Higher Education Review Process

Meeting the Challenges: the Governance and Management of Universities

3. university governing bodies

• a. the role of governing bodies

• b. duties of members of governing bodies

• c. remuneration

• d. size of governing bodies

• e. composition and appointment methods

84   Issues to do with university governing bodies are primarily the responsibility of universities and State/Territory governments. The Commonwealth is not suggesting, in discussing the issues below, a more intrusive role in matters rightly the responsibility of universities and/or State/Territory governments. There are, however, areas where a more cooperative approach to tackling issues may be beneficial.

85   Good governance is critical to the effectiveness of universities and to the contribution they can make to Australia’s economic and social development. The Commonwealth Government and the community therefore have a strong interest in ensuring that universities are well governed.

86   The dramatically changing environment in which universities now operate, including the growing importance of managing risk, begs the question as to whether university governing bodies are appropriately tasked, structured and composed to lead institutions effectively through the next decade and beyond. How can an appropriate governance balance be struck between the requirement for accountability and probity and the necessity for appropriate risk management of commercial ventures? This is a key issue for this Review.

87   The only relatively recent national review of university governance was the Higher Education Management Review chaired by David Hoare in 1995. The Report of the Committee of Inquiry (the Hoare Report) identified shortcomings in university governance arrangements. The Review recommended clarifying the role of governing bodies, changes to their size and composition and changes to the methods of appointment of members to ensure that governing bodies have the necessary skills.

88   Many State/Territory governments, in co-operation with universities, have made changes to the operations of university governing boards since the Hoare Review. It is clear from submissions to this Review that these changes have resulted in improvements in university governance arrangements in recent years. Universities are quite active in reviewing and improving their governance:

UWA has put a high institutional priority on governance and management issues raised in the Hoare Review … Good governance is at the heart of the UWA Senate reforms of the last three years, and is the basis of the current Review of Committees and ongoing review of decision-making processes in the institution.
(The University of Western Australia, Submission 175, p12)

89   It is equally clear that there remains substantial scope for improvement:

There is currently a high level of dysfunction in the governance and management arrangements at some Australian universities, including:

• debilitating divisions within governing bodies, often linked to special interest groups;

• difficult relationships between governing bodies and executive managers;

• an inability of governing bodies to respond quickly and decisively to change;

• a failure of governing bodies to inform themselves adequately about the operations of universities, and especially their controlled entities, in order to discharge their monitoring and public accountability roles. 
  (University of Adelaide, Submission135, p5)

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a. the role of governing bodies

the role of governing bodies is not always easy to define, particularly given the range of expectations, from outside as well as from within the academic community, regarding how universities should be governed.
(Meek and Wood, 1997, p7 of Ch. 3, web version)

90   University enabling Acts generally include a description of the governing body’s functions, making it clear that they manage and control the entire affairs of the university, consistent with the university having a high level of autonomy. As noted earlier, there may be many other provisions in establishing Acts and related legislation that limit their powers, for example in relation to borrowing and investment.

91   The Hoare Report identified a number of problems associated with the performance of governing bodies. It argued that:

• they lacked a focus on strategic issues;

• they had inadequately articulated roles and responsibilities of members;

• there was a lack of commitment and interest by some members (in particular, poor attendance of parliamentarians and some other external appointments); and

• there were procedural difficulties and delays with appointments to the governing body (Higher Education Management Review, 1995, p45).

92   The Hoare Report recommended that the Commonwealth, through appropriate Commonwealth and State/Territory bodies, should recommend that States/Territories amend university enabling legislation, where appropriate, so that the primary responsibilities and roles of governing bodies are explicit (Higher Education Management Review, 1995, p57). It argued that the governing bodies of universities should have three primary roles. They should:

• have ultimate responsibility for external accountability;

• have strategic planning oversight for the university; and

• be responsible for the overall review and performance monitoring of university operations, relying on the advice of the academic board or senate for monitoring academic standards and performance (Higher Education Management Review, 1995, p42).

93   The Hoare Report also made specific mention of some other responsibilities it believed governing bodies should attend to:

• ensuring that there is an independent and vigorous academic board;

• ensuring that decisions take into account the views of stakeholders;

• developing and fostering links with the community, industry and business; and

• ensuring a proper framework for operations within the university (Higher Education Management Review, 1995, p42-43).

94   While there have been improvements since the Hoare Report, clarification of the roles and responsibilities of governing boards has continued to be an important issue. It was brought into focus by the adverse findings of a number of audits conducted by State Auditors-General over recent years. These audits, inter alia, gave rise to the various State reviews of university governance referred to in section 2a above. They gave prominence to the role of governing bodies in oversighting universities’ commercial activities. The increasing level of commercial activity of universities has highlighted the role of governing bodies in ensuring that universities respond quickly and decisively to rapidly changing commercial realities.

