Towards ethical universities via ethical governing boards

As independent governing boards continue to become more common across nations, so do instances of and possibilities for ethical lapses by these boards. Ensuring that boards behave in the best interests of their universities is important because boards are the fiduciary agents and the legal authority recognised by governments, courts and auditors.

Unethical governance behaviours can be an immediate and time-consuming distraction for a university. More substantively they can create longer term organisational challenges that are difficult to overcome. Just look to the American examples at the University of Virginia, Penn State University, Michigan State University and the University of Louisville.

Ethical lapses by university governing boards are, unfortunately, all too common, even in countries with long-established boards. For example, in the United States an independent audit alleged that one board allowed the president and select members of his senior team to be overcompensated by US$3.9 million.

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In countries just establishing boards that are independent from government, the lapses are sometimes shaped by the absence of norms of ethical behaviour or simply a lack of knowledge about governance.

In one instance I was asked how a rector would be able to “prevent boards from drastically raising tuition fees so that students don’t enrol, effectively putting the university out of business, so trustees can sell the buildings and pocket the money”.

Ethical governance lapses range from inappropriate meddling in the work of management, such as hiring decisions, to the lack of board oversight of institutional finances. Or it can be cases of individual board members seeking personal gain, be it selling their services or products to the institution or getting their children or those of colleagues admitted or enrolling in the institution free of charge.

Ethical codes of conduct

To limit ethical failures, effective institutions adopt codes and practices of ethical governance conduct. These are like the guard rails aimed at protecting boards from going astray and pulling their universities into the ditch (or ravine in some cases).

Like roadways with guard rails on both sides, ethical governance can be channelled by two sides. The first is board accountability, which are external forces pressing boards to be ethical. The second element is internal to the board – ideally the practice of self-monitoring what happens inside the boardroom and in interactions between members.

The externally accountable board

In many countries, under statutory and common law, board members are fiduciaries, stewards of public trust who are responsible for ensuring that the institutional assets (financial, reputational and physical) of the organisation are safeguarded and held for the benefit of another.

In the United Kingdom the governing body is “unambiguously and collectively accountable for institutional activities”, according to the Higher Education Code of Governance.

In the US this notion is codified in the fiduciary role, which encompasses three duties described by the Association of Governing Boards of Universities and Colleges:

  • The duty of care which requires trustees to carry out their responsibilities in good faith for the best interests of the university;

  • The duty of loyalty which requires board members to put the interests of the institution first and to act in ways consistent with the institution’s public purposes; and

  • The duty of obedience which obliges a board member to advance the mission of the college or university consistent with its stated purpose and within the boundaries of the law.

In the UK the Committee of University Chairs offers the following ethical guidelines for British university boards:

  • • The governing body will want to ensure the highest standards of ethical behaviour among its members, who must act ethically at all times in line with the accepted standards of behaviour… and in the interests of the institution.

  • • Members of governing bodies must act, and be perceived to act, impartially, and not be influenced by social or business relationships.

  • • The governing body must ensure that its decision-making processes are free of any undue pressures from external interest groups.

  • • The governing body should abide by the principle of collective decision-making and avoid putting specific interests before those of the institution.

  • • The governing body must take practical steps to ensure that the students’ union or association operates in a fair, democratic, accountable and financially sustainable manner.

It is common for external agencies to monitor board behaviour. In some instances, it is examined in institutional accreditation processes when quality assurance agencies also look at board governance practices.

In addition, US tax law requires non-profit institutions to file a statement (IRS Form 990) detailing compensation of directors and senior officials and other financial transactions which can reveal instances of self-dealing, undue or excessive payments and inappropriate use of assets. This is a public statement that reflects ethical practice.

An additional external factor is the academic staff. University public accountability in some ways is akin to government agencies answering to the electorate and businesses answering to shareholders. While university stakeholders lack direct levers of influence, they cannot vote out board members at the ballot box or use the tools of activist investors in the corporate setting. However, the faculty can vote no confidence in the board.

Finally, the press plays an important external role in board ethics, serving to call public attention to potential ethical violations. It is often in the court of public opinion that boards’ ethical and unethical practices are judged and may be judged most harshly.

The internally ethical board

External frameworks and independent scrutiny of institutional governance are only part of the solution. Even when these guard rails exist, ethical lapses still occur. The strongest pressure preventing unethical board behaviour comes from within the board itself.

Board members are individually and collectively responsible for monitoring and correcting poor board behaviour. Common strategies are to develop explicit statements of trustee behaviour and expectations and to have all trustees sign conflict of interest statements annually.

While these documents are helpful, they address only part of the problem. The challenge is not to create better structural controls of boards (aka more laws or reporting requirements beyond a necessary baseline) but to foster internal practices and habits that become accepted norms of behaviour that keep unethical behaviour in check.

What may matter most to ensure ethical governance is board culture. Boards like other social systems have cultures. Culture is the patterns of behaviours and ways of understanding that become deeply embedded in groups or organisations. It facilitates ways of working, but also creates blind spots for groups.

The statements of expectations and conflict of interest or even board development workshops that explain ethical parameters – the typical efforts to address ethics in the boardroom – do not focus on aspects of culture that may be more important to curtailing unethical behaviour. They are structural approaches to what is often a cultural problem.

