results in the dynamic synthesis of opposing ideas, leading to innovation. Ideological diversity and innovation go hand-in-hand, because the positing of diverse ideas is essential for the synthesis of new ones.

Moreover, academic assessment is critical to understanding what students have learned at the end of the day. To be valid, credible, and meaningful, it must be based on objective criteria and uniform standards. And student equality is basic to higher education. It implies that no student should be favored or disfavored because of race, religion, ethnicity, national origin, sexual orientation, gender, or gender identity. As a guiding principle, it promotes a “level playing field” in which all students are treated as “learners” on the same footing. Lastly, norms of acceptable conduct ensure that student activism coexists with order, safety, and respect for others. Without these norms, academic freedom, civil discourse, ideological diversity, and student equality would all be at risk.

What aspects of the Compact are “negative”?

Let us turn to the “negative” aspects of the Compact, which is negative in the sense that they appear to be at odds with trustee fiduciary duties and ethical responsibilities.

Institutional Autonomy

First and foremost is the risk that the Compact poses to institutional autonomy.⁷ For decades, institutional autonomy has been a defining feature of American higher education. It gives colleges and universities wide latitude to determine their own mission, strategy, curricula, policies, organizational structure, and academic standards. It also distinguishes U.S. institutions of higher learning from their counterparts in other countries. In many of these countries, the higher education system is centralized, and academic institutions are practically appendages of the central government. This condition often impairs their ability to challenge conventional wisdom, question government policies, and innovate, particularly in areas that do not advance the interests of the state.

As for the United States, the Compact risks the autonomy of American institutions by conditioning federal benefits on their endorsement of what is explicitly stated to be “the priorities of the U.S. government.”⁸ Their accepting this condition could be a step in the direction of a more centralized U.S. higher education system. Effectively, it would supplant the will of trustees, administrators, faculty, and students with that of federal government officials. Such a result would occur in five functional areas traditionally overseen by trustees, managed by administrators, and influenced by faculty.

The first is admissions. Usually, admissions policies are formulated by academic administrators with input from faculty. Frequently, they are based on a holistic approach to admissions, which takes into account aptitude, past academic performance, extracurricular activities, social diversity, personal motivation, and other factors associated with student success. The Compact would not only modify these policies but also dictate how they should be implemented. It would prioritize aptitude over all other factors⁹ and require colleges and universities “to screen out [foreign] students who demonstrate hostility to the United States, its allies, or its values.”¹⁰

The second is financial affairs. In university governance, trustees approve tuition rates and usually set them high enough to cover most, if not all operating costs. Their doing so is incidental to their duty of care, which mandates, among other things, that they exercise reasonable care to ensure the financial health of the institution. The Compact would undermine their effort by requiring boards to freeze tuition rates for the next five years.¹¹ The moratorium would go into effect right away in the context of escalating operating costs, mounting capital expenditures, and diminishing margins. To make matters worse, the Compact would require institutions with an endowment exceeding $2 million per undergraduate to exempt “hard science” majors from paying any tuition at all. The exemption would not only reduce revenues but also skew enrollments away from the social sciences and humanities toward the natural and applied sciences.

The third area is enrollment management. Generally, college administrators formulate enrollment policies with a multitude of aims in mind, including advancing the institution’s mission, ensuring student quality, promoting student diversity, and maximizing tuition revenues. The Compact would intrude into this domain by setting a 15 percent cap on foreign undergraduate enrollments, and a 5 percent cap on enrollments from any one foreign country.¹² Because foreign students typically pay tuition at the full undiscounted rate, these measures are likely to weaken the financial condition of American colleges and universities, just at a time when they face declining tuition revenues as a result of adverse U.S. demographic trends, and soaring operating costs because of rising inflation. The measures would also limit the ability of these institutions to attract the best and brightest of foreign student talent.

The fourth area is organization. Under the laws of most states, entities are free to determine their own organizational structure without government interference. The Compact would restrict this freedom by requiring colleges and universities to revise their governance structure and “transform or abolish units that purposely punish, belittle, and even spark violence against conservative ideas.”¹³ What this means, in practical terms, is that under some circumstances the Compact could force a reorganization based purely on political and ideological considerations. Such a move would violate not only institutional autonomy, but also academic freedom, despite the Compact’s professed support for it.

