Even before the coronavirus pandemic hit, the UK university sector faced a real and possibly existential crisis in governance, funding and strategic direction. Yet addressing the scale and parameters of these complex issues, let alone effectively resolving them, has never been more contentious.
But what really are the obstacles and management realities the executives running our vital UK university sector and sitting on university councils must overcome? What do they really think, or think needs to be done?
Original, extensive, independent, empirical research for our new book by Henley Business School – including in-depth qualitative interviews with key opinion leaders plus confidential surveys of 135 people including 35 chairmen/chairwomen and 86 executives/non-executives/trustees supported by the Committee of University Chairs (CUC) and the Association of Heads of University Administration (AHUA) – finds many interesting results when it comes to corporate governance.
These include that the office of vice-chancellor is very powerful, while its counterweight, the university council, is an ill-structured entity rooted in the past. Worse still, university governors lack diversity, time, incentive, and tools to be effective, resulting in the university’s fate often being left to the idiosyncrasies of the VC. Nevertheless, university council members and VCs rate themselves highly, but, in reality, governance structures are opaque and cumbersome while executives also fail to devote adequate time to critical governance issues. Some VCs enjoy this state of affairs, but many are vulnerable and insufficiently challenged or inadequately supported by their council. Additionally, constraints against independent, evidence-based action, means university council members face an uphill struggle, which can only be resolved by significant university governance reform. It is clear that the role of chair of council urgently requires strengthening. As in so many sectors throughout the UK presently, the impacts and ramifications of Covid-19 are surfacing and turbo-charging a host of already known concerns – for example, the £18bn black hole in universities’ finances.
Forty-two per cent of council members never visit faculties or colleges of their university to meet staff and students
Despite the formidable challenges faced by universities, we found a remarkable degree of complacency on the part of independent directors sitting on university councils. Too often, university councils appear to be in denial about the problems they face, or simply do not recognise that the problems exist. There is a worrying lack of engagement. Most councils meet six times or fewer per year, and most meetings last no more than three hours. Eighty-two per cent of council members spend 20 days or fewer per year attending to their duties. 23% spend 10 days or less on the role. Thirty-five per cent currently have no other independent director role, meaning they lack experience of the post. Forty-two per cent never visit faculties or colleges of their university to meet staff and students. Too many council members are not engaging with their organisations, and as with businesses, this is bound to have an effect on board performance. This is especially worrying given the size and complexity of many universities.
In part, as one of our interviewees commented, this may be down to the culture of universities themselves. University councils tend to be large, as they are required to represent a wide range of stakeholders including staff, students, the university senate and so on, and this can make them unwieldy. The majority of council members are part of the university. “That creates a culture of stewardship, a culture of ‘we’re all in it together’, and that can be very good”, the interviewee said. On the other hand, independent members of the council can easily get drawn into that culture and lose their independence.
Some council members did express concerns. We found that over 35 per cent thought their council was risk-averse, and 25 per cent felt they lacked enough data to adequately monitor performance. Another 28 per cent believed that the views of the independent directors are not aligned with those of the vice-chancellor. Ten per cent doubted whether the contributions they made at council meetings were effective.
22 per cent believe that a cohesive culture does not exist among Council members and only 44 per cent think that chairs deal effectively with non-performing council members. And yet, council members themselves seem to take a remarkably laissez-faire approach to their role.
That said, powerful vice-chancellors sometimes throttle independence on university councils. As one respondent told us bluntly: “In fact, any governor who showed real independence would probably be asked to leave the board.” Of course, information asymmetry between the non-executives and the executives is a well-known constraint, preventing independent directors from scrutinising and raising questions confidently and effectively. “In any organisation the odds are stacked in favour of the executive because they have more information and knowledge”, said one of our interviewees, and another, from the academic sector, presented this picture of their own university council:
“The vice-chancellor knows infinitely more about their business than the council…The executive have a disproportionate power because they can reveal what they wish to reveal and keep hidden what they don’t wish to reveal to predetermine the outcome of a discussion. It’s very difficult for a non-executive director to get behind that, unless they come from the world of higher education. The council members need to spend a lot of time assimilating an enormous volume of paperwork (much more than in a company)… in an attempt to rectify the information asymmetry. They can’t catch up with information built up over 20 years in one hour and then make a decision.”
One respondent told us: ‘Any governor who showed real independence would probably be asked to leave the board’
The best practice model for evidence gathering, in our view, is the dual assurance model practiced, for example, at the University of Exeter. In this model, each executive function has two leads: one, a member of the executive team and the other, an independent director from the university council. This obviates the danger of having all information channelled through the vice-chancellor/CEO, who can then act as an information gatekeeper. Instead, independent members of Council are obliged to go out to different parts of the university, meet with faculty, staff and students and hear their views. Armed with sufficient knowledge, the independent lead then reviews with the executive lead their findings to discuss and analyse what they know, before reporting jointly to the council.
In turn, because everybody feels more informed and confident to speak up, there is robust challenge and discussion at various levels, including during council meetings. People feel that the process works. Proposals put before the council receive a level of scrutiny that would not be possible under a more classical model of governance.
Of course, a Covid-19-inspired elephant in the room remains the fact that some fee-paying UK university (home) students are no longer getting value for money (VfM) from their universities in a pandemic era where learning has often fully or partially migrated online. Despite the Office for Students (OfS) putting a lot of weight behind its regulatory pressure upon universities to provide VfM, this dog has yet to bark.
While, for their annual fee of £9,250, students currently appear to have little formal legal redress against university contracts, it is self-evident that students at some universities are currently only receiving some of the educational experiences they could usually reasonably expect of university life. Especially so where universities have failed to plan sufficiently for the impact of Covid-19.
There is a much stronger case for ex-gratia annual degree fee refunds on a VfM basis. Disappointingly, the issue of refunds has yet to be effectively grappled with by government, the regulators or university councils. In the context of severe financial pressures across the sector, and existing evidence that various individual universities are currently vulnerable to possible insolvency or bankruptcy, in the absence of government or OfS regulatory leadership, the urgent question is how university councils are going to respond?
Gerry Brown (council member at the University of Exeter), Andrew Kakabadse and Filipe Morais (both Henley Business School) are the authors of The Independent Director in Society: Our Current Crisis of Governance & What To Do About It published by Palgrave Macmillan
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