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  • Thursday, August 16, 2012
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Too Many Trustees Can Burden a Board, More Colleges Realize

Shrink My Board, Please 1

Nabil K. Mark, Centre Daily Times, MCT via Getty Images

Rodney Erickson, Penn State's president, speaks at a board meeting in November. The university's 32-member board, which has been bombarded with criticism over the recent child-sex-abuse scandal, is nearly three times as large as the average public college's.

In a dramatic scene that has been reduced to a footnote in the story of Southern Methodist University's football scandal, nearly three dozen trustees voted to fire themselves in the spring of 1987. By eliminating many of their own positions, the Southern Methodist board elected to do something few boards ever do: get smaller.

Those were desperate days for Southern Methodist. Following an investigation of a long-running pay-for-play football scheme at the university, the National Collegiate Athletic Association had meted out its harshest punishment in history. The so-called "death penalty" effectively suspended Southern Methodist's football program for two years, and the sanction carried with it the implication that the university needed to overhaul a governance system that lacked oversight.

The decision to shrink Southern Methodist's board from 75 members to 40, and to eliminate a powerful executive committee that was particularly tainted by the football scandal, seems prescient now. Governance experts say such large boards dilute accountability and invariably allow a small group to seize control of an institution, leaving the remaining trustees on board merely to cut ribbons and big checks.

But it is easy to see why a college might want a big board. It is simpler to add trustees than to remove members who are no longer pulling their weight, and growth can be justified as an effort to broaden the diversity of opinions in a group. It is also true that there may be no better way to cultivate donors than to give them active policy-making roles at a college.

Large boards are particularly prevalent at private institutions. According to the Association of Governing Boards of Universities and Colleges, the average private college board has 29 voting members, and most boards have hovered around that range for the past three decades. But there are a fair number of boards that have twice the average membership. The University of Miami, for example, has 74 voting members. Syracuse University has 60.

The typical public college board has about 12 voting members, but there are outliers among them, too. The board at Pennsylvania State University, a public institution that is often considered quasi-private, has nearly three times as many members as the average public-college board. In the wake of the recent sex-abuse scandal involving a former assistant football coach, the 32-member board was criticized for disengagement and poor communication. Those same shortcomings are commonly associated with large governing boards.

Even in a group of well-meaning individuals, the basic mechanics of a meeting can be gummed up if a board gets too large, said Walter D. Scott, a professor of management at Northwestern University's Kellogg School of Management.

"You're going to have to confine the numbers so you're not having dysfunctional meetings, unless you're willing to have half the people at the table say nothing," said Mr. Scott, who has served on more than a dozen corporate boards and 20 nonprofit boards, including the board of National Louis University.

Never Waste a Crisis

Over the past several years a few institutions have conceded that their large boards may be a problem. Johns Hopkins University is in the process of shrinking its board, and two small liberal-arts colleges in the Southeast recently completed similar restructurings.

Southern Methodist trustees did not come easily to the decision to reduce the size of their board, and few boards would take such action lightly. The very idea of lopping off significant numbers of board members risks alienating a college's most loyal supporters. It is notable that it took what was then the biggest college sports scandal in history to jar Southern Methodist's trustees into action.

"The athletics scandal created a crisis," recalls Ray L. Hunt, who served on the Southern Methodist board at the time and remains a member. "Things can happen in a crisis that would not happen in normal times. That is what happened at SMU in the '80s."

Mr. Hunt, who was never implicated in the scandal, led the search for a new president amid the crisis. He still recalls a pivotal meeting when his fellow trustees begrudgingly accepted a slate of difficult proposals, including the reduction of board size. At the time Mr. Hunt was 44 and new to the board's inner circle, and he was telling men he revered to step aside in the interest of landing a strong president.

"I finally had to stand up and say, 'Folks, I'm now wearing my hat as chair of the search committee; if we don't make these changes you can kiss off any of the people we're talking to, any of them,'" Mr. Hunt said. "There were lots of skirmishes, but at the end of the day the right decisions were made, and the bylaws were totally reformed."

The presidential search concluded with the hiring of A. Kenneth Pye, who over the course of two decades at Duke University had served two terms as chancellor and dean of the law school. He stayed at Southern Methodist for seven years, resigning just before his death from cancer. Many people lauded him as a reformer of an imperiled institution.

Small Classes, Big Boards

In a notable contradiction, some of the largest governing boards can be found at colleges that promote the intimacy of small class sizes as a pedagogical hallmark. If it's true that the leaders of these colleges think students learn more when there are fewer of them in a room, what should be made of the instruction their trustees are receiving?

Transylvania University, a liberal-arts college in Lexington, Ky., makes much of a 12:1 student-to-faculty ratio, advertising on its Web site that "many classes have fewer than 10 students, and no classes have more than 35 students."

The board, until a couple of years ago, was a different matter. With 55 members, and 10 more emeritus trustees with voting powers, Transylvania's boardroom looked more like a midsized lecture class than a cozy seminar.

When R. Owen Williams arrived as Transylvania's president in 2010, he quickly identified knowledge gaps on the board. He blamed the trustee-to-president ratio.

"To govern effectively, you have to know as much as you can know about the underlying enterprise," Mr. Williams said. "As it turned out, we had a lot of members of the board that, for reasons often beyond their control, tended not to know nearly as much as they needed to know about higher education and how it operates."