The fifth is academic affairs. Typically, in a system of shared governance, the faculty propose degree requirements, while the president, provost, and board approve them. The provost and faculty formulate academic policies, such as those relating to transfer credits, subject to presidential approval and board oversight. The Compact would bypass this system and enter the realm of academic affairs first, by requiring foreign but not U.S. students to undergo instruction in civics¹⁴—presumably as a degree requirement and contrary to the principle of “student equality”—and second, by requiring college and universities to accept transfer credits earned by active and retired military.¹⁵ However meritorious the underlying policy goals may be to some, what is objectionable about these provisions is their “political overreach.” In pursuing the underlying goals through the instrumentality of the Compact, federal officials would effectively be stepping into the shoes of faculty, administrators, and trustees.

Duty of Loyalty

Another “negative” aspect of the Compact is that endorsing it, arguably, would require trustees to breach their duty of loyalty. As previously mentioned, this duty mandates that trustees place the interests of the institution above their own personal interests, as well as those of any third party. The duty is owed to the institution. Here, the relevant “third party” is the federal government. Based on “best practices” in governance, college and university boards should always “take into consideration” the interests of the federal government, as well as those of the general public.¹⁶ However, according to applicable court rulings, they should ultimately base their decisions on the interests of the institution.

In many respects, the interests of the federal government and those of U.S. colleges and universities coincide, as is evidenced by the parties’ professed endorsement of the fundamental aims of American higher education and its core values. However, the two interests are not identical, as is implied by (1) the explicit statement in the Compact that it “represents the priorities of the U.S. government,”¹⁷ and (2) its proposed intrusion into university affairs.¹⁸ Indeed, that the Compact was advanced in the first place suggests a broad divergence of interests.

Academic Freedom

Despite its professed commitment to academic freedom, the Compact would actually restrict it—at least for some internal constituencies. In a sense, it would create a three-tiered system of “expression rights”: the first, for representatives of the institution; the second, for foreign students; and the third, for everyone else.

The rights of institutional representatives, including trustees and administrators when acting in their official capacities, would be the most restrictive. Forced to embrace “institutional neutrality,” they could not engage in “actions or speech relating to societal and political events,” except where such events have a direct bearing on the institution.¹⁹

The rights of foreign students would be somewhat less restrictive. Despite the Compact’s professed support for “student equality,” they, unlike U.S. students, could not contest American or Western values, or endorse values that are “noxious”²⁰—presumably in the judgment of federal officials.

The rights of all faculty and U.S. students would be the least restrictive. They could broach just about any issue, and engage in just about any kind of behavior, so long as such behavior is not discriminatory, threating, harassing, or disrespectful of the rights of other members of the university community.²¹

Although these restrictions are intended to restore order, civility, and dignity to campus life, they purport to do so in a way that abridges the rights of some, but not other members of the university community. The end-result is likely to be a chilling effect, not just for university representatives and foreign students, but also for everyone else.

What Is Troubling About the Compact?

From a social, political, and economic perspective, the Compact is troubling in several respects.

Public Disaffection

First, and foremost, it symbolizes public disaffection with American higher education. This sentiment is strong and widespread. A survey conducted by the Pew Research Center in September 2025 indicates that 70 percent of Americans believe that the U.S. higher education system is “generally going in the wrong direction,”—up from 56 percent in 2020.²² This belief is shared by a majority of both Republicans²³ and Democrats²⁴—65 percent of the latter, and 77 percent of the former.

Aspects of American higher education that Americans find unacceptable include these:

• Affordability: nearly eight out of ten give U.S. colleges and universities poor or fair ratings on “keeping tuition costs affordable.”
• Job preparation: more than half (55 percent) give U.S. institutions poor to fair marks on “preparing students for well-paying jobs in today’s economy.”
• Ideological diversity: a large percentage (45 percent) give U.S. institutions poor or fair ratings on “exposing students to a wide range of opinions and viewpoints.”
• Opportunities for self-expression: a similar percentage (46 percent) give U.S. colleges and universities poor to fair marks on “providing students opportunities to express their own opinions and viewpoints.”

No doubt, federal officials are well-aware of this sentiment. They have responded by proposing in the Compact measures aimed at “restoring” the financial responsibility, ideological diversity, institutional neutrality, civility, order, and transparency of American colleges and universities.

