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July 31, 1998

D R A F T

Not for quotation or attribution

AGB Statement
On Institutional Governance


Introduction First Principles Standards of Good Practice External Stakeholders Conclusion

Questions to Consider A Checklist for Reviewing Policies and Practices



INTRODUCTION

The rich diversity of American colleges and universities is reflected in their disparate governance structures and
functions. Although the culture and process of governance vary widely among institutions, the presence of lay citizen
governing boards distinguishes American higher education from most of the rest of the world where universities
ultimately are dependencies of the state. The nation's public and private institutions also depend on government, but they
historically have been accorded considerable independence in carrying out their educational functions through the
medium of independent governing boards. These boards usually are gubernatorially appointed (and less frequently
elected) in the case of public institutions, and are generally self-perpetuating in private institutions.

The Association of Governing Boards of Universities and Colleges (AGB) has concluded that the governing boards
responsible for the nation's 3,600 nonprofit colleges and universities should consider a number of "first principles" and
standards of good practice. In setting forth these principles and standards, AGB respects the distinctive history, culture,
missions, structures, and resources of our public and private institutions. Thus, this document is not intended to be
prescriptive but rather a template of good practices and policy guidelines for boards to consider and adapt. A series of
questions and a checklist to help boards and chief executives assess whether and how to review their institution’s policies
and practices appear at the end of this document.

Much has changed in the three decades since the American Association of University Professors issued its "Statement on
College and University Government." In 1966, AGB "commended" that document to the attention of its members, but it
did not "endorse" it. This new statement, which addresses institutional decision making from the governing board
perspective, takes into consideration some of the changes in the landscape of American higher education. These changes
include but are not limited to the following:

The proportion of part-time or adjunct faculty has increased rapidly.

Community colleges now enroll for almost one-half of all students in higher education.

The majority of students attend public institutions that are part of multicampus systems.

The public demands greater accountability—particularly regarding student learning outcomes—and
elected officials have intensified their scrutiny of higher education.

There is a widespread perception that faculty members, especially in research universities, are
divided in their loyalties between their academic disciplines and the welfare of their own institutions.

Higher education officials are increasingly sensitive to changing student interests and the shifting
demands of the job market.

Many governing boards, faculty members, and chief executives believe that internal governance
arrangements have become so cumbersome that timely decisions are difficult to make, and small
minorities often are able to impede the decision-making process.

Alternatively, the governance process sometimes produces a "lowest common denominator" decision,
which does not adequately address underlying issues.

As a result of various demands on limited state treasuries, state funding for public institutions has not
kept pace with enrollment or cost increases. Consequently, many institutions, including independent
colleges and universities, have had to downsize or reallocate resources.

The average length of service by institutional chief executives has declined, in part, as a result of
conflicting demands from constituents, the politicization of public-sector governing boards, and the
frequency of budget crises.

The AGB Board of Directors has concluded that these factors are so compelling that a new statement on internal
governance is necessary—a new perspective as seen through the lens of governing boards and trustees. Its purpose is to
encourage AGB-member boards to examine the clarity, coherence, and appropriateness of their institutions' governance
structures, policies, and practices and to revise them as necessary.



FIRST PRINCIPLES

The ultimate responsibility for the institution rests in its governing board. Boards cannot delegate
their fiduciary responsibility for the academic integrity and financial health of the institution.
Traditionally, and for practical reasons, boards delegate some kinds of authority to other
stakeholders with the implicit and sometimes explicit condition that the board reserves the right to
question, challenge, and occasionally override decisions or proposals it judges to be inconsistent with
the mission, integrity, or financial position of the institution. For example, the delegation of authority
to the administration and faculty in adding, reducing, or discontinuing academic programs is made
with the implicit understanding that the board still retains the ultimate responsibility.

The governing board should retain ultimate responsibility and full authority to determine the
institution’s mission (within the constraints of state policies, in the case of public institutions). As with
many other topics, the board should work toward a consensus or an understanding on the part of the
stakeholders and set forth a realistic view of the resources necessary to carry out the mission.