The strength, dominance and prevalence of culture can vary in boards just as in other organisations. National culture can also impact board culture. Regardless of differences in the specifics of board culture, most dimensions of culture are invisible to those within the organisation or group.

The Board Culture Profile that I and my colleagues developed can be used to make culture visible, revealing the norms and values that can impact board ethics. This framework has been used with US universities and non-profit organisations to help boards make their culture explicit and therefore actionable. (We are curious about the framework’s relevance to non-US governing boards).

Our board culture profile has five dimensions. The first four are continuums where neither end is right or wrong, as there are strengths and vulnerabilities associated with each. They address factors including power, decision-making, the intellectual approach of the board and the primary role the board serves:

  • • How Boards Act: Consolidated vs Distributed Influence. This dimension looks at the extent to which power is widely dispersed among board members or held in the hands of a few.

  • • How Boards Decide: Convergent vs Divergent Thinking. Do boards engage predominantly in decision processes in which the discussion is divergent (messy and creative) or convergent (calculated and focused on outcomes)?

  • • What Mindsets Boards Have: Academic vs Corporate. Given the fact that in the US most board members have corporate backgrounds, to what extent do they bring that perspective into the boardroom or adopt an academic one?

  • • How Boards Perceive the Role: Partner vs Critic. Some boards see their primary role as to challenge whereas other boards see their primary role as one of supporting the institution.

The fifth dimension focuses on how board members treat each other, comportment. What are the levels of trust, respect and candour within a board? Unlike the above dimensions, this is not a continuum as more of each is better for board dynamics.

By identifying board preferences across these dimensions via a field-tested survey instrument, we can begin to describe key aspects of a board’s culture. These elements together can be used to create a board culture profile that highlight strengths and potential vulnerabilities.

One can speculate that certain profiles might be more open to ethical lapses or even failures because the cultural safeguards might be missing.

Take as an example a board with a ‘3C’ profile: Consolidated Influence, Convergent Thinking and a Corporate Mindset. A board with such a profile could be open to ethical lapses because influence is in the hands of a few. They might run the board in a way that does not allow others to monitor the behaviour of those in power or to have sufficient power to redirect misguided actions.

Distributed power, on the other hand, may help a board strike better balance among what its members can and cannot do without the input of the group.

Convergent thinking may also allow more unethical actions. This way of deciding means that decisions are rarely discussed at length, different perspectives are ignored or downplayed and the board strives for efficiency over thoroughness in its deliberations.

Again, one could envision convergent thinking creating conditions for ethical problems. A board that does not pause to deliberate in order to consider a range of options may miss opportunities to explore issues thoroughly or call out potentially damaging behaviour.

Finally, a corporate mindset, while not by definition unethical, permits a different set of lenses to frame and render decisions. These assumptions and biases might allow behaviours to occur that are common in a corporate setting but run against academic sensibilities and norms.

Open to ethical challenges

Each of these dimensions might be open to ethical challenges, but in an extreme case, a single board may have all three elements, each reinforcing the other.

One might speculate that a board that has consolidated influence, a convergent approach to decision-making and a corporate mindset may be most at risk with regard to ethical problems. The issues are framed in a way outside of academic norms and expectations; the board does not take the time to thoroughly vet decisions for the sake of time, expedience and decisiveness; and few, not many, board members are truly influential in the boardroom.

All of this said, a specific cultural profile does not mean that ethical problems will automatically appear in the boardroom. Instead a board’s cultural profile suggests that a set of preferences and vulnerabilities may exist. Through a cultural understanding of their strengths and vulnerabilities boards can be more intentional about developing the means to ensure that they do not fall into unethical practices.

The solutions boards pursue may be operational and structural, such as including strengthening reporting processes and protocols, spending more time on conflict of interest abatement and developing more explicit and detailed sets of trustee expectations. Or such boards can work to modify their cultures. More deliberation; wider distribution of influence and an academic mindset may help.

However, one must recognise that, by altering board culture, the board may well be exchanging one set of cultural shortcomings for another. All board cultures have some type of potential vulnerabilities.

There is no perfect board culture, but there is one that has more strengths than limitations given institutional context and the work required by the board. For example, consolidated influence and convergent thinking might be beneficial to universities operating in a hyper-turbulent environment where decisions must be made quickly.

The role of trust

University governing boards are important and likely increasingly important in the near term. They can and should make essential contributions to advance the missions of the universities they govern. Yet, ethical lapses set back boards and their universities.

Although certain cultural profiles may more easily allow unethical behaviour, the final dimension of our profile – how board members treat each other, with trust, candour and respect – also has an important role to play.

Boards that exhibit high trust for one another and for management, respect each other personally and professionally, and are honest and open in their communication may be better prepared to avoid compromising positions and to address them when and if they do arise.

Being mindful of the right guard rails, both external and internal, can help to ensure ethical governance. Both sets are needed to keep boards on the right path.

Dr Peter Eckel is a senior fellow and director of leadership programmes at Penn AHEAD in the Graduate School of Education at the University of Pennsylvania, USA. He co-directs the Penn Project on University Governance. He and Cathy Trower recently released Practical Wisdom: Thinking differently about college and university governance (Stylus Publishing).