Loss of Confidence

Equally disturbing is a lack of confidence on the part of federal officials, mainly conservatives, in the leadership of American higher education. In their eyes, college and university presidents have been passive in the face of rising antisemitism, the suppression of right-wing views, and the erosion of civil discourse. They have given “woke ideologues” free rein in the classroom and have allowed foreign students to subvert American values. They have endorsed policies that discriminate against students and faculty on the basis of race, ethnicity, gender, and other immutable characteristics, to the detriment of aptitude, merit, and equality. And they have been ineffective at controlling costs, holding down tuition rates, and forging rewarding career paths for college graduates.

Through the instrumentality of the Compact, these officials have set out to fix these “problems.” In a sense, they have taken aim at university leaders for allegedly failing to promote ideological diversity, civil discourse, and student equality; foster a safe and non-hostile learning environment both conducive to learning and supportive of American values; and make a college education affordable.

“One-directional” Benefits

Another disturbing aspect is that by focusing exclusively on federal benefits, the Compact overlooks the enormous benefits that American colleges and universities generate for the U.S. economy. In 2024, for instance, private educational establishments contributed nearly $335 billion to U.S. gross domestic product.²⁵ In the preceding year, public and private colleges, universities, and professional schools employed 3.1 million workers whose incomes served to broaden the federal tax base.²⁶ Also expanding this base were the lifetime earnings of college graduates, whose knowledge, skills, and competencies were imparted by these institutions.²⁷ Scientific projects that research universities sponsor create new technologies, many of which are protected by patents and licenses that support tens of thousands of start-up ventures.²⁸

These outcomes demonstrate that American institutions of higher learning are not just passive recipients of government largesse. Rather, they are powerful engines of economic growth. By sparking technological innovation, providing instructional services, and increasing human productivity, they generate massive returns to the U.S. economy that justify “investing in them” with federal benefits.

“Heavy-handedness”

Also troubling is the Compact’s “heavy-handed” approach to the challenges facing American higher education. To many college and university leaders, this approach borders on “duress,” aggravated by unequal bargaining powers.

The benefits provided by the federal government to U.S. colleges and universities are numerous and varied. They include “access to student loans, grant programs, and federal contracts; funding for research directly or indirectly; approval of student and other visas in connection with university matriculation and instruction; and preferential treatment under the tax code.²⁹” Valued at over $250 billion,³⁰ they effectively subsidize college and university operations.

By conditioning these benefits on their endorsement of the government’s “priorities for higher education,” the Compact presents U.S. colleges and universities with two unsavory alternatives: either reject the condition and forego the benefits,³¹ or accept the condition and forego their autonomy. The first alternative could debilitate these institutions financially. The second would effectively subordinate their educational mission to the political ideology of the state.

Populist conservatives might argue that such “heavy-handedness” is justified because “woke ideologues,” who dominate the political conversation on U.S. campuses, are entrenched, and university leaders are either unable or unwilling to dislodge them. In their eyes, the Compact represents a “political correction,” necessary to set U.S. colleges and universities on a path more aligned with their mission, and in the broader scheme of things, to reorient society ideologically.

A less onerous approach would have been for federal officials to work with college and university governing boards toward improving American higher education in a manner consistent with its fundamental aims and core values. Such an approach is founded on respect for the fiduciary duties of governing boards, as well as the autonomy of their institutions. No doubt, many trustees share the concerns of federal officials. Like a multitude of Americans, some believe that U.S. higher education is headed in the wrong direction. To coerce them into accepting the terms of the Compact is not only to ignore their well-founded views, but also to disregard their role as stewards of the institution, bound by legal obligations and ethical responsibilities. It is also to dismiss the possibility of a constructive “partnership” between U.S. colleges and universities and the federal government.

In Closing

Ultimately, college and university governing boards must decide for themselves whether to accept or reject the Compact for Academic Excellence in Higher Education. In their deliberations, they should consider the degree to which it comports with their legal obligations and ethical responsibilities. They should also consider the extent to which it aligns with the fundamental aims of American higher education and its core values. As a sound practice, they should take into account the priorities of the U.S. government. They should also bear in mind the legitimate concerns of the general public. In the final analysis, however, they should strive to fulfill their fiduciary duties to the institution by endeavoring to act in its best interests.

