Who Owns a College?

By Roger H. Hull    //    Volume 32,  Number 1   //    January/February 2024
Takeaways

  • Trustees “own” and are accountable for the college or university on whose board they sit, which they need to understand and take far more seriously than most do.
  • Engaging in “seagull” management—swooping in three to four times a year and flying off after a few meetings and meals—can no longer be the board’s modus operandi.
  • Trustees must be fully informed, keep their noses in but their hands off “their” college, press the administration but let it do its job, and, if they conclude the president is not up to the task, find a new president.

Who owns a college? A question not often asked and one few can answer with any degree of confidence. Even then, most of the respondents would be wrong.

Is it alumni, faculty, or trustees? Not surprisingly, if these groups were asked, each would lay claim to ownership.

The reality is no one owns a college in the common sense of ownership, where assets can be disposed of with impunity. Of course, trustees cannot sell the college and pocket the proceeds. Were a board to decide to close a college’s doors and shut down, trustees would have to either merge with another college or transfer its assets, net of liabilities, to some other nonprofit institution.

However, the legal authority for colleges clearly rests with the board of trustees. In effect, board members act as stewards and collectively hold the institution in trust. By definition, trustees are fiduciaries, each of whom owes a duty of care, loyalty, and obedience to their institution.

What is the Role of a Board of Trustees?

The board of trustees controls an institution’s fate and is clearly in charge. Why then do board members in far too many instances fail to take seriously their responsibilities and provide the requisite care of “their” college? Instead of the care and loyalty owed to the college, trustees all too often resemble seagulls, fly in three or four times a year, attend a campus event or two, and fly off after a few nice meals.

Such fly-by engagement is hardly a way to provide oversight and fulfill the duties of care, loyalty, and obedience owed to the institution they ostensibly serve. Boards shouldn’t micro-manage or presume to do a president’s job. However, simply signing off on whatever a president wants to do is irresponsible and a violation of trustees’ fiduciary responsibilities.

Finding a Balance

If a situation gets to the point where a board feels it has to be involved in a college’s daily operations, the board has the wrong president. Conversely, if the board can’t abide by appropriate, self-imposed boundaries separating a board’s oversight from the work of the administration, the president has the wrong board.

A board that continuously violates clear boundaries presents a president with a simple choice. Either the president sits down with the board chair and figures out a way to establish (or re-establish) boundaries between the administration and board, or the president and board need to agree on an exit strategy for the president. It is really that simple.

On four occasions during my 24 years as a college president, I had to sit down with my board chair. For a number of years thereafter, the board adhered to the agreed-upon parameters. Ironically, the two chairs with whom I had those conversations were excellent chairs, who, in the heat of the challenges we were tackling, stepped outside their lanes for a moment.

The Duties of the Board

Trustees at private colleges set policy, make financial decisions, raise (or, more accurately, should raise) funds, promote the institution, and, most importantly, hire and fire the president. For each of these things, they should be held accountable. Unfortunately, they rarely are.

Reappointing a trustee at the end of a term when that trustee has abrogated, deliberately or through neglect, these basic responsibilities is, obviously, the course of least resistance. It is far easier (but wrong) for a board chair to reappoint a trustee than to sit down with the person, explain why the trustee is not going to be reappointed, and thank the person for service to the college or university. While no one enjoys having these difficult conversations, they are part of the required leadership in any organization.

Of course, there is the hope (which always seems to remain unfulfilled) the trustee will someday make a major financial commitment. Rather than play the “hope game,” it is far better to have term limits in place and to bring a person back on the board after a year or two if doing so makes sense. While some chairs and presidents may fear losing a key trustee when a board member’s term expires, one can always find a way to keep the trustee connected to the college.

Unfortunately, when boards overstep the lines separating board and administrative responsibilities and when they reappoint trustees who have not fulfilled their basic fiduciary duties, as things stand now, there are no consequences for trustees. None.

Well, maybe if there is malfeasance or misfeasance, a state attorney general might step in. In cases of nonfeasance, though, nothing happens—and that is something that needs to change. The financial landscape of the private college world, increasingly littered with shuttered institutions, poignantly points to the need for boards of trustees to change the way they oversee “their” college and to do so quickly.

Unlike for-profit boards where membership comes with hefty fees, private nonprofit and public college board members do not get paid. Instead, trustees “pay” (or should pay) for the privilege of membership by donating what they can to the college.

“Give, get, or get off,” “wealth, work, or wisdom,” or “time, talent, and treasure,” are shorthand for encapsulating most easily what private college trustees are expected to do. Of course, members bring a range of talents to the board, but, to the extent they have the wherewithal, it would be nice if they met those financial expectations.

