Why board composition, transparency, and accountability to stakeholders should matter to higher education boards
The responsibilities of trustees are swelling. Alongside all the remarkable and exciting work that occurs on college and university campuses every day, national and global conflicts are fueling tensions, igniting turmoil, and raising profoundly complicated questions. Leading successfully in the current pressured environment means facing difficult governance issues.
In the past year the challenges of achieving diversity, equity, and inclusion (DEI) and serving increasingly diverse stakeholders have escalated with the Supreme Court’s affirmative action decision, political attacks on DEI initiatives, threats to withdraw funding made by wealthy alumni and alumnae—some of whom are board members, and rancorous debates on freedom of speech.
Having served for decades on the boards of three universities and one related health system, I understand that the board is the nucleus of leadership. It is for this reason, as a current trustee of a large public urban university, that I reflect on my accountability to the institution and its many stakeholders with renewed focus and concern.
As contentious leadership, social, economic, and political issues continue to emerge, persistent news coverage focused on board disagreements and decisions at some of the most highly regarded academic institutions is serving as notice that academic institutions (and we trustees) are under greater scrutiny than in the past. Media focuses on personalities, the power of the purse, and board size. But there is more to consider. Now is the moment to address board composition and board culture as a cornerstone for advancing the mission, mitigating risks, strengthening preparedness, protecting reputation, serving stakeholders, and anticipating what is on the horizon and beyond. And now is the moment for boards to be transparent about the backgrounds and demographic makeup of their members.
Getting complex decisions right and balancing the needs of all stakeholders with true insight and understanding requires a scrupulous look around the table, not to see who is present but to ask, “who is missing?” Does the board reflect the diversity of its stakeholders? Research consistently shows that diverse teams make better decisions. Yet how often are boards asking, What perspectives and lived experiences are needed to inform and enlighten the analysis and challenge the information? Which first-hand knowledge sets are missing? Whose voices are too loud? Whose voices are not being heard? And are we keeping our stakeholders informed about who serves on our board and what perspectives they represent? Does our board culture reflect a genuine commitment to the value of diversity in our governance responsibilities?
Too Many Boards Still Not Diverse
Most higher education boards do not reflect the make-up of the people they serve and employ, and many are far from doing so. A number of recent regional and national studies and reports show some progress in achieving gender and racial diversity on boards, but change has been slow.
A 2022 report revealed that 47 percent of all board members of the 106 leading research universities in the United States were White men.1 In another 2022 report, researchers found that in Greater Philadelphia, 48 percent of the trustees at the largest colleges and universities were white men.2 White men, who make up only about 30 percent of the U.S. population, fill almost a majority of these important board seats, while white women and women and men of color are seriously underrepresented.
In still another 2022 study that focused on board alignment with student demographics, only 19 of 100 prominent schools had boards that were well aligned with their undergraduate student populations. And overall, there is greater disparity of gender than there is of race, as women make up 57 percent of college students across the United States.3
A 2002 study by the Women’s Nonprofit Leadership Initiative about why gender and racial gaps persist and how and why to increase board diversity—the basis of the lead article in the September/October issue of Trusteeship—revealed a prevalent cause for the gaps. The expectation, and often requirement, that trustees make substantial monetary contributions perpetuates the dominance of White male trustees because of both assumptions about who has money and a disregard for the importance of economic diversity.4 A recent (2024) AGB report, Diversifying the Governing Board, emphasizes “de facto trustee qualifications of wealth and social status” as a barrier to board diversity.5
Though substantially increasing institutional income through board appointments may be tempting, there are real risks and potential costs to having nonprofit boards dominated by wealthy White men. The University of Southern California became a national example of such risks and downsides when it settled claims for $1.1 billion for years of sexual abuse of students by the university’s gynecologist. One survivor blamed the board’s “bad decisions” on the board’s lack of “stakeholders” and “diversity”.6 The board announced it would make several adjustments so as to change the environment that enabled the abuse to go on over many years. Those changes included committing to a board composition that reflected the diversity of the university community.
