Universities - Time for a Change in their Governance

Universities are created by law as corporations, separate from government and from the people who work and study in them.  In the past they were run democratically by academics or faculty members, and sometimes by students as well.

Now they are run by highly paid management teams, and governed by small boards.  From the outside, legally they look similar to large for-profit companies.  "Corporate governance" ideas apply to both.

But is this appropriate?  Universities are vastly different from large companies.  Their management and governance is not particularly accountable to anyone in practice.  So more and more money goes into more and more management.  Failures keep on occurring and little happens.

Governments are waking up to this but their response is more regulation.  We argue for a return to a modernised academic democracy.  Drawing on our recent paper for the University of Melbourne, Imagining a Revolution in University Governance, we talk about a model constitution for our own Australian Exemplar University.  See https://melbourne-cshe.unimelb.edu.au/__data/assets/pdf_file/0009/5477778/Imagining-a-Revolution-in-University-Governance.pdf

For more information about your dashing hosts and the Law in Context podcast series visit our website at About - Law in Context

Transcript

STEPHEN PARKER

Today we are talking about universities, and specifically how they are legally governed.  This might be of real interest to those who work in universities, but there is a broader public interest in the topic.  Universities in countries like Australia are bigger than many for-profit companies.  They educate around half our young people and they make a huge contribution to our economy and prosperity.

STEPHEN BOTTOMLEY

OK Steve, I get that, but what is there really to talk about?  Universities have been around for 800 years, and they don’t seem to be going away.  Participation in universities has been rising and rising.  Arguably during our lifetime we have seen the Golden Age of Higher Education.

STEPHEN PARKER

That Golden Age could be coming to an end.  Artificial intelligence could take away a lot of graduate jobs, and other forms of automation such as robotics could take away others.  As important, are government attacks on universities over particular ideas, such as we have seen in the United States, and moves to increase regulation and monitor what they do.

STEPHEN BOTTOMLEY

This takes us to another major contribution of universities; they generate ideas and new insights, which contribute to the development of our civilisation.

STEPHEN PARKER

Because this is a podcast about Law, we are going to focus on universities as corporations, and look at how they are governed and managed, but this all feeds into bigger issues about democracy and freedom of expression.

STEPHEN BOTTOMLEY

We devoted a whole episode to Corporations in season 1 of Law in Context.  They are created by law as entities separate from those who form them.  They can sue and be sued.  They live on until wound up.  For-profit corporations, usually called companies, are the main unit of the business sector.  But there are other types of corporation.  As we said in Episode 8, universities  are corporations. They are usually established by a specific Act of Parliament, but in the UK some were created through the grant of a Royal Charter.  The key point is that universities as corporations are legally separate from Government and from the staff and students who work in them.

STEPHEN PARKER

We will focus on Australia, but many of the same debates are occurring in Canada, New Zealand, the UK, and the United States.  Here in Australia, the main complaint over the last 20 years or more has been the rise of … MANAGERIALISM!!

STEPHEN BOTTOMLEY

Yes, there was a time when universities were largely run by the academics themselves, with more or less student involvement.  The earliest universities in Bologna and Paris had these features.  In more modern times they may have been led by a Vice-Chancellor, President or Rector, but most decisions needed to be made by the academics, and few Vice-Chancellors would dare to go out on a limb.

STEPHEN PARKER

It’s true that there have always been governing bodies to oversee how universities were being run, but these were often large and ceremonial.  They helped with fund-raising but kept out of day to day management.

STEPHEN BOTTOMLEY

This began to change in the second half of the 20th century.  More tax-payer money was being invested, to expand higher education and improve social justice.  Governments wanted to keep a closer eye.  And over time they insisted that universities be run as business entities, responsible for their own financial future, rather than budget entities whose goal was to spend every single dollar granted to them in that year’s budget.

STEPHEN PARKER

So governing bodies – university councils – became smaller, like the boards of large for-profit companies, and they appointed more and more senior managers.  During our careers in universities we have seen a proliferation Deputy Vice-Chancellors, Pro Vice-Chancellors, CFOs, COOs and directors of this and that.  But in my first academic job, in the 1970s, I think there was a Vice-Chancellor, a Bursar and maybe someone to look after the buildings and grounds.  Everything else was done in the Faculty.