95   The more recent formulations of the role of governing bodies add ‘risk management’ to the Hoare Report’s formulation reflecting, in part, the contemporary concerns about the risks associated with commercial activities. An example is provided by the Victorian Review of University Governance. It recommended that university councils adopt the following primary responsibilities;

• to appoint the Vice-Chancellor as the university’s chief executive officer, and to monitor her/his performance;

• to identify the mission and strategic direction of the university;

• to define policy and procedures consistent with legal requirements and community expectations;

• to establish and monitor systems of control and accountability including monitoring controlled entities;

• to review and monitor both the management of the university and its performance as an institution; and

• risk management (Victorian Department of Education and Training, 2002, p25).

96   The Victorian Review of University Governance recommended no change to the legislative specification of councils’ functions in that State, primarily because no submissions to its review argued that councils’ powers were limited or inhibited by current formulations in Acts. It did, however, argue that there would be benefit in adopting a statement of councils’ functions to concentrate councillors’ attention on core council responsibilities, and that university councils not delegate their primary responsibilities (Victorian Department of Education and Training, 2002, p24-25).

97   The Victorian Review of University Governance suggested that governing bodies adopt the statement of their primary responsibilities and use it in an annual review of the council’s performance (Victorian Department of Education and Training 2002, p25). The Hoare Report also recommended that governing bodies should, on a regular basis, review their own role and performance, and that of the Vice-Chancellor (Higher Education Management Review, 1995, p56).

98   There does appear to be merit in both Commonwealth and State/Territory governments continuing to work with university governing bodies to ensure all parties have a clear understanding and common set of expectations about the contemporary roles of governing bodies and what is required for governing bodies to carry out these roles effectively.

99   The Commonwealth has attempted to aid governing bodies in developing their role through encouraging universities to benchmark their activities. McKinnon et al in their Benchmarking Manual listed the following as good practice principles for governing bodies:

• establish a clear vision and goals for the university;

• ensure that university planning and implementation is consonant with those goals;

• distinguish between its governance role and the responsibilities of management;

• maintain appropriate conventions and relationships with the Academic Board/Senate;

• establish the leadership, management and accountability responsibilities of the Vice-Chancellor;

• unequivocally support management staff as they implement Council policies and decisions;

• regularly review the responsibilities and efficiency of functioning of the committee system;

• annually at least review and amend formal financial, personnel and other delegations of responsibility;

• induct new members of the governing body into their duties carefully; and

• review and report publicly on its own efficiency and effectiveness. (McKinnon et al, 2000, p19)

100  Some university governing bodies have clearly adopted many of these principles to help them improve their practices. The University of South Australia governance arrangements were presented to the Review as a good practice model. Key continuous improvement practices adopted by its Council are detailed in the box below.

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101  Government encouragement for university governing bodies to review their own performance and practices may be a simple and unobtrusive means of clarifying the role of governing bodies. There could therefore be value in pursuing more coordinated efforts to establish national good practice principles, building on those listed here.

102  An important role of a governing body is to dispassionately consider strategy against an institution’s mission, including testing it against risk criteria for appropriateness, ensuring the continuity and competence of the management structures that will deliver it, and taking action if required. The need for members of governing bodies to act in the overall interests of the university, rather than as a representative of an interest group is discussed below. 

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b. duties of members of governing bodies

103  A key issue for university governance is whether governing body members act as trustees or delegates. In general terms, trustees are regarded as obliged to always act in the overall interests of the university, whereas delegates may regard themselves as primarily representatives of the groups who have elected them.

104  Meek and Wood (1997) refer to the 1967 judgement of Justice Lawrence Street in the case of Bennetts v Board of Fire Commissioners of New South Wales and Others. In discussing the delegate versus trustee role of the members of governing boards, he ruled:

The consideration which must in board affairs govern each individual is the advancement of the public purpose for which parliament has set up the board…Once a group has elected a member he assumes office as a member of the board and becomes subject to the overriding and predominant duty to serve the interests of the board in preference, on every occasion in which conflict might arise, to serving the interests of the group that appointed him.
(Meek and Wood, 1997, p7 of Ch. 3, web version)

105  The Victorian Review of University Governance also refers to the legal precedent set by this ruling. Yet a recurring theme in submissions to this Review is the inability of some governing body members to act as a trustee as opposed to a delegate.