Richard J. Joseph, JD, is the former president of Babson Global, Inc., a wholly owned education subsidiary of Babson College. As chief executive officer, he advised the leadership of academic institutions in the Middle East and Southeast Asia. Joseph is also the former provost-for-term and chief academic officer of Bryant University. Earlier, he served 13 years on the faculty and administration of the University of Texas at Austin, where he taught mergers and acquisitions and international taxation. He also served as interim dean of the Knauss School of Business at the University of San Diego. Before embarking on his career in higher education, Joseph worked in banking and as a mergers and acquisitions lawyer. He is a is a senior consultant for mergers, affiliations, and partnerships with AGB Consulting and co-editor and co-author of the Handbook of Mergers and Acquisitions (Oxford University Press, 2014).

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1. The full text of which is published by Nerve at https://nerve.news/news/full-text-of-trumps-compact-for-academic-excellence/.
2. In its introduction the Compact explicitly states, “To advance the national interest arising out of this unique relationship [between the U.S. government and the U.S. university system], this Compact…represents the priorities of the U.S. government in its engagements with universities that benefit from the relationship. Compact for Academic Excellence in Higher Education [italics added],” Nerve at https://nerve.news/news/full-text-of-trumps-compact-for-academic-excellence/.
3. Squeri v. Mount Ida College, No. 19-1624, 2020 WL 1445400 (1st Cir. Mar. 25, 2020).
4. AGB Statement on External Influences on Universities and Colleges, 2012, as affirmed in AGB Statement on Influences Impacting Governing Board Independence and Leadership, December 8, 2023, https://agb.org/agb-statements/agb-board-of-directors-statement-on-influences-impacting-governing-board-independence-and-leadership/.
5. See Robert J. Thompson, Jr., Beyond Reason and Tolerance (Oxford University Press, 2014).
6. AGB Board of Directors Statement on Governing Board Accountability for Campus Climate, Inclusion, and Civility (AGB, 2016), https://agb.org/wp-content/uploads/2019/01/agb-statements/statement_2016_campus_climate.pdf; and Freedom of Speech and Diversity, Equity, and Inclusion on Campus (AGB, 2022), https://agb.org/product/freedom-of-speech-and-diversity-equity-and-inclusion-on-campus/.
7. With respect to private institutions, the principle of institutional autonomy was endorsed by the U.S. Supreme Court in Trustees of Dartmouth College v. Woodward (1819). With respect to the public institutions of many states, the principle is protected by constitution or statute. For example, Article IX, Section 9 of the California Constitution, which established the University of California, states in relevant part, “The university shall be entirely independent of all political or sectarian influence and kept free therefrom in the appointment of its regents and in the administration of its affairs…” Cal. Const. art. IX, § 9.
8. See Note 2.
9. The Compact mandates that undergraduate admissions be based on standardized tests, which purport to measure aptitude.
10. Id., Section 8
11. Section 7 of the Compact states, “Signatories acknowledge that universities that receive federal funds have a duty to reduce administrative costs as far as reasonably possible and streamline or eliminate academic programs that fail to serve students. Toward this end, signatories to this compact commit to freezing the effective tuition rates charged to American students for the next five years.” Id.
12. Id., Section 8
13. Id., Section 2
14. Id., Section 8
15. Id., Section 7. The original credits would be recorded in the Joint Services Transcript, “an academically accepted document approved by the American Council on Education (“ACE”) to validate a service members military occupational experience and training along with the corresponding ACE college credit recommendations.” Joint Services Contract website, at https://jst.doded.mil/jst/.
16. See the AGB Board of Directors’ Statement on Influences Impacting Governing Board Independence and Leadership (AGB, 2023), p. 5, https://agb.org/wp-content/uploads/2023/12/AGB-Board-Statement_Influences-Impacting-Board-Independence-Leadership_web.pdf.
17. Id., Introduction
18. See the previous discussion under “Institutional Autonomy.”
19. Compact for Academic Excellence in Higher Education, Section 4, Nerve at https://nerve.news/news/full-text-of-trumps-compact-for-academic-excellence/.
