Posts tagged ‘governance reform’

Governance Committee Wrestles with Reform—Again

The Board of Trustees’ governance committee began discussing the details of potential reforms on Wednesday afternoon. But what the trustees discussed isn’t yet known.

On Wednesday, at an extra meeting of the committee—called after the March meeting, when the trustees and governance consultant Holly Gregory spent a couple of hours discussing what data they needed in order to begin discussing reform—the trustees received a report benchmarking Penn State’s board with 20 peer institutions.

Gregory introduced the report today by saying that she and her associate Paige Montgomery had conducted more than 40 interviews, reviewed “a variety of reform proposals,” organized a January retreat for the Penn State board to identify goals and guiding strategies, and met with a legislative caucus in Harrisburg. “What’s become very obvious from all of these,” Gregory said, “is that a clear consensus on reform has not yet emerged. Nor does there appear to be a clear consensus on what are the underlying problems that we are attempting to solve by considering reform.”

The 29-page benchmarking summary report compares the structure, composition, and selection of Penn State’s board to Pennsylvania’s other three state-related universities (Pitt, Temple, and Lincoln), 14 Committee on Institutional Cooperation universities (the CIC is the highly regarded academic counterpart to the Big Ten and includes the University of Chicago), two private land-grant universities (Cornell and MIT), and Johns Hopkins.

(As usual, I feel compelled to point out that we at The Penn Stater benchmarked Penn State’s board against other Big Ten universities and land-grant universities in our July/August 2012 issue; click here for a PDF of our findings. I should also note that the Faculty Senate committee, which anyone who cares about governance issues should read, also did substantial work on benchmarking.)

No two boards are structured the same, but there tend to be consistent differences in how public vs. private universities are structured. For instance, private boards are larger—of the five that Gregory and Montgomery benchmarked, the median number of members is 64, with 55 having voting privileges. For the 15 public universities, the median size is 13, with 12 voting. As a state-related university, Penn State has characteristics of both public and private schools.

Among the consultants’ findings were these numbers on the percentage of the 20 peer institutions that include representatives from the following groups as voting members:

— Governor: 15 percent (Penn State’s board: no longer)

— Secretaries of state agencies: 15 percent (Penn State: yes)

— President/chancellor: 35 percent (Penn State: no longer)

— Student: 55 percent (Penn State: a student is traditionally appointed by the governor)

— Faculty: 10 percent (Penn State: no)

— Staff: 5 percent (Penn State: no)

— Alumni: 35 percent (Penn State: yes)

— Agriculture: 10 percent (Penn State: yes)

— Business: 5 percent (Penn State: yes)

The report also compares Penn State’s selection methods to the peer university group’s selection methods:

— Appointed by governor: 60 percent (Penn State: yes)

— Secretaries of state agencies: 25 percent (Penn State: yes)

— Appointed by legislature: 20 percent (Penn State: no)

— Elected by alumni: 15 percent (Penn State: yes)

— Selected by board: 45 percent (Penn State: yes)

— Elected by students: 20 percent (Penn State: no)

— Elected by statewide vote: 15 percent (Penn State: no)

— Elected by staff: 5 percent (Penn State: no)

— Elected by faculty: 10 percent (Penn State: no)

— Selected by Alumni Association: 20 percent (Penn State: no)

The committee had a brief discussion after several members noticed that the report indicates Penn State has about six fewer trustees who are alumni than it actually does. Board chair Keith Masser ’73 said, “It just makes me question—if this isn’t right, what else isn’t right?”

Gregory and Montgomery apologized and said the data was compiled from publicly available sources. I don’t know when they gathered their data—or what the composition of the board was then—but I just checked the Board of Trustees’ website, and there are several trustees without biographical information, including six who joined the board in the past year: Kathleen Casey ’88, Ted Brown ’68, Barbara Doran ’75, Bill Oldsey ’76, M. Abraham Harpster ’94, and Richard Dandrea ’77.

Including those trustees, there are 22 alumni serving on the board (nine who are elected by alumni).