STEPHEN BOTTOMLEY

And as university councils became smaller, the representation of staff and students decreased, whilst at the same time more people with business experience joined them.  So we see the idea of “corporate governance”, in inverted commas, being applied to universities.

STEPHEN PARKER

Now the listener might well say, what’s wrong with that?  Universities have become larger, more complex and there is a lot of public money going into them.  Why shouldn’t they be run like businesses?

STEPHEN BOTTOMLEY

Well one problem is that universities operate in quite different contexts.  Large companies have shareholders, who can remove directors if they are under-performing.  They may issue shares that are sold on a stock exchange, so the market gives feedback on their performance through a share price.  Stock exchanges have their own rules about making public certain information, and ensuring it is accurate.  Companies have Annual General Meetings where, in theory, everything can be laid out.  Universities have none of this.  They have senior managers and governing bodies which look  similar to those in large companies, but which in practice are not accountable to anyone in particular. Trying to apply conventional ‘corporate governance’ ideas won’t work.

STEPHEN PARKER

And the problems seem to be mounting.  Here in Australia, there is concern that Vice-Chancellors are being paid huge sums of money irrespective of the success of their organisation.  Most earn more than the Prime Minister.  At the same time, various universities have been caught out under-paying their most vulnerable staff, the sessional academics who are paid by the hour.  There have been some disastrous failures, such as with overseas campuses or failed IT installations.  But nothing much seems to change.

STEPHEN BOTTOMLEY

And what is really rankling with academics, is that university managers bring in outside consultants, at great expense, seemingly to do the things that the managers are paid to do in the first place.  A larger share of the pie is spent on managing things rather than teaching students or discovering new knowledge. 

STEPHEN PARKER

In Australia, the government is picking up on discontent over all this, but its response is to regulate universities in more detail.  So now we have new agencies, and more powers for existing ones.  These agencies need to employ people, so more public money goes out on regulating the conduct of university councils and management teams, who themselves are using more public money.

STEPHEN BOTTOMLEY

So what’s the answer Stevo?  We can’t go back to the past, which actually wasn’t all that rosy.  Some of us can remember universities dominated by male professors determined to preserve the status quo , making career progression all the more difficult for  younger academics wanting to move up.

STEPHEN PARKER

As you well know, Stevo, we have come up with AN answer.  We have drafted a model for a modern, democratic, academically-led university.  We have written the constitution of an imaginary institution – the Australian Exemplar University – which frames the university as more like a mini-state than a for-profit company.

STEPHEN BOTTOMLEY

Our paper, published by the University of Melbourne, and available on our website at https://lawincontext.com.au/universities/ is based on the idea of separation of powers, with checks and balances.  Obviously, there is a governing body, but it is divided into two chambers, one with external members appointed by the Government and one, the Academic Senate, with academic staff and students.  We say that all important matters need to go through both chambers, just like a Bill needs to go through both Houses of Parliament or both Houses of the US Congress, before they have effect.

STEPHEN PARKER

We also say that there should be something like a judiciary – the University Arbiter – who should uphold the Constitution and decide internal disputes about compliance with the Constitution and university policy more generally.

STEPHEN BOTTOMLEY

Crucially, these boards of governors and the University Arbiter must hold the university management – the Executive – to account, and the Executive needs to be kept separate from governance functions.  At the moment, the Vice-Chancellor is an influential member of a university council, which confuses lines of accountability. 

STEPHEN PARKER

We also include detailed arrangements for faculties and faculty boards, including the election of faculty deans, but the central messages are that there is to be an internal rule of law, to ensure that management is compliant, predictable and accountable, and more academics are to be involved in governance, because they know the detailed requirements of higher education better than most external council members can be expected to know.

STEPHEN BOTTOMLEY

Well, I know that you and I get excited about these things, but really, why should most people care?  Well, one reason is that the performance of companies in the economy is also mixed, with concerns about abuse of power, invasions of privacy, restructures and redundancies of staff.  If universities can show how complex organisations can be run in participatory ways, we might expect corporate titans to come under similar scrutiny.

STEPHEN PARKER

We can but hope, Stevo.  We can but hope.