Board Diversity Matters
The rationale for increasing diversity on for-profit corporate boards has been substantiated extensively and is widely accepted by corporate leaders. The fourth and most recent report in McKinsey’s Diversity Matters series, Diversity Matters Even More (2023), takes a comprehensive global perspective. It claims the relationship between leadership diversity and company performance is the strongest since tracking began in 2015. It also focuses on the importance of stakeholders and finds that “leadership diversity is also convincingly associated with holistic growth ambitions, greater social impact and more satisfied workforces.” The report concludes:
While year over year financial performance remains critical, businesses are increasingly aspiring to have positive, long-term impact on all stakeholders—the core tenet of stakeholder capitalism. This emphasizes the interests and needs of a wider set of stakeholders, including employees, customers, and investors, prioritizes social and environmental goals, and drives towards sustainable, inclusive growth—in short, what we refer to as holistic impact. Our research points to five main areas of holistic impact: financial and operational, capabilities, health and workforce, and environmental and social. Our findings are striking. Across all industries surveyed, more diversity in boards and executive teams is correlated to higher social and environmental impact scores (emphasis added).7
In a recent article in CFO Dive, a vice president and senior analyst at Moody’s is quoted as saying, “the presence of women on boards—and the potential diversity of opinion they can bring—supports good corporate governance, which is positive for credit quality.”8
Such articles and reports, along with advocacy by organizations representing women and people of color and growing pressure from shareholders, particularly large institutional shareholders, have influenced boards of numerous public companies to diversify. It is time for colleges and universities to emulate the business sector by focusing on the importance of board diversity, particularly since higher education has been leaning into for-profit business strategies for decades—and for good reason. Many colleges and universities are comparable to public companies in size and in operational and financial complexity. Most use the public market to raise funds by issuing bonds. They are also often among the largest employers in a region.
However, unlike public companies, nonprofit institutions of higher education have operated with little pressure to diversify their boards. Most people are not aware of these boards, let alone the power they wield and who sits on them. It is challenging, even for researchers, to obtain accurate information on nonprofit board demographics because there is no requirement to disclose demographic composition.
The for-profit sector is well ahead of the nonprofit sector not only in championing board diversity, but also in informing the public, including shareholders, about board demographics. In August, it will be three years since the U.S. Securities and Exchange Commission (SEC) approved Nasdaq’s plan to require listed companies to disclose the demographic makeup of their boards, not by identifying individuals but by giving aggregate numbers in different categories. Letters to the SEC supporting Nasdaq’s proposal came from major institutional investors, including state treasurers who administer pension funds, large institutional investors such as Goldman Sachs, and business organizations such as the U.S. Chamber of Commerce.9 Such organizations have become advocates for corporate board diversity as a result of their experience and on the basis of years of research and reports. They support disclosing the demographics of governing boards, along with the financial data that companies already provide to shareholders.10
Meanwhile, a 2023 Shearman & Sterling study reported “a 42 [percent] jump in the number of Top 100 companies to disclose director-specific diversity information increased to 61 companies from 43 in 2022.”11
In the January/February 2024 issue of Trusteeship, Richard Chait, Raquel Rall, and Demetri Morgan, the professors who studied board alignment with student demographics, wrote: “Should not stakeholders and the public at large be able to assess whether college boards have trustees with varied and relevant backgrounds, experiences, and expertise, much as investors can evaluate the rosters of corporate boards? Would it not be useful for students, parents, grant-makers, and donors to know whether the demographics of an institution’s trustees reflect the demographics of its students?”12
Yes, it would be extremely useful to have informed stakeholders who could hold colleges accountable for lack of diversity, just as shareholders are holding public companies accountable. Gathering and charting demographic information as part of the skills evaluation needed for every board enables trustees to face demographic deficiencies they otherwise might overlook. Reporting on that data provides an impetus to act to remedy such deficiencies.
Getting to Transparency, Accountability, and Board Action
To make sure that large public charities, including nonprofit colleges and universities, gather and report demographic data, last June the Coalition for Nonprofit Board Diversity Disclosure sent an open letter to the IRS and Treasury requesting the addition of a single question to the annual Form 990 public charity tax return.13 That question would require the disclosure of the aggregated demographic makeup of these nonprofit boards, similar to the Nasdaq requirement. To be clear, the request is not for a mandate to achieve a numerical goal. It is simply a request for data collection and reporting because “what gets measured, gets done.” The Form 990 already asks questions related to good governance and asks for a list of board members. The 140 original signatories to the open letter included AGB, current and former college presidents and board members, and a wide variety of national and regional organizations and prominent individuals. Today, there are nearly 500 signatories.14
Transparency about board composition in exchange for nonprofit designation and the benefit of tax exemption is a fair trade. The purpose of tax exemption is to allow nonprofit entities to use all funding to achieve their missions in service of all stakeholders. Diversity disclosure creates awareness and enables accountability to stakeholders. It is not a political issue. It provides data for measuring governance excellence.