university councils’ behaviour indicates that delegates find it very hard to take a total institution role rather than supporting their own constituencies.
(Burdon, Submission 116, p27)

106 Smith notes that:

the existence of legislation in and of itself will not necessarily ensure that governing body members will act at all times as trustees.
(Smith, Submission 71, p7)

107  The Hoare Report identified the confusion about trustee and delegate roles as a major problem and recommended that changes be made to university enabling legislation so that the trustee responsibilities of the members of governing bodies are explicit. This recommendation was not widely acted upon, although the recent Victorian Review of University Governance has recommended that:

universities’ Acts state explicitly that council members’ duty is to act solely in the interests of the university taken as a whole having regard to its objects.
(Victorian Department of Education and Training, 2002, p26)

108 The effectiveness of university governing bodies is clearly affected by confusion about the role of some members. Some submissions to the Review argue for the duties of the members of governing bodies to be legally codified.

...(acting at all times as trustees of the university) is particularly difficult for elected student or staff members, whose constituencies often see them as ‘their representatives on the Board’ and a funnel through which industrial issues may be raised above the level of the normal negotiation processes. In the Corporations law, the overriding responsibility of Board members is made clear. It would be helpful if similar clarity could be imported for universities, through their enabling legislation as well as an education campaign.
(University of Western Sydney, Submission 263, p16)

109  The responsibilities of board members in corporations law include the duties to act in good faith, honestly and for a proper purpose; to exercise appropriate care and diligence; to not improperly use their position to gain an advantage for themselves or someone else; and to avoid conflicts of interest. Many of these are currently common law duties that apply to members of the boards of statutory authorities.

110  Issues of conflict of interest are particularly important given the growth of university commercial activities. The Victorian Review of University Governance noted that adoption of comprehensive provisions such as those for RMIT University “would increase the public’s perception of the probity of councils’ decision-making” (p27). It recommended that such provisions be extended to all Victorian universities.

111  A significant number of establishing Acts do not contain any conflict of interest provisions for members of the governing bodies of universities. Governing bodies may have established clear understandings on these matters for themselves. They may have statutes about conflict of interest. State and Territory guidelines for the members of statutory bodies, such as the Queensland Government Welcome Aboard: A guide for Members of Queensland Government Boards, Committees and Statutory Authorities, may alert board members to their common law duty to avoid conflicts of interest. It may nevertheless be desirable to amend enabling Acts to ensure that the need to avoid conflicts of interest has a high profile.

legislative reform should … ensure a clear definition of the accountability, liability, responsibility, and authority of the governing body and of senior management, and … avoid a situation where such lines are blurred and conflicts of interest arise.
(The University of Adelaide, Submission 135, p5) 

112  There are currently few formal mechanisms to ensure that the duties of members of governing bodies are enforced. Consideration could be given to strengthening the sanctions which might be applied to members breaching their duties. One approach which could be explored is the amendment to the University of Tasmania Act 1992 which enabled the State Minister to dismiss from office, on the recommendation of two thirds of the University’s Council, a member who fails to carry out their duties.

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c. remuneration

113  The issue of remuneration of members of governing boards sits uncomfortably with the traditional role which is seen as a form of honorary public service. These roles are, however, requiring greater time and expertise from members. Remuneration might be seen as an essential complement to increasing specification of the duties of members of governing boards, with potential sanctions.

114  The Victorian Review of University Governance recommended that the Victorian Government consider whether there should be remuneration for external members of governing bodies. It proposed that any arrangement reflect the varying size and complexity of the university and the additional responsibilities of some members on key committees.

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d. size of governing bodies

115 The size of the university governing body has been identified as an important factor in effective governance in at least three major reviews since 1988. The 1988 White Paper Higher Education: A Policy Statement, the 1995 Hoare Report and the 1998 West Review all argued for governing bodies of between 10 and 15 members. The current average size of governing bodies is well above these levels at 21 members. This is substantially down on the average of 27 members in 1990 (Meek and Wood, 1997 and AVCC website). Information on the current size and composition of the governing bodies of each of Australia’s universities is at Appendix 2.

116  Several submissions to this Review suggest that the size of the governing body is still a major issue:

The current Senates and Councils are clearly too large. They tend to function as assemblies of sectional interests.
(Watts, Submission 94, p6)

Given the complexities facing university governance, there is a need for smaller and more expert governing bodies.
(Edith Cowan University, Submission 225, p5)

117 The Hoare Report was concerned that the size of governing boards not make them unmanageable, but argued that:

the size of the governing body was less important than the quality of the membership and the quality of the information made available to them.
(Higher Education Management Review, 1995, p5)

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e. composition and appointment methods

118  The Hoare Report highlighted the balance between external and internal members and the appointment of government nominees as key issues associated with the composition of governing bodies. These are contentious issues.