After hearing the report today, the governance committee was divided into three separate breakout groups to spend an hour, behind closed doors, considering questions posed by the consultants. (Group one: trustees Keith Eckel, Dandrea, and Anthony Lubrano ’82; faculty representative Roger Egolf, and vice president for administration Tom Poole. Group two: trustees Masser, Jim Broadhurst ’64, Doran, and emeritus trustee David Jones ’54. Group three: trustees Carl Shaffer, Jesse Arnelle ’55, ’62g, Marianne Ellis Alexander ’62, and student representative Emily McDonald.

At the March committee meeting, Arnelle had asked whether the next meeting would be public, and attorney Frank Guadagnino ’78 said it depended on what was being discussed. Eckel said Wednesday that the small groups were not open because there was no quorum and because there were non-voting members present in each of the groups. Pennsylvania’s Sunshine Law says open meetings are required when there is “official action and deliberations by a quorum of the members of an agency.”

Each of the small groups was to consider the same questions and report a consensus back to the consultants; the results of their discussions aren’t yet known. Eckel said he would like to schedule another governance committee meeting between now and the July Board of Trustees meeting to further discuss potential recommendations. He hopes that the committee will be able to make reform recommendations to the full board in July but said that the complexity means it could stretch until September. The board needs at least 30 days’ notice before voting on changes to the university’s bylaws or charter.

The officially scheduled governance committee meeting is Thursday morning. More updates as events warrant.

Lori Shontz, senior editor

 

May 7, 2014 at 8:30 pm 2 comments

Trustees Struggle to Find Consensus on Board Reform

Perhaps in this case, the best place to start is the end.

Two hours into the Board of Trustees’ governance and long-range planning committee meeting Thursday afternoon in Hershey, chair Keith Eckel decided the group needed another session before its next scheduled meeting in May. The board’s governance consultant, Holly Gregory, agreed and pushed for a substantial chunk of time to find some consensus on what reforms to pursue—and to understand why those reforms are needed.

“We need to drill down,” Gregory said. “I’m still really, really challenged because I need to make sure we have a sense of what we are trying to move on. And it’s difficult to come up with ideas of what we’re going to do when we don’t know what we’re trying to achieve. That was my hope. I have some sense of that on the size (of the board) issue, but we haven’t had the time to go down as deep as I’d like.”

Then she added, “I’m supposed to help facilitate. Not come up with my own reform proposal. I can easily come up with one based on what I’ve heard, but that really isn’t the task as I understand that.”

The committee members and Penn State staff pulled out their calendars and started tossing out suggestions. None worked. (Perhaps a suggestion from the media seats—why not do a Doodle poll?—would have helped.) These are busy people, people with calendars full of other board meetings, vacations, grandchildren. The upcoming celebration of Penn State’s capital campaign took up a few days, as did the ag trustees election and the counting of alumni election votes. At one point, Anthony Lubrano ’82, one of the board’s most vocal critics, even after joining it, noted a week he was unavailable, prompting Jim Broadhurst ’64, an executive committee member and former board chair who has served since 1998, to quip, “Might be a good week to have it, then.”

Everyone laughed, even Lubrano, who said, “I gave you a softball, Jim—if you couldn’t hit that one …”

Consensus was almost impossible to find. They tentatively settled on May 7, the day before the officially scheduled governance committee meeting, and according to attorney Frank Guadagnino ’78, responding to a question from Jesse Arnelle ’55, ’62g, that meeting should be open to the public.

It’s no secret, of course, that Penn State’s board is divided and that proceeding on the next part of governance reform, which involves the size and composition of the board, plus qualifications for trustees, was going to be difficult. That’s why the governance committee said it hired Gregory, to help members find the right path.

The board’s stated intent is to vote on a reform package in the fall. But the trustees entered Thursday’s meeting, their first public discussion on reform with Gregory, having not yet determined which data they needed or which universities they wanted to use as benchmarks. After a lengthy back-and-forth, that was settled. (And if they want more data, they are welcome to check out a feature from our July/August 2012 issue in which we compared the size and composition of Penn State’s board to those of other Big Ten, land-grant, and Pennsylvania universities.)

Even a potential reform that has widespread support—the addition of a permanent student trustee, necessary because there’s no guarantee of student representation, only a tradition that a student is of the six trustees appointed by the governor—required a sustained, sometimes contentious, discussion.