Colleges and universities have many of the characteristics of business enterprises. Consequently,
boards must ensure that, as corporations, their institutions' fiscal and managerial affairs are
administered with appropriate attention to commonly accepted business standards. At the same time,
nonprofit colleges and universities differ from businesses in many respects. They do not operate with
a profit motive, and the "bottom lines" of colleges and universities are far more difficult to measure.
They also differ from businesses in the sense that the processes of teaching, learning, and research
often are at least as important as "the product," as measured by the conferring of degrees or the
publication of research results. And by virtue of their special mission and purpose in a pluralistic
society, they have a tradition of participation in institutional governance that is less common in and
appropriate for business.

The governing board should conduct its affairs in a manner that exemplifies the behavior it expects of
other participants in the institutional governing process. From time to time, boards should examine
their membership, structure, and performance and should expect the same of faculty and staff. Boards
and their individual members should engage in periodic evaluations of their effectiveness and
commitment to their institution. They should strive to understand and respect the unique culture of
their institution and its place in the academic landscape. They should comprehend all sides of an issue
and afford contending parties an opportunity to present their views. And they should be prepared to
defend and set forth the reasons for their decisions.

Just as administrators and boards should respect the need for individual faculty members to exercise
academic freedom in their classrooms and laboratories, boards should avoid the temptation to
micromanage in matters of administration. And just as responsible faculty participation in governance
places good institutional citizenship ahead of departmental or personal professional interest, so
should individual board members avoid advocacy—real or perceived—of any personal or special
interests. In the case of public institutions, trustees and governing boards should not be seen as
advocates for their appointing authorities or of certain segments of the electorate. Board members as
well as faculty members should avoid undermining their administrations.

Historically, higher education governance has included three principal internal
stakeholders—governing boards, administrators, and the full-time faculty. In fact, other stakeholders
exist and in increasing numbers. For example, the nonacademic staff usually substantially outnumbers
the faculty, and yet this group rarely has a formal voice in governance. The same is true of the
part-time or adjunct faculty. These groups now predominate in community colleges and are an
ever-larger component of the faculty in senior institutions, particularly in the public sector. Students
have a vital stake in the institution, but their participation in governance can be problematic, given
their transitory role in the institution.

The involvement of these diverse internal stakeholder groups will vary according to subject matter
and the culture of the institution, but the board is responsible for establishing the rules by which their
voices are considered. Boards should ensure that no single stakeholder group is given an exclusive
franchise in any area of governance, while recognizing that the subject matter in question will
determine which groups have predominant or secondary interests.

All board members, regardless of how they came to the board, should feel a responsibility to serve the
institution as a whole and not any particular constituency or segment of the institution. Faculty,
student, and staff involvement in the work of the board can appropriately occur by membership on a
standing or ad-hoc committee of the board. Faculty, staff, and students ordinarily should not serve as
voting members of their own institution's governing board because doing so violates the principle of
independence of judgment. Particularly in the case of faculty or staff members, board membership
inevitably places them in conflict with their employment status. In any event, boards should be mindful
that the presence of one or more students, faculty, or staff members on the board or its committees
neither constitutes nor substitutes for full communication and consultation with these stakeholders.

Most senior public institutions and many community colleges are parts of multicampus systems
wherein the system or corporate board has the legal authority and responsibility for a set of
institutions or campuses. The system governing board should clarify the responsibilities of the campus
heads, the system head, and any institutional quasi-governing or advisory boards and should state
clearly its expectations regarding the relationship of the campuses and the system. That same clarity
of roles and expectations also should apply to single-campus advisory boards. Such expectations
should lean strongly in the direction of maximum possible autonomy for individual campuses.



STANDARDS OF GOOD PRACTICE

Governing boards should state explicitly who has the authority for what kinds of decisions—that is, to
which persons or bodies it has delegated authority and whether that delegation is subject to board
review. For example, curricular matters and decisions regarding individual faculty appointments,
promotions, and contract renewal normally would fall within the delegated decision-making authority
of appropriate faculty and administrative entities operating within the framework of policies and
delegations of the board. Boards may wish to reserve the ultimate decision on the granting of tenure.
The board should reserve the right to review and ratify noncurricular matters, as well as proposals to
adopt major new academic programs or eliminate others. The board should set budget guidelines
concerning resource allocation on the basis of assumptions, usually developed by the administration,
that are widely communicated to interested stakeholders and subject to ample opportunity for
challenges. But the board should not delegate the determination of the overall resources available for
planning and budgetary purposes. Once the board makes these overarching decisions, it should
delegate resource-allocation decisions to the chief executive officer who may, in turn, delegate to
others.

