4 November 2019

Governance and the issue of remuneration

The topic of governance in higher education is increasingly coming into sharper focus fuelled, in part, by the controversy over vice-chancellor salaries and benefits, but also by the premature departure of several vice-chancellors and the reported financial problems of some institutions.  Questions are being raised over the role of chairs of governing bodies and the capacity of independent board members to provide effective scrutiny given such boards have relatively few meetings of a short duration and are essentially unpaid volunteers.

After the December 2016 introduction of the new assurance requirement, governing bodies are now expected to formally seek assurance of an institution’s academic quality and standards.  However, research subsequently conducted by the Leadership Foundation, which runs training courses for university governance, and the Council for University Chairs, which strives to codify good practice and encourage more effective oversight, produces some revealing findings.  It found that some governing bodies did not possess a good understanding of their role in academic governance and that the interface between “corporate” and “academic” governance was often unclear.  It found that materials presented to governors are not always written in an accessible form or language and they often fail to address the key issues, such as the strengths and vulnerabilities of the institution, which would enable governing bodies to function properly.  The sheer volume of material, moreover, made it often difficult for independent governors to digest in the very limited time available to them.

These findings have been confirmed in more recent research conducted by a team from UCL / IOE and Oxford Centre for Global Higher Education led by Michael Shattock.  The research concluded that government places too much expectation on the powers and capacity of lay-dominated governing bodies, acting as pseudo company boards, to manage and direct the affairs of universities.[1]  There is evidence of considerable uncertainty in many universities as to the definitions of roles for the most senior members of the executive, the chairs and the most active lay governors.

Historically, there has been a marked difference between different types of institutions and the relationship between the academic community and governors. The taxonomy is revealing.  Older universities tend to describe external members of their boards as “lay members” reflecting the widely held belief that the primary authority rests with the academic “clergy”, academics and senates; generally, the term “lay” means “non-professional”.  Such universities still have strong Senates and derive their authority from Royal Charters.  By contrast, post-92 universities, once the subject of significant control by external local authority members, usually use the term “independent members” for their external governors, often appointed as directors and subject to Companies Act provisions, while the Vice-Chancellor is more of a Chief Executive with accordingly greater authority to direct affairs.  However, there has been a tendency for government, since the Dearing Report of 1997, to encourage universities to follow the spirit of the post-92 models and although there has been much resistance to this in many institutions, there is no doubt there is some conflation in this direction.

Across the sector, however, regardless of institutional differences, chairs and governing bodies are becoming more assertive and are taking a greater interest in the core business of the institution not simply the estates and the finances.  This has been driven largely because of the increase in risk levels.

Would remunerating external board members make a difference?  A few chairs are already paid but in a recent HEPI paper on the subject[2], Allison Wheaton, former Chief Executive of GSM Education has recommended a more thorough-going examination of the costs and benefits of remuneration.  This also includes the question of whether appointments should be made through Public Appointments websites as is currently the case with NHS Foundation Trusts.  A number of universities already use executive search companies to identify and assist in appointing board members but paying all board members is a much broader issue.

While many public organisations have moved in the direction of paying governors, it is not clear how this would improve the performance of university boards.  One argument in favour is that it would broaden the field of applications since it is suggested that many younger people, especially those in full-time careers or with substantial domestic responsibilities, cannot consider taking on onerous tasks without some financial compensation.  The counter argument is that paying independent governors changes the relationship between governance and executive functions and can create tensions in decision-making, especially if there has been institutional resistance to governors becoming too involved in the academic processes.

The tensions between the academic community and independent governors are illustrated in a discussion between Professor Stephen Jones and Nick Hillman of HEPI, both of whom are members of Manchester University Board of Governors.[3]  Of course, Manchester is by statute a bicameral institution with the senate described as “the principle academic authority” but even here there is a concern, expressed by Professor Jones, that “university governance seems detached from the day-to-day reality of many academics’ working lives’.”  Will paying governors improve that relationship or will it make governors themselves more visible and therefore more accountable, and will this, in turn, improve the situation as described by Shattock and others?

The Office for Students has laid greater stress on the use of data in governance and this may put greater pressure on universities to involve their governors in issues of academic performance.  But what kind of experience and expertise will governors therefore need?  It has been noticeable in the past decade that governing bodies are increasingly dominated by individuals whose experience lies entirely outside education and whose skill sets are essentially those of professional accountants, lawyers and the commercial world.  But is such a background any value in assessing academic issues?  Or will this require a different kind of governor, one far closer to the educational environment and, indeed, the local community (noticeably absent in many institutions)?

The key to successful governance lies in finding the right balance between the necessary spectrum of professional skills such as financial strategy, estate management or human resource management on the one hand, and experience and understanding of key education and skills issues on the other.  Both are needed in equal measure.

And there is one final consideration. While some privately owned and for-profit institutions are managed differently, the vast majority of universities and colleges are public institutions and empathy and appreciation of the values of the public sector remain key requirements.

Remuneration aside, finding the right individuals and the right combination of skills and experience for a governing body has never been more important and will ultimately precede its success.

by Deian Hopkin

[1] Michael Shattock and Dr Aniko Horvath, The Governance of British Higher Education: the impact of governmental, financial and market pressures, (London: Bloomsbury Academic, 2019)
[2] Payment for university governors? A discussion papers. (HEPI Report 118:  2019)
[3] University governance in a new age of regulation. A conversation between Professor Stephen Jones and Nick Hillman, with a Foreword by Professor Michael Shattock (HEPI Report 119:  2019)