Posts tagged ‘Holly Gregory’

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

The BOT’s Governance Consultant Speaks

Holly Gregory wanted to clear up one thing right off the bat. The lawyer hired to facilitate the Board of Trustees’ discussion about the more difficult parts of governance reform—the size of the board, the constituencies represented on the board, the qualifications needed to serve on the board, etc.—opened the trustees’ retreat Thursday afternoon with, as she put it, a disclosure:

She’s not a Penn State graduate.

That was a soft opening, to be sure. But as Gregory continued, she laid out her philosophy of good governance and how she sees her consulting role. She explained the focus of her law practice—working with boards of directors and trustees, at both for-profit and nonprofit organizations, and said that includes other universities.

She acknowledged the progress Penn State has already made in governance reform, but she added, “There are a number of areas where observers have continued to call for change. We have to listen.”

When governance committee chair Keith Eckel announced the hiring of Gregory in November, he stressed that he was looking for not for an expert in the field, but a facilitator, someone who could guide the board—which is divided—in what he has called the ongoing and continuous work of determining how best to govern the university.

He reiterated that Thursday, when he introduced Gregory and opened the retreat:

“The right model for Penn State will be the Penn State model,” he said. “It is within every one of our hands, the ability to shape that. Holly is the expert, and I have great confidence in her ability. But perhaps her most important talent is one of facilitation.

“There may be differences among us, but I am convinced there is one thing that unites all of us, and that is that we want the best for Penn State. Our viewpoints may differ in what that definition is, but we want the best for Penn State. And this effort is to create and in many cases reaffirm processes we may already have as the best Penn State model.”

And Gregory immediately picked up one of Eckel’s main themes: “Governance is a work in progress,” she said. “It never really ends. You never really say you’re done. You continually need to think about how this board functions and operates and the rules it has in place to guide it.”

The first part of the retreat was open to the public; by my count, 12 people—including me, four other reporters, and two Penn State public information staffers—attended the session, which lasted for about 40 minutes. The trustees were in one room; we watched a video hookup from the room next door that showed whoever was addressing the trustees. The rest of the retreat took place in a closed executive session.

Among the points that Gregory made in the public portion of the retreat:

Fiduciary duty: As a lawyer, she sees fiduciary duty as the underpinning of everything a trustee does. “Not as an ending,” she said, “but as a starting point.”

Disagreements are OK: Tensions in “key relationships” at an institution that has undergone a crisis are not unusual. “In fact,” she said, “they are the norm.”  Gregory called herself “agnostic” on the Sandusky scandal and aftermath and stressed that “disagreement isn’t something to be afraid of. It’s something to be valued.”

Speaking with “one voice:” That said, she also stressed how important it is that the board speaks publicly with one voice. They key, she said, is to figure out a way to get the “benefits of vigorous debate”—meaning, in private—“without causing harm to the university.”

Three duties of trustees: She laid out three duties that should guide trustees: obedience, meaning that everything the trustees do should be tied directly to the university’s mission as described in the charter and bylaws; care, meaning to put in the time needed to fully understand issues and to do due diligence; and loyalty, meaning avoiding conflicts of interests—or identifying ones that can’t be avoided and protecting the university’s reputation. “After all,” Gregory said, “that’s one of a university’s primary assets.”

She continued: “The good news is that perfection is not required. These duties, they expect a very, very high standard from trustees. But the law recognizes that the board, acting in real time and in response to real emerging issues, will not always make the best decision. You’re going to get it wrong. You’re going to make mistakes sometimes. As long as you’re acting with reasonable and prudent care, you as trustees will not be held liable.”

A culture to strive for: Gregory characterized the culture the board should strive to meet with these phrases: Mindful of fiduciary duties. Future-focused: anticipatory, not reactive. Revitalizing, not entrenched. Diverse and inclusive.

She ended with this: “I can’t emphasize enough the value that comes from having the opportunity to debate a variety of viewpoints.”

Lori Shontz, senior editor

January 17, 2014 at 9:44 am 2 comments

BOT Election: Boosting Alumni Participation

At the November meeting of the Board of Trustees’ governance and long-range planning committee, the discussion centered around how to increase participation in the alumni trustee election. At the committee meeting today, the committee made clear it wants to broaden participation even further.

The committee wants to automatically send ballots to all alumni with email addresses on file with Penn State, and it further wants to send snail-mail postcards to alumni who have only a mailing address on file. Those postcards would explain how to obtain a ballot.

In previous elections, ballots have been sent automatically only to alumni who have been members of the Penn State Alumni Association within the previous two years and alumni who donated to the university within the previous two years. Other alumni needed to request ballots.