In all instances in which the board believes resources will need to be reallocated in ways that will lead
to reducing or eliminating some programs, the board should ask the administration to create a
process and criteria for decision making that are broadly acceptable to the stakeholder groups. The
board must recognize that institutional consensus is more likely when all parties have agreed on the
process and criteria. If, for example, the board decides the institution is in such financial jeopardy
that faculty and staff reductions and reallocations are necessary, it first must consult the
stakeholders, share the information, and defend the analysis that has led them to make such a
determination.

Governing boards have the sole responsibility to appoint and assess the performance of the chief
executive. They should assess the chief executive’s performance informally on an annual basis and
more formally every several years in consultation with other stakeholder groups. The selection and
support of the chief executive is the most important exercise of board responsibility. In assessing the
chief executive’s performance, boards should bear in mind that board and presidential effectiveness
are interdependent. Consequently, boards should concurrently assess their own performance and that
of the chief executive every several years. Performance reviews assisted by third parties will
contribute to the objectivity and professionalism of the process.

The chief executive is the board's major window on the institution, and the board should expect both
candor and sufficient information from the chief executive. In turn, the board should support the chief
executive, while ensuring that the voices of other stakeholders are heard.

Boards and chief executives should establish deadlines for the conclusion of various consultative and
decision-making processes with the clear understanding that failure to act in accordance with these
deadlines will mean that the next highest level in the governance process may choose to act. While
respecting the sometimes lengthy processes of governance, a single individual or group should not be
empowered to impede decisions through inaction.

There should be a conscious effort to minimize the ambiguous or overlapping areas in which more
than one stakeholder group has authority. The respective roles of the administration, faculty, and
governing board in faculty appointments, promotions, and tenure illustrate the principle of shared
authority. For example, although the board may wish to exert its ultimate responsibility by insisting on
approving individual tenure decisions, it might choose to delegate other kinds of actions to the
administration, which might, in turn, delegate some authority for some decisions to an appropriate
faculty body. Clarity does not preclude gray or overlapping areas of authority, but each group should
understand whether its purview, and that of others in the governance process, is determinative or
consultative.

"Communication," "consultation," and "decision making" should be defined and differentiated in
board and institutional policies. Governing boards should communicate their investment and
endowment spending policies, for example, but they may choose not to invite consultation on these
matters. Student financial-aid policies and broad financial-planning assumptions call for both
communication and consultation with stakeholder groups.

In institutions with faculty or staff collective-bargaining contracts, internal governance arrangements
should be separate from the structure and terms of the contract. If a collective-bargaining contract
governs the relations of faculty and staff with the institution, the board should consider a formal
policy regarding the role of union officials in institutional governance and the limitations the existence
of a bargaining agreement may place on the officials’ participation in governance.



EXTERNAL STAKEHOLDERS

The preceding sections primarily address the internal governance of institutions or multicampus systems. But public
institutions receive large proportions of their financial resources through governors, legislatures, and in some cases,
statewide coordinating bodies, and governing boards are accountable for these funds. The role of these officials and
bodies varies widely among the states, but governing boards serve as important buffers between the college or university
and the political structures and pressures of state government. This role requires advocacy and education both to defend
and articulate the mission and programs of the institution and to convey to the institution the concerns of these external
stakeholders. Boards also are bridges to state government leaders whose views and perspectives concerning the conduct
of public higher education as it relates to state needs and priorities should be heard and considered.

The relationship between the institution and the various external political and regulatory oversight groups should reflect
an understanding by which the institution is held accountable for results in relation to agreed-upon objectives and, in
return, oversight and regulation is minimized. This arrangement preserves the essential autonomy of the institution, which
differentiates it from other state entities, and makes it clear that the institution is accountable for results.

The alumni are an especially important stakeholder group in both public and private institutions. Alumni are a vital
resource, and their participation in the life of the institution should be actively encouraged. But separately incorporated
alumni organizations frequently give rise to alumni activism that intrudes on the roles of governing boards and chief
executives. The governing board should have appropriate alumni members, but it always must retain the full legal, moral,
and fiduciary responsibility for the institution.

Other organizations—higher education associations, disciplinary organizations, and specialized accrediting bodies,
among others—sometimes attempt to prescribe institutional policies and practices. With the exception of regional
accrediting bodies and those institutions owned by or closely affiliated with sponsoring religious communities, the board
should not feel obligated to adopt the policies and prescriptions of any of these external bodies.