The problem is that, even if trustees do not fulfill any of their responsibilities, they are often reappointed again and again and again. And at some institutions, they even attain the exalted status of life trustee, so it is not unusual for incapable or unproductive trustees to occupy seats for decades, thereby blocking the potential energy, effectiveness, and talents of new appointments to the board that may be sorely needed.

Financial contributions are easy to measure; the other duties are less so. Incredibly, boards seem to have lost their yardsticks for measuring what board members are doing to meet their fiduciary responsibilities. Given the state of affairs on most college and university campuses, it is hard to explain why many trustees have been so lax in doing much more than simply swooping in a few times each year.

What Happens When Boards Fail?

In recent years, I met with board chairs and presidents at four colleges in significant trouble. I offered, free of charge and with the assistance of successful, retired presidents and vice presidents from the academic world whom I knew well, “no holds barred” advice. In each instance and for different reasons, my offer was rejected. Within two years, three of the colleges were shuttered. As for the fourth college, it is on life-support.

What were the consequences when the boards in these cases allowed their institutions to fail? Students had to transfer; alumni suddenly no longer had a home; faculty and staff found themselves back on the job market; and the community no longer had an anchor institution that made the area a better place in which to live. And what were the consequences to members of those boards? Aside, I suspect, from a bit of embarrassment when the college closed, nothing.

There clearly should be consequences for trustee inaction. At public colleges and universities, voters or governors can choose not to keep a negligent trustee as a board member. But, political appointments present their own inherent challenges, as recent events involving those appointments have demonstrated.

Private institutions are different, though. Boards are self-perpetuating. While “remedies” exist, they are rarely invoked.

Resistance to change is a reality in all organizations. Things are the way they are for reasons that are critically important to understand. First and foremost, it is necessary to ask who benefits from the status quo. Most often, it is those who are entrenched.

So, what can be done about it?

  • A major donor who feels a gift was inappropriately used would appear to have standing to sue the college’s board. Yet, paradoxically, a suit might well do the college irreparable harm, which no donor would want.
  • The state attorney general could initiate a lawsuit against the board for its actions or lack of action. After all, the college or university is chartered by the state and is exempt from taxation, therefore a duty of care and loyalty is owed to the state and its taxpayers. Such a suit, of course, would also harm the institution’s good name among prospective faculty and students, as well as potential donors.
  • Breaches in board and institutional accountability can also threaten institutional and programmatic accreditation. Loss of accreditation can be an existential threat since federal and state student financial aid would be threatened—and all but a handful of colleges depend on this aid for their students.

Far better would it be for trustees simply to fulfill their fiduciary responsibilities and to treat the institution as if they owned it in the traditional sense of the word. What are the things boards should do? What are the “yesable” propositions they should adopt?

AGB Board of Directors’ Statement on Board Accountability (2015)

Defining “Board Accountability”

Members of governing boards, regardless of the size, mission, or source of support of their institutions, characteristically are bound by the duties of integrity, care, loyalty, and obedience. These values transcend differences among American colleges and universities and bear special importance to our nation’s institutions of higher learning. At least four categories of board accountability may be identified. Boards are accountable to (1) the institution’s mission and cultural heritage, (2) the transcendent values and principles that guide and shape higher education, (3) the public interest and public trust, and (4) the legitimate and relevant interests of the institution’s various constituencies (page 2).

Fiscal Integrity

Among the responsibilities of governing boards, maintaining fiscal integrity is fundamental. Boards bear ultimate legal responsibility for approving the institution’s annual budget and monitoring the institution’s fiscal welfare. The board is the ultimate fiduciary of the institution, even though day-to-day operations are properly delegated to the administration (page 3).

Board Performance

No aspect of a governing board’s activity is more visible than the conduct of its business as a board. If serious lapses occur at the highest level of the institution’s governance, confidence in overall institutional management inevitably will suffer. The quality of a board’s conduct of its business should be a model that guides the rest of the institution, setting standards that invite emulation in campus-wide governance and management. Because of the high visibility of the example they set, board members must be individually accountable to one another for civility, preparedness, ethical behavior, restraint, cohesion, and sound judgment (page 5).

Six Recommendations for Responsible Trustees

1. Develop a Clear Job Description for Board Members. Trustees need to know what is expected of them so that neither the college nor the trustee is misled. Not only will new trustees be better informed, but longstanding members of the board will be reminded of where they may be falling short. (See the excerpts in box on page 51 from the 2015 AGB Board of Directors’ Statement on Board Accountability.)

