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Lessons from Stevens
Sweeping governance changes just imposed by the attorney general of New Jersey in a case involving the Stevens Institute of Technology Board of Trustees underscore why trustees need to get their houses in order: If you don't, someone may do it for you! Here are some lessons, for starters.
The full board -- not just the executive committee -- needs to set the pay level of the president and resist the temptation to raise presidential salaries higher and higher. It is interesting to remember that the New York Board of Regents once removed almost an entire college governing board for permitting enormous presidential compensation (of which the full board was ignorant) on the grounds that it was the trustees' legal obligation to conduct adequate oversight.
Boards must insist on clear conflict of interest policies. Self-policing measures will obviate the need for intervention. While outside trustee involvements can sometimes be valuable and informative, they can give rise to inappropriate transactions if the potential conflict is not disclosed. Accordingly, it is imperative that higher education governing boards adopt clear conflict policies that ensure transparency in university operations.
Presidential leadership does not depend on being a member of the board. Presidents of private colleges today commonly have voting rights on their boards. However, this status confuses the governance relationship. Presidents, after all, work for the board and frequently bring proposals to the board; sometimes presidents are also members of the faculty, where various conflicts of interest can arise. Permitting the president to serve as a nonvoting, ex officio member, or to attend board meetings upon the call of the board, can eliminate this problem.
Boards of trustees should insist on their own staff and budget. Currently, most boards of trustees have no staff and no budget. They are, for the most part, entirely dependent on the president's staff for support and for continuing education. It is not surprising that, given this fiscal arrangement, most boards are not independent.
Boards of trustees should regularly ensure donor intent is being followed. As a general practice, trustees should review restricted gifts and ensure the donors' terms are followed as part of their fiduciary responsibility.
Bylaws should provide for trustee term limits, and for removal of trustees for lack of attendance, misconduct, and conflicts of interest. The audit committee (whose members should be financially literate) can be responsible for ensuring that policies are adhered to and conflicts of interest avoided, reviewing compensation (including the 990s) and publicly disclosing top administrative salaries each year.
Posted by Anne D. Neal on January 15, 2010 at January 15, 2010 06:15 PM
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