ARPA: Irrelevant counsel

The Commonwealth budget for 2003–04 includes the Coalition’s second attempt at reforming higher education policy, as outlined in its paper Our universities: Backing Australia’s future. The first attempt followed a review of higher education financing and policy in 1997 that had been ineptly chaired by Roderick West. The resulting proposals of the then minister David Kemp were destroyed by the leaking of his Cabinet submission in October 1999. The usual witch hunt followed, but retribution was muted when it transpired that the leak came from the office of a minister with a strong rural constituency, which felt threatened by the marketised policy proposed by Dr Kemp.

The current proposal has been much better handled by the new Minister for Education, Science and Training, Dr Brendan Nelson. Nelson launched an extensive national consultation with the release of the ministerial discussion paper Higher education at the crossroads in April 2002. His resulting policy paper is a finely crafted balance of competing interests. Regional politics have been addressed with subsidies of 2.5 per cent to 7.5 per cent for rural campuses, and core Coalition values have been advanced through proposals for increased user-pays, increased role for the private sector, voluntary student unionism and workplace reform.

Backing Australia’s future contains funding increases of about four per cent per annum from 2004 to 2007. This is a major turnaround for a sector that has suffered significant cuts under the Howard Government and the eroded funding from Labor governments before that. However the proposed increase barely covers expected cost increases over the four years, and does not restore cuts made by the first Howard Government in 1997. While the total new expenditure on higher education of $1.5 billion seems large following a decade of decline, it is only six per cent of the new expenditures in the budget. Most new expenditures are on tax cuts ($10.7 billion, 46 per cent of the total), budget surpluses ($9.4 billion, 40 per cent) and defence ($1.65 billion, seven per cent).

The biggest single spending measure of Backing Australia’s future is a proposal to increase institutions’ operating grants by 2.5 per cent to 7.5 per cent over 2005 to 2007. Unlike all other spending measures, this increase would be untied, but it would not be unconditional:

The paper does not spell out the workplace relations policies that institutions would be required to adopt. Furthermore, there are differing interpretations of the requirement that enterprise agreements not preclude the option of negotiating AWAs. One view is that this would not be a major change to current arrangements, since AWAs would be activated only when enterprise agreements lapsed. Subsequent statements by Dr Nelson have sounded sympathetic to the view that industrial relations is only a secondary issue in higher education, but workplace relations minister Tony Abbott has countered with his clever belligerence. It seems at least possible that the workplace relations conditions for the increased Commonwealth contributions await determination by Cabinet.

Proposed national governance protocols

The Coalition has been more specific about the governance conditions for the proposed increased funding. It proposes twelve national governance protocols, most of which are taken from a Victorian government review of university governance. That review was established by Education Minister Lynne Kosky mainly to address governance issues arising from a series of reports by the Victorian Auditor General on universities’ management of financial risk. Three of the review’s seven members were vice chancellors, one of whom was nominated by the Victorian Vice-Chancellors’ Committee. It is thus unsurprising that its recommendations were broadly acceptable to Victorian universities, and other Australian universities are unlikely to have much difficulty with many of the protocols. Proposed protocol three duties of members of governing boards is also based largely on the Victorian recommendations, although the Coalition has added punitive provisions for breach of duty.

The Coalition gives no justification for limiting governing bodies to eighteen members. The Commonwealth’s own review of higher education management chaired by merchant banker David Hoare (1995) set a limit of twenty members, but recommended ten to fifteen members, perhaps as a negotiating gambit. The only reason I can imagine for choosing eighteen as the limit for university governing boards is that this is the size of the current federal Cabinet.

While the University of Queensland’s senate has 35 members, all other Australian universities have 25 or fewer members on their governing boards. So the Coalition’s proposed maximum of eighteen members would be a modest change to most existing arrangements and it is hard to imagine it would improve universities’ governance enough to warrant the fuss of enforcing the change. The University of Queensland and the universities with the next largest governing bodies—Griffith, James Cook and Murdoch with 25 members—seem to be governed no worse than the universities that would meet the Commonwealth’s prescription—Bond, Australian Catholic University, Western Sydney, Tasmania and Southern Cross.

International comparisons further undermine the Commonwealth’s case. Of the US universities ranked in the top twenty by the US News & World Report, most have boards of trustees of 35 to 45 members to accommodate large donors, since all but the University of California, Berkeley, are private. Examples are Princeton, CalTech, Duke, Stanford and Emory. Some are more selective, such as Yale (nineteen), Columbia (24) and Rice (25), while others are more expansive, such as MIT (75), Pennsylvania (60), Chicago (47), Cornell (64), Brown (54), and Notre Dame (56). The University of California system, of which Berkeley is a part, has 26 regents. Two colleges have very large boards—Johns Hopkins has 104 and Northwestern has 122 trustees. Only Harvard (seven) and Dartmouth (sixteen) would meet the Commonwealth’s conditions.

Of the UK’s Russell group of ‘research led’ universities for which I could find information on the web, none would meet the Commonwealth’s condition and most had 25 to 35 members on their governing board. Examples are Bristol, Glasgow, Leeds, Manchester, Nottingham, Oxford, Sheffield, Southampton and Strathclyde. Cambridge (21), and Edinburgh (22) have the smallest governing boards.

There is thus no relation between the size of the governing board and a university’s performance. Even the private sector gives no support to the Commonwealth’s position. In her Review of New Zealand tertiary education institution governance, Meredith Edwards (2003) quotes studies that find that outside the extremes of very small and very large boards, there is no correlation between the size of the governing board and a company’s performance.