The issue has some urgency because the current student trustee, Peter Khoury, is graduating in May, and the board realized that unless it acts, it could be without a student representative when tuition is set at its July meeting. Eckel said Gov. Tom Corbett has assured that he will select Khoury’s successor in plenty of time to have the selection ratified by the state senate, but the committee wanted a back-up plan in case that doesn’t work.

The plan: for the committee to vote on the permanent student trustee reform immediately, but bring the item to the full board for the necessary approval only if the process in place now hasn’t moved forward by the next meeting. There’s a chance that the full board will not vote on this in May. But this action separated the student trustee from the rest of the reform package, which does not yet exist.

The student trustee position involves three changes: The size of the board would increase from 32 members to 33 (both numbers include non-voting trustees) because the governor would still have six appointments. The board itself would select the student trustee, but the University Park Undergraduate Association, the Graduate Student Association, and the Council of Commonwealth Student Governments would recommend that student. And the student trustee term would be two years, not three, to make it less likely that students would have to choose a freshman.

Barbara Doran ’75 suggested that Khoury stay on, that he could still represent student interests as an extremely recent graduate. (His term doesn’t officially expire until November; he has agreed to resign to make way for a student-chosen trustee.) The committee’s student representative, Molly Droelle, the president of CCSG, said that is unacceptable to students: “That’s a very strong point for us.”

Vice president for administration Tom Poole told the committee that the governor makes his decision after student organizations recommend one or two candidates and the state secretary of education (also a trustee) interviews the candidates. Richard Dandrea ’77 noted that the board could decide to make the student trustee position permanent but officially designate that trustee as one of the governor’s appointees.

“Not in the eyes of the students,” Droelle said. “That’s not the proposal.”

“I know that’s in the eyes of the students,” Dandrea said. “I like your vigorous advocacy. I’ll write your recommendation for law school. But I’m just saying, that’s another alternative we should consider.”

That idea was discussed but never brought forth for official consideration.

Lubrano objected to the item because it was separated from other potential reforms and because while the issue of the student trustee has been discussed generally in committee, he hadn’t seen this official proposal until the meeting. He insisted on a roll call vote, and the proposal passed 8-1, with his dissent.

“It’s imprudent to move forward with one part without talking about the whole,” he said.

Dealing with that whole, however, is proving difficult. And the proverbial devil, it became clear as the meeting progressed, is not only in the details, but in the overall philosophies of board members.

Board reform became a hot topic after the Sandusky scandal, when the board was criticized for its actions, particularly not knowing that Jerry Sandusky was under investigation before he was charged, the decision to fire Joe Paterno and how it was carried out, and the handling of the Freeh report. Alumni trustee Marianne Ellis Alexander ’62, who was on the board in 2011 and is not running for re-election, addressed that issue head-on late in Thursday’s meeting.

She referenced a  report by the Association of Governing Boards of Universities and Colleges from the late 2000s that cited Penn State’s board as a model of good governance because of the diversity of constituencies represented on the board (alumni, agriculture, business, state officials) and the diversity of ways in which they are chosen (direct election, self-selection, appointees).

“I don’t want to lose sight of that,” she said. “And also, since eight years ago … there’s been a steady evolution toward board reform that means every member of this board is more included and feels more engaged. Really, it’s been a revolution.

“And I think what we are doing here today is on a continuum. I just don’t want us to lose sight of that. Just because we had a terrible thing happen, suddenly we have this terrible system. I don’t believe that.”

Doran, a private wealth manager at Morgan Stanley who was elected by the alumni post-scandal, answered by citing the nation’s financial crisis of 2008. “Most of the banks concerned were very well run, had risk management systems, everything looked good—and then fell apart when they failed the ultimate stress test. … A stress came (to Penn State), and it hurt us. Wall Street has been undergoing massive reform. I think that’s where we are now. We need to continue to look at how to improve.”

Alexander, one of two voting members of the board with a higher education background, responded, “I don’t like the idea of Penn State being compared to those financial institutions.”

Replied Doran, “It’s out there.”

The back-and-forth called back to how Gregory began her section of the meeting, which was billed on the agenda as “facilitated discussion of governance considerations with consultant.”

She said: “We need to ask, ‘Is change likely to have a positive result on board effectiveness?’ And also, perception matters here—you govern in public, and having the support of the community is critically important. … I think we have to deal with both issues.”