As trustees, we have the power to achieve public accountability and strengthen governance while we ensure diversity of thought and knowledge, life experience, and understanding of stakeholder needs. But that can’t happen without actively seeking and welcoming more women, people of color, and other underrepresented groups to the table. Then we need to create board cultures that embrace and include all members for the wisdom and perspectives they bring along with their other professional expertise. This is not about tokenism or bringing people on board simply because they self-identify as belonging to a demographic category. It is only one of the various factors that should be used to evaluate every candidate.
To succeed in this effort requires intentionality and changes in behavior. It requires analyzing what skills are needed for the success of the institution, gathering demographic information on the current board, determining what skills and demographics are needed to bridge the gap between what is present and what is needed, and changing the recruiting process so that lists of prospects are not primarily lists of those known to the dominant current board members and/or the university development office.
Leaders and members of boards that have succeeded in becoming much more diverse agree that without intentionality, diversity doesn’t just happen. But with thoughtful execution of planned strategies, boards can become more diverse and therefore more effective, respected, and trusted.
Board diversity should galvanize and energize board members. I count on my board colleagues whose life experiences and knowledge differ from mine to educate, enlighten, and reassure me that we are deeply informed as we work to achieve the highest standards of governance excellence and advance our mission.
Jane Scaccetti, JD, is a Temple University trustee, was board chair of the Temple University Health System and Hospital, and served on the boards of Salus University and the University of the Arts. In the for-profit sector, she chairs the audit committee of Penn Entertainment; she was board chair of Mathematica, a private company, and has served on many other public company boards. She is former chief executive officer of a tax specialty consulting firm and co-chairs the Women’s Nonprofit Leadership Initiative.
1. Magdalena Punty, Andrea Silbert, and Elizabeth Brodbine Ghoniem, “The Women’s Power Gap at Elite Universities: Scaling the Ivory Tower,” Eos Foundation, January 2022.
2. The Nonprofit Center at La Salle University and Women’s Nonprofit Leadership Initiative, “Closing the Gaps: Gender and Race in Nonprofit Boardrooms,” 2022.
3. Raquel M. Rall, Demetri L. Morgan, and Richard Chait, “Does Your Board of Trustees Reflect Your Student Body?” Washington Monthly, August 2023.
4. Carolyn T. Adams and Vicki W. Kramer, “Increasing Gender Diversity on the Boards of Nonprofit Eds and Meds: Why and How to Do It,” Women’s Nonprofit Leadership Initiative and Nonprofit Issues, 2020.
5. Lesley McBain, Raquel Rall, and Valeria Dominquez, Diversifying the Governing Board, AGB, March 2024.
6. Judy Woodruff, “Survivor Details How USC ‘Empowered’ Campus Doctor at Center of Sexual Abuse Scandal,” PBS News Hour, March 30, 2021.
7. Dame Vivian Hunt, Sundiatu Dixon-Fyle, Celia Huber, Maria del Mar Martinez Marquez, Sara Prince, and Ashley Thomas, “Diversity Matters Even More: The Case for Holistic Impact,” McKinsey, December 5, 2023.
8. Jim Tyson, “Gender Diversity on Boards Correlates with High Credit Quality: Moody’s,” CFO Dive, March 2024.
9. U.S. Securities and Exchange Commission, “The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change to Adopt Listing Rules Related to Board Diversity,” [Release No. 34–90574; File No. SR-NASDAQ-2020–081].
10. Levi Sumagaysay, “Not a ‘Woke Mission’: Nasdaq, SEC Say Push for Diversity on Corporate Boards Is What Investors Want,” MarketWatch, August 29, 2022.
11. Shearman & Sterling, “Corporate Governance & Executive Compensation Survey 2023: Survey of the 100 Largest U.S. Public Companies, 21st Annual,” 2023.
RELATED RESOURCES
Reports and Statements
Diversifying the Governing Board
Trusteeship Magazine Article
Why Not Disclose the Demographics of a College’s Board Members?