119  The traditional rationale for staff and student participation on university governing bodies is that they “bring some specified knowledge to the deliberations of the senate”. (Meek and Wood, 1997, pp8-9 of Ch. 3, web version)

120  McNicol contends that, in general, current methods of appointment fail to ensure the mix of the skills among members that is required for an effective governing body. He argues that:

Constituencies such as graduates, staff and students elect a large proportion of members without any overall view of what a governing body needs to properly function. ... Parliamentary representatives, who are appointed by their respective houses, seem to be the product of a capricious lottery that sometimes deliver prizes of great value or, on other occasions, painful afflictions.
(McNicol, Campus Review, 8-14 May, 2002)

121  Only New South Wales and the Commonwealth continue to have dedicated appointments of Members of Parliament to university governing bodies. Most States and Territories have retained Ministerial appointments. Changes to enabling Acts in South Australia in 1995 removed provision for Parliamentary, Ministerial and Governor-in-council appointments. The arrangements for the University of South Australia were presented to the Review as a best practice model that could be considered by other States/Territories.

122  The Council of the University of South Australia, itself, appoints 10 out of 21 of its members on the basis of the recommendation of a selection committee consisting of the Chancellor and six other persons appointed by the Chancellor. There is the possibility of the council co-opting and appointing a further person. There are six elected representatives and four ‘ex officio’ members being the Chancellor, Vice-Chancellor, head of the Academic Senate and the General Secretary of the Students’ Association.

123  One of the most important considerations for those charged with making appointments to university governing bodies is the capabilities that those bodies require and the attributes needed to be an effective member of such a body. Smith listed the following as important attributes of university governing board members in his submission to this Review:

• commitment to voluntary service with regular (occasionally, substantial) time demands;

• willingness to: prepare for, attend, and contribute to/participate in meetings;

• ability and willingness to learn about the institution;

• ability and willingness to ask good, occasionally hard questions;

• preparedness to seizeopportunities to inform the public at large about the institution;

• awareness of the need to avoid conflicts of interest, real or perceived;

• possession of a basic understanding of the essential elements of the higher education sector;

• possession of the rudiments of understanding of the financial realities for a large organisation;

• ability and willingness to be a team player; and

• preparedness to serve the institution as a whole (that is, to be a trustee, not a delegate).
  (Smith, Submission 71, p3)

124  If a good practice manual for university governance were to be developed, such a list might be included? 

125  Some submissions propose that university governing bodies be reviewed with the aim of promoting skills-based appointments, rather than representational appointments. Governing bodies could be given the flexibility to make appointments to ensure that, as a whole, they have the balance of capability, experience and business acumen that Vice-Chancellors need to draw upon in managing a large organisation.

126  Several submissions to this Review suggest that the composition of the governing body should reflect the purposes and priorities of the university:

the composition of councils should reflect the purposes of the institution.
(Australian University Alumni Council, Submission 73, p7)

it is important …. to move away from a “one-size-fits-all” model of University governance, and to develop a diversity of governance structures appropriate to the diversity of institutional missions and cultures at Australian universities.
(University of Adelaide, Submission 135, p5)

127  An issue closely related to appointment methods is the timeliness with which appointments are, and can be, made. The Hoare Report recommended that governing bodies be able to fill vacancies by appointment on a temporary basis until elections can be held or external appointments are made, and that governing bodies be able to co-opt members.

128  The recent Victorian Review of University Governance noted that some universities experienced particular difficulties when the term of appointment for members with particular expertise expired and they were not immediately replaced. Examples were members with particular business or financial expertise who often have distinctive roles and chair significant committees. It recommended that university Acts be amended to provide for the continuation of a member’s term until a new appointment or re-appointment is made.

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some possible responses

129  A number of possible options have been raised in relation to the issues covered in this chapter. While not an exhaustive list, these questions have been included for consideration and discussion:

• Should university enabling Acts be amended to:

  • clarify the role of the governing body?

  • clarify the duties of members of governing bodies?

  • reduce further the size of governing bodies?

  • clarify conflict of interest provisions for members?

  • remove provisions for Parliamentary, Ministerial and Governor-in-council appointments?

• Should consideration be given to the remuneration of governing board members?

• Should the Commonwealth work with State/Territory governments and the university sector to develop a good practice manual for university governance that might include:

  • good practice models in respect of the size and structure of the governing body?

  • information on the duties and responsibilities of governing body members?

  • information on the skills and attributes for effective governing body membership?

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