Unlike the changes made in November, this change requires a revision of the university charter, which must be voted on by the full board. That requires a 30-day notice, so a vote will be taken at the March trustees meeting. So while this policy will not be in effect for the nomination process, which has already started, if passed it will be in place for the election, which runs April 10 through May 8.

The committee voted enthusiastically to recommend the change to the full board for a vote.

While we’re at it, this is probably a good time to define who, exactly, is an alumnus or alumna of the university—a definition that will be tweaked in the proposed charter change. Obviously anyone who’s received a degree—associate’s, bachelor’s, master’s, or doctorate—counts. But according to the charter, so do “former students … who have satisfactorily passed one semester’s or two terms’ work, or more,” in any program that requires at least two years of study.

The proposed changes would clarify that those programs requiring at least two years of study must end in a degree—basically, that people completing one of Penn State’s certificate programs are not eligible to vote.

More news from the committee meetings:

Executive committee nominations: One of the governance committee’s roles is to recommend at-large members for the board’s executive committee, and the recommendations that will be put forth Friday—if  board chair Keith Masser ’73 is re-elected—are Kathleen Casey ’88, appointed by Gov. Tom Corbett in 2013; Donald Cotner ’71, an ag trustee since 2012; and Richard Dandrea ’77, appointed as a business and industry trustee in 2013.

Those names were put forth by Masser and governance chair Keith Eckel; Masser said he chose Casey because she is vice chair of the human resources subcommittee and the compensation committee, Cotner because he is vice chair of the finance and business committee, and Dandrea because he’s a lawyer and because Ken Frazier ’73 (who has a law background) has decided to step down from the executive committee. (The board chair, board vice chair, immediate past chair, and standing committee chairs are automatically part of the executive committee.)

Barbara Doran ’75 noted that Casey is a lawyer, filling that need, and that none of the nominees were elected by alumni. She nominated Ryan McCombie ’70, who was elected by alumni in 2012. Because there were four nominees for three positions, the committee voted: Casey, Cotner, and Dandrea each received a majority of the vote; the totals were not released.

If Masser is not re-elected as chair, Eckel said, he will confer with the new chair before the governance committee puts forth nominees for the executive committee.

First compensation committee meeting: The first in-person meeting, that is. The committee, which was created at the November board meeting, did meet via conference call Saturday morning to approve compensation for new football coach James Franklin, a process that committee chair Linda Brodsky Strumpf  ’69 said was “interesting.”

Strumpf had served on the predecessor to the compensation committee, an ad-hoc group that was convened when circumstances warranted it, but this was the first time that details of the contract were reported during the process. The speed was potentially problematic—the bylaws stipulate that the committee must give three days public notice before meeting, but they were able to use the provision that if all committee members agreed to waive the three-day requirement, 24 hours notice would suffice.

The committee also approves compensation for nine other university employees (see below for the list), but that process is usually far from the spotlight. “People are really interested only in the football coach’s salary,” Strumpf said. “That’s the world we live in, I suppose.”

Under operating guidelines approved by the committee Thursday morning, the committee has responsibilities for four tiers of university officials. (Click here for the draft; see page 5 for the complete list.) The president is alone in Tier I as the only compensation the full board must approve.

The compensation committee approves compensation for five officials in Tier II—executive vice president and provost, senior vice president of finance and business, senior vice president for health affairs, senior vice president for development and alumni relations, and vice president and general counsel—and four intercollegiate athletics employees who are designated Tier IIA. That’s the athletic director, football coach, and men’s and women’s basketball coaches. For Tier II employees, the full board is informed, but does not vote.

That’s standard practice, said Jason Adwin, vice president of Sibson Consulting, who is working with the committee. “Executives govern,” he says. “Administrators manage.” And managing, he says, includes deciding on compensation.

The committee also voted to recommend to the full board that it approve an executive compensation strategy (click here for the draft) developed in consultation with Sibson; Strumpf said the hope is to vote on the strategy at the March meeting.

Sibson plans to conduct a study that’s sponsored by Penn State and will survey 60 institutions, 30 of which will be peers of Penn State, to compare how the university’s salaries, bonuses and incentives, retirement, and deferred compensation compare.  The report is expected to be ready by May, which Strumpf said is good timing because the committee will begin reviewing salary increases in August or September.

The report will not be made public, for two reasons. First, the sensitivity of salary numbers; vice president of human resources Susan Basso says a public release would deter other institutions from participating. Second, Adwin said, because institutions pay for the data.

Trustees retreat: The typical committee meetings ran on a different schedule today (and the student life and outreach committees did not meet) because of a retreat with Holly Gregory, a lawyer and consultant hired by the governance committee to facilitate discussion of further governance reforms. The first 40 minutes of the session were open to the public before the board went into executive session; I’ll have a piece on Gregory’s introduction later.

Lori Shontz, senior editor

January 16, 2014 at 6:46 pm 3 comments


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