Those issues have many parts. I’m planning to flesh out some of them in future posts.

Lori Shontz, senior editor

March 7, 2014 at 11:56 am 1 comment

More on Governance Reform at Penn State

EckelIt appears, more and more, that change in the structure of the Board of Trustees will not end with the removal of the university president and governor as voting members and the other reforms enacted in May. The governance and long-range planning committee, which recommended the May changes, plans to hire a governance consultant by the board’s November meeting. This consultant would help the governance committee to determine what further changes should be referred to the entire board.

This process is moving quickly. Keith Eckel (pictured here) suggested that a consultant was needed in July—his first meeting as chair of the committee–just two months ago.

At Thursday afternoon’s committee meeting, Eckel reported that he, board chair Keith Masser ’73, and Barbara Doran ’75—a subcommittee, I’d note, that incorporates both a veteran and a new member of the board—had reviewed about a dozen possibilities and narrowed the field to four or five people. Doran said they had solicited recommendations for the position “as broadly and widely as we could.”

The idea that Penn State needs to hire another consultant to discuss governance after already receiving reports on the subject from Louis Freeh, former auditor general Jack Wagner, and Penn State’s Faculty Senate has sparked anger and some ridicule among critics of the board. But Eckel said the trustees are not looking for another informational report.

“We want a top expert in the field, but we also want a facilitator, because obviously a number of these issues don’t have unanimous agreement,” he said.

Eckel, Masser, and Doran want to get some additional information on the remaining candidates, they said, and are planning to bring the full committee together again to interview the candidates as soon as possible. Their goal is to have made a hire by the board’s November meeting. Eckel called the timetable “aggressive,” but no one at the meeting objected to it.

Eckel, who talks and explains more in committee than his predecessor, Jim Broadhurst ’65, did, also gave what seems to be his mission statement going forward:

“We can’t emphasize enough, the improvement of our governance is a work in progress,” he said. “There are a number of areas that need to be looked at, need to be reconciled.

“If you’re going to be world-class, each year you ought to have the entire board review the operations of the board and make suggestions for changes as well as committee operations. And, in fact, if we became very aggressive in that area, we might reach a point where the board agreed on an evaluation process of each other by every member of the board in order to create a more efficient process and higher-performing board members. That’s an aggressive step.

“I’m only listing these things to indicate it will be a work in process that I don’t believe is ever completed. But our goal is to have the best governance for this university.”

Other notes from Thursday’s governance committee meeting:

—More information on the formation of a separate compensation committee, including bylaws changes, was given by Susan Basso, vice president for human resources, and Frank Guadagnino ’78, an outside attorney from Reed Smith hired by Penn State for his expertise on governance issues. This committee would help to determine salaries for several tiers of university officials, ranging from the president (its primary purpose) down through top vice presidents, the athletic director, and even some highly paid coaches.

The discussion expanded into Penn State’s structure, in which Basso reports to David Gray, senior vice president for business and finance. Doran asked how this lines up with recommendations in the Freeh report and best practices at other universities.

Making human resources a separate department reporting directly to the president is a Freeh report recommendation that Penn State has decided to not follow, partly because this would give the president of the university another direct report in a time when he has many obligations, and partly because that’s not how most other universities do it. (Sen. George Mitchell, who is assessing Penn State’s compliance with the Freeh report as part of the NCAA-mandated Athletics Integrity Agreement, has signed off on Penn State’s decision.) Guadagnino also said only one or two other universities have the structure outlined in the Freeh report.

Doran said she found the Big Ten’s practices, which are consistent with Penn State’s interesting, saying, “It seems that modern governance is evolving away from” having HR and finance in one department.

Marianne Ellis Alexander ’62 voiced a sentiment that I’ve heard often around campus, but not at trustees meetings: “Freeh was using a corporate standard to apply to higher education. We are going with the best practices of higher education, and there’s definitely a different model. We chose to go with the higher ed model.”

—The committee also engaged in an interesting discussion about how trustees should conduct themselves in public forums, particularly if they disagree with the position the board or university has taken as a whole. Anthony Lubrano ’82, of course, was the focal point of the discussion, which was nuanced and thought-provoking. I’ll delve into that in a later post.

Lori Shontz, senior editor

September 20, 2013 at 9:09 am 4 comments


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