The Victorian review of university governance (2002) recommended that governing bodies include expertise relevant to each university’s objectives. The Coalition’s proposed national governance protocols assume that financial management and commercial operations are a significant part of all institutions’ activities, which is probably true of all institutions except the The Batchelor Institute of Indigenous Tertiary Education. Even before the recent review, Victorian universities were required to have on their governing body one person with substantial business experience and one with qualifications and experience in financial matters. Most universities probably already meet this condition in one way or another.

The Coalition’s proposal to prohibit members of parliament from being members of university governing boards is probably of more symbolic than practical significance—although not necessarily less important for that—reflecting a shift in public accountability from members of parliament to business. It is also likely to be of more concern to backbenchers and local members than universities, again reflecting the shift in power from parliament to the executive over the last twenty years.

Two protocols proposed by the Coalition would increase Commonwealth surveillance of universities. Protocol eight would require universities to report on ‘high level outcomes required by the Commonwealth’, thus duplicating the requirements of most universities’ State/Territory governments. Proposed protocol ten would require universities to ‘keep the Commonwealth Minister for Education informed of any significant event affecting the institution or its subsidiaries which may affect its capacity to meet its obligations as set out in its funding agreement with the Commonwealth’ (p. 47). These proposals are perhaps most important for symbolising the Commonwealth’s assumption of a role in monitoring university’s performance, and perhaps as precursors to more intrusive surveillance.

Loud silences

The Coalition’s governance protocols say nothing about academic boards. Yet the Commonwealth’s own Hoare review (1995) recognised the importance of academic boards, and the Victorian review emphasised the importance of academic boards as the custodians of universities’ academic standards, which is central to their role as academic institutions (p. 35). The problems arising from the lack of a strong deliberative academic body were emphasised by the report of Professor David Penington’s review of the University of Adelaide’s council committees (2002).

Perhaps the greatest structural weakness suffered by external members of governing boards is that they have no guaranteed source of information and advice independent of university management, particularly the vice chancellor. Vice chancellors have different practices, but some control external members’ access to information very tightly, purporting to require all communications between external members and the rest of the university to be conducted through their office. This makes it very difficult for external members of governing boards to obtain information that is not filtered by the vice chancellor and thus at least neutral if not supportive of their position.

By far the most significant structural measure to strengthen university governing boards would be to make the secretary to the board a statutory office reporting to the chancellor, not the vice chancellor. In most cases this would require States/Territories to make the relevant provision in their university’s Acts or subordinate legislation. A second important measure, within governing boards’ existing powers, would be to obtain advice independent of the university’s administration.

The Victorian review hinted at these measures (p. 26) but did not pursue them because they would have been opposed by the vice chancellors sitting on the review. Nor are these measures considered in Backing Australia’s future, either because they were overlooked or because they would reduce vice chancellors’ powers as chief executive, which the Commonwealth is anxious to strengthen.

Conclusion

The Commonwealth is hardly in a good position to lay down the law on governance. The policy of both major parties since at least 1988 has been for small councils, yet the councils of the higher education institutions established under Commonwealth legislation—the ANU and the Australian Maritime College—are above the maximum size specified by the Commonwealth. The ABC, CSIRO and Civil Aviation Safety Authority have problems due in part to either the Commonwealth’s poor governance arrangements or to its poor appointments to their boards. Positions on boards are left vacant for months as portfolio ministers struggle to find the combination of personal acquaintance, ideological orientation and publicly plausible appointability acceptable to John Howard.

And of course, aside from the ANU and the AMC, the Commonwealth has scant legislative responsibility for university governance. The Commonwealth has no authority over the governance of most of Australia’s universities, which are established pursuant to State legislation. It has somewhat more authority over institutions established by the legislation of Territory governments—The University of Canberra, Batchelor Institute and Northern Territory University—but even so the accepted practice is to delegate legislative responsibility to Territory administrations.

Yet this hasn’t stopped the Commonwealth repeatedly trying to change universities’ governance, and yet again the Commonwealth fetishises the size of university governing boards. Meredith Edwards (2003) refers to numerous studies showing either very weak or insignificant relationships between company performance and standard prescriptions for good governance, such as board size and composition, proportion of external members, and separation of board chair and chief executive. And we have seen similarly that there is no apparent relationship between a university’s performance and the size of its governing body.

It therefore seems likely that the Coalition’s national governance protocols don’t matter. Reducing the size of university governing bodies is unlikely to improve their performance. On the other hand, the small governing bodies at Harvard and Dartmouth College haven’t apparently damaged their performance. The sanest course might be to ignore the issue and concentrate on something important, like learning and teaching.

REFERENCES

State of Victoria (2002) Review of university governance, Department of Education and Training [Online] Available: http://www.eduweb.vic.gov.au/highered/.

Gavin Moodie is a policy adviser at Griffith University and has previously worked at The University of Adelaide, Deakin University, The University of Melbourne, Monash University and Victoria University of Technology. He was secretary to the Victorian Government review of university governance.

View other articles in this symposium:

Public Debt: Another Perspective Ian McAuley

View other articles by Gavin Moodie:

The Big Business of Higher Education (Digest, 15 Dec 2003)
Engineering R&D is Not the Answer (Digest, 19 Apr 2002)
Three Reasons to Cut Higher Education Funding (Digest, 25 Oct 2001)
Australia Should Oppose the War Against Terrorism (Digest, 11 Oct 2001)