2. Embrace Term Limits. As noted, life is easier for board chairs who reappoint trustees, even when they have failed to fulfill their basic obligations to the college. Doing so is wrong. While, admittedly, there is a risk a key trustee may lose interest in the college once there is a break in board membership, it is a minor one the board chair and president can easily address.

3. Insist on Realistic Financial Assumptions. Trustees must be fiscally conservative to ensure all decisions are financially viable and sustainable. In this regard, any reasonable business plan must focus on the issues of net tuition revenue and how construction costs will be addressed.

A college is a business entity, a reality not necessarily accepted by faculty or students. If costs exceed revenues, the financial model is not sustainable, unless, magically, fundraising suddenly grows beyond reasonably achievable limits or endowments are sufficiently large.

For example, despite the ongoing (and appropriate) focus on enrollment, there is simply not enough attention paid to retention, completion, and how much each student is actually costing the college. A college that receives at least 51 cents on each dollar of tuition may be sustainable; an institution receiving less than 50 cents on each tuition dollar is on a slow or not-so-slow death march.

By the same token, boards that sign off on the construction of new or renovated facilities without funds pledged for construction and an endowment to maintain and operate the new or renovated facility are failing their institution (unless, again, fundraising can service debt or trustees oversee endowments large enough to absorb these costs). Presidents who seek to have the board of trustees approve projects whose expenses the college cannot meet may believe they are burnishing their legacy and satisfying their “edifice complexes;” but they are really putting both the college and their careers in jeopardy. In short, while it is important for boards and presidents to demonstrate the college is progressing, they should never do so by championing apparent short-term success at the risk of long-term harm.

4. Hire the Right President. Boards must select presidents with the requisite expertise to address the challenges of the day and recognize the traditional president, a product of academia, is armed with many skills but little exposure to the financial challenges facing the college. In the course of my years in office, I met hundreds of presidents who had come from the professorial ranks. Almost without exception, these talented men and women disliked the financial side of the job (budgets and fundraising), which today for most institutions is the overwhelming part of the job. So, why would they want to spend their time doing something their predecessors never liked? Why would boards of trustees continue hiring presidents whose talents do not match the challenges they will encounter? And why would the board continue to cede its responsibility to faculty who inevitably are drawn to “one of their own,” even if those candidates are not suited to address the college’s problems?

For a relatively small number of colleges and universities, those with the reputation and resources to sustain them during challenging times, the selection of a president will probably not matter; for the rest of the college world, the presidential choice is crucial. In short, there is an inverse relationship between how good a president needs to be and the reputation and financial wealth of the institution. So, caveat emptor!

5. Come to Meetings Prepared. Before arriving for meetings, trustees must read board materials carefully; then, rather than rubberstamping what the president wants, they should press the president to ensure that what is being proposed is reasonable and fits within the business plan and long-term strategy of the college. In other words, board members should ask hard questions, stick their noses in but keep their hands off operations, and let the president run the college. Doing so will help both the president and the institution.

6. Assess the Board and Individual Trustees. Trustees should take a hard look in the mirror and ask themselves why they aren’t doing what they should be doing for the college. After all, trustees are responsible, through the policies they put in place and the hiring of the president they select, for the college’s fate. Again, while trustees “own” the college, they also need to own up to their duty of care and loyalty to it. Simply stated, the board needs to accept responsibility for the performance of its members.

Trustee Ownership

Too many colleges are in too much trouble because board members have failed miserably to take their responsibilities seriously and to exercise the duty of care required of them. Some have closed; others are in the process of closing; and still others, in large part due to trustees’ failure to fulfill their duties, are zombie institutions facing likely closure, with the resulting decline making it more difficult to attract good faculty and students, thereby accelerating the downward spiral.

Who needs this unsustainable situation? No one.

On behalf of current students and alumni, the people who work at the institution and have served it loyally, the community in which the college is located, and the institution to which trustees owe a duty of care, loyalty, and obedience, it is time for boards to reexamine their commitment and performance.

Trustees need to wake up and fulfill their fiduciary obligations to the institution they “own.” Rather than sleep-walking through their duties, they should begin by adopting commonsense, “yesable” propositions. For far too many colleges and universities, the seagull approach they are now following is simply not working. In the final analysis, it is obviously up to them, as the “owners” of the institution, to correct the problem.

Roger H. Hull, a lawyer by training, was a corporate attorney, counsel to the Governor of Virginia, a member of the United States delegation that negotiated an international agreement on the oceans, and a college president for 24 years at Beloit and Union. Author of several books on international law, leadership, and politics, he is the founder and president of the Help Yourself Win Foundation, which seeks both to change the lives of children through the creation of after-school programs on college campuses and to provide construction training for unemployed and underemployed adults. hullr@union.edu

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