20. As inferred from the following passage in the Compact: “Federal permission for foreign student visas is intended to further America’s national interest to the extent…the selected students are introduced to, and supportive of, American and Western values, ultimately increasing global understanding and appreciation for the United States and our way of life. Universities that rely on foreign students to fund their institutions risk…if not properly vetted, saturating the campus with noxious values such as anti-Semitism and other anti-American values, creating serious national security risks.” Id., Section 8. While the drafters of the Compact might have intended this statement to apply primarily to foreign applicants, ensuring that foreign matriculants are “supportive of American and Western values” and do not “saturate the campus with noxious values,” would, for all practical purposes, require restrictions on their expression rights, as the current practice of deporting foreign students clearly indicates.
21. Caveat taken from id., Section 2.
22. See https://www.pewresearch.org/short-reads/2025/10/15/growing-share-of-americans-say-the-us-higher-education-system-is-headed-in-the-wrong-direction/.
23. Including Republican-leaning independents.
24. Including Democrat-leaning independents.
25. U.S. Bureau of Economic Analysis, GDP by Industry, Table 14. “Gross Domestic Product by Industry Group: Level and Change from Preceding Period,” available for download at https://www.bea.gov/data/gdp/gdp-industry. Although corresponding data for public educational establishments is unavailable, these establishments, being more numerous, probably contributed a larger dollar amount to U.S. gross domestic product.
26. U.S. Bureau of Labor Statistics, “Occupational Employment and Wage Statistics, May 2023 National Industry-Specific Occupational Employment and Wage Estimates, NAICS 611300 – Colleges, Universities, and Professional Schools,” https://www.bls.gov/cew.
27. For the median weekly earnings of college graduates in 2024, see U.S. Bureau of Labor Statistics, “Employment Projections, Earnings and Unemployment Rates by Educational Attainment, 2024,” https://www.bls.gov/emp/chart-unemployment-earnings-education.htm; also, Jaison R. Abel and Richard Deitz, “Is College Still Worth It?” Liberty Street Economics, Federal Reserve Bank of New York, at https://libertystreeteconomics.newyorkfed.org/2025/04/is-college-still-worth-it/.
28. From 1996 to 2020, U.S. academic technology transfer made the following contributions to the American economy: $1.9 trillion to US gross industrial output, $1 trillion to U.S. gross domestic product, 6.5 million jobs, over 149,000 patents, and licenses for more than 19,000 start-ups. Association of University Technology Managers, “Driving the Innovation Economy,” at https://autm.net/AUTM/media/SurveyReportsPDF/2024-US-AUTM-Infographic.pdf.
29. Compact for Academic Excellence in Higher Education, Introduction, Nerve at https://nerve.news/news/full-text-of-trumps-compact-for-academic-excellence/.
30. A conservative estimate based on the following facts: (1) In the 2024–25 academic year, federal financial aid to students totaled approximately $155 billion. College Board, Table SA-1: “Total Student Aid and Nonfederal Loans in 2024 Dollars (in Millions), Undergraduate and Graduate Students Combined, 1994-95 to 2024-25, Selected Years,” Trends in College Pricing and Student Aid 2025, at https://research.collegeboard.org/media/pdf/Trends-in-College-Pricing-and-Student-Aid-2025-final_1.pdf. (2) In Fiscal Year 2023, federal research funding to higher education institutions totaled $55 billion. National Science Foundation, National Center for Science and Engineering Statistics, Table 1: “Higher Education Research and Development: Fiscal Year 2023,” NSF 24-307, at https://ncses.nsf.gov/pubs/nsf24307 (3) Between 2022 and 2025, Federal education-related tax benefits were approximately $211 billion, or about $42 billion per year. Urban-Brookings Tax Policy Center, “What Tax Incentives Exist for Higher Education?” Tax Policy Center Briefing Book, 2023, at https://www.taxpolicycenter.org/briefing-book/what-tax-incentives-exist-higher-education.
31. This “take-it-or-leave-it” approach is expressed in the Introduction to the Compact: “Institutions of higher education are free to develop models and values other than those below [i.e., described in the main body of the Compact], if the institution elects to forego federal benefits.” Compact for Academic Excellence in Higher Education, available through Nerve News at https://nerve.news/news/full-text-of-trumps-compact-for-academic-excellence/.