CONCLUSION

College and university governing board membership is one of the most serious and consequential exercises of voluntary
leadership in our society. It calls for balancing and sometimes buffering the often-conflicting claims of multiple internal
and external stakeholders. It requires good judgment in avoiding becoming managerial while being sufficiently informed
to assess management. It calls for listening and questioning more than pronouncing and demanding. Most of all, it
requires a commitment to the institution as a whole rather than to any of its parts. Governing board membership is both
challenging and enormously rewarding in the service of the current and future generations of students and, therefore, the
nation's ultimate well-being.



Questions to Consider

These questions may help boards assess whether policies and practices concerning the participation of trustees,
administration, faculty, staff, and students in institutional governance are reasonably clear, coherent and consistent.
Answers to these questions will help boards and chief executives determine whether to establish a process to revise
these policies or improve how they are used.

Do all trustees, administrators, faculty, staff, and students understand that the board has ultimate
responsibility for determining, in consultation with appropriate stakeholders, the institution’s mission? Do
these constituents clearly understand that the board is ultimately responsible for the institution’s welfare? Do
the trustees understand that such responsibility requires not only monitoring the fiscal and physical assets of
the institution but also having sufficient knowledge of the academic programs to ask hard questions
concerning program quality, coherence, relevance, attractiveness, and appropriateness?

Has the board explicitly defined the major areas of delegated authority? Has it specified to whom the
authority is given, the extent of the delegation, and the measure of accountability?

If the board governs a multicampus system, is the authority of the system head, campus heads, and
institution-based advisory or quasi-governing boards reasonably clear and demonstrably effective?

If a collective bargaining contract governs the relations of faculty or staff with the institution, has the board
considered a formal policy regarding the role of union officials in institutional governance and the limitations a
bargaining agreement may place on their participation in governance?

Does the board conduct its affairs in a manner that exemplifies the behavior it expects from other campus
constituents as they participate in governance? As the board strives to promote quality by means of rigorous
review of programs, processes, and people, does it demonstrate a similar commitment to the assessment
of its own performance? As the board seeks to encourage more open and effective communication on
campus, does it exemplify openness and respect in its interactions with stakeholders? As the board calls for
a greater commitment to the institution on the part of campus stakeholders, do trustees eschew advocacy of
narrow interests and exemplify dedication to the institution?

Has the board enhanced communication with the campus stakeholders? Has it clearly distinguished between
information, consultation, and decision making in its communication with campus constituents? Do
stakeholder groups regularly consult with the board and chief executive on substantive matters that may
affect major institutional policy?

Does the board establish clear deadlines for the conclusion of consultative and decision making processes,
and do campus constituents understand and accept the need for timely decision making?





A Checklist for Reviewing
Policies and Practices

If the board and chief executive determine that the institution’s policies and practices governing participation by
internal stakeholders in decision making need to be reviewed, this checklist may prove helpful. Ultimately, however,
the review process should reflect the institution’s own distinctive history, culture, and traditions.

Define the project clearly and succinctly, convene a group of appropriate stakeholders, and provide an
explicit charge to review all relevant governance documents and processes. The group should recommend
appropriate changes to the board within a specific timeframe.

Seriously consider retaining a third-party facilitator to preside over the review process. If there is persistent
tension between two or more stakeholder groups, consider securing a professional experienced with both
academic culture and dispute resolution. The facilitator should be an individual acceptable to all parties.

The review group should begin by carefully reviewing all institutional governance documents.

How current are the governance documents? How consistent are the provisions of these
documents with the mission of the institution and with recognized principles of good practice?

Do institutional stakeholders view the governance principles articulated in these documents as
responsive to the needs of the institution; sensitive to different perspectives, values, and cultures
represented on the campus; and effective as means for making important and timely decisions?

The group also should carefully review all institutional decision-making processes.

In what areas has the implementation of governance policy been problematic?

Has the board, in consultation with appropriate stakeholders, assessed the level of constituent
participation in institutional decision making and the level of stakeholder collaboration in policy
implementation? What initiatives should be undertaken to clarify and strengthen communication,
participation, and collaboration on campus?

Among its recommendations to the board, the group should include a plan for resolving any significant
differences among stakeholder groups concerning the proposed changes and for satisfactorily
communicating the new policies and processes to the campus community.



July 31, 1998

D R A F T

Not for quotation or attribution