Mr. Williams said he could hardly blame the trustees for having a few blind spots. Many trustees at Transylvania, like elsewhere, are proven business thinkers. But most of them have very little background on the finer points of higher-education finance, and they needed one-on-one consultation that a large group does not facilitate, Mr. Williams said.

"People at the board level tend not to know how financial aid works," he said by way of example. "If I would ask them what percentage of our students are full-pay students, it was rather surprising to me how few of them knew the answer to that question. Now, that's not their fault, because no one had ever educated them about it."

Early in his presidency, Mr. Williams and the board's chairman sat down with every trustee at the university. With an eye toward reducing the size of the governing board, they asked individual members to consider whether they would prefer to serve on an advisory board that required a lesser time commitment.

Most of the board members were happy to be given the choice, Mr. Williams said. "What we found was people knew what we suspected, which was that the board was too big. They didn't feel like they were part of something special."

With little to no protest, Mr. Williams said, the board's membership was reduced to 36. Those who dropped off joined a new 45-member Board of Regents, which was asked to develop a stronger alumni network, among other projects.

"Those boards that exceed the average by dramatic numbers can be unwieldy, and it is difficult to coordinate and get the policy work done as well as you need to," said Richard D. Legon, president of the Association of Governing Boards. "I applaud those institutions that are taking a hard look and making reductions to become more efficient."

Following a 14-month review of its governance structure, Johns Hopkins University's Board of Trustees voted last year to begin reducing the size of its 65-member board by nearly half, setting a cap of 35 for 2015. N. Anthony (Tony) Coles, a trustee who led the governance review, said the board's size was out of step with the university's peers.

The board's membership has already been whittled down to 45. The reduction "has enhanced our productivity, and we certainly have a deeper level of strategic engagement," said Dr. Coles, who is president and chief executive of Onyx Pharmaceuticals.

Donor Base

Though it is seldom publicly acknowledged, trustees often join boards with dollar signs on their backs. Colleges typically tap new board members who have been successful in industry, hoping to benefit from both their wisdom and their largess. Add trustees, and you probably add donors as well.

From 2008 to 2011, contributions from trustees made up between 7 percent and 13 percent of all dollars raised each year by colleges engaged in capital campaigns, according to the Council for Advancement and Support of Education.

When Transylvania officials approached trustees about staying on the board or resigning, they overtly discussed expected contributions, Mr. Williams said.

"You certainly say to people in very certain terms we expect a financial commitment and we expect a temporal commitment, and here is roughly what those look like," he said. "You're meant to give a certain amount, and if you can't give it then you're meant to get it."

John Nelson, managing director of Moody's Investors Service's ratings for health care and higher education, said the expectation that trustees will become donors makes any conversation about reducing the size of a board more difficult.

"Most presidents would really like to have a smaller board that is more intimate," Mr. Nelson said. "But there are significant net worth individuals who want to be on the board, and are very likely to give you more money if they are on the board. So there is this natural inertia to grow the board for philanthropic reasons, and to shrink the board for true oversight and planning and governance. Generally, the philanthropic drive wins out."

Since shrinking a board can be unpalatable, some institutions have looked for other ways to handle communication problems and board disengagement. The Corporation of Brown University, for example, underwent a major restructuring in 2003 that was designed to promote strategic discussions of greater depth and frequency. With 54 members, the board as a whole remains larger than average, but the corporation eliminated 10 of its 21 committees, and reduced the number of people serving on each committee. Each committee is now required to give regular reports to the full board.

While large boards rely on smaller committees to do much of the heavy lifting, there are institutionwide matters that warrant the full board's direct attention. That was the case at Birmingham-Southern College, where well-publicized financial problems at first appeared to take a large governing board by surprise.

"The large board helped foster a culture of weak internal controls," Moody's reported in 2011.

Gen. Charles C. Krulak, who was named Birmingham-Southern's president last year, took note of the criticism. The board, which had 72 members at its peak, now has 39.

As is often the case with religiously-affiliated colleges, reducing the size of Birmingham-Southern's board required historically represented constituencies to surrender some of their influence. While still represented by six board members, two Methodist conferences collectively gave up 12 seats on the board.

Better to have a small board that is fully engaged, General Krulak says, than to appoint a host of trustees and treat them "like mushrooms."

"You put them in a closet so it's nice and dark," he said, "and you feed them manure."

Even Average Boards Fail

It is certainly not a universal truism that smaller boards make for better governance. Indeed, one of the most notable board missteps in the last year happened at an institution with fewer than 20 board members.

The University of Virginia's 17-member Board of Visitors demonstrated this summer that even an average-sized public governing body can suffer from communication failures, or cede too much control to a small group. The board's leadership pressured Teresa A. Sullivan to resign from the Virginia presidency in June, only to reinstate her two weeks later amid public outrage and obvious disagreement among visitors about the wisdom of the ouster.

James W. Gauss, chairman of board services for Witt/Kieffer, an executive search firm, said having a large board invites risks. But, there is no sure-fire formula for governance success.

"I have seen very big boards function efficiently with the right leadership and focus," he said. "And I've seen small boards take an organization back to the Dark Ages."

3 COLLEGES THAT MADE THEIR BOARDS SMALLER
The average size of a private-college governing board is 29. Such large boards can complicate decision making, dilute meaningful strategic discussions, and hamper oversight. TMindful of these risks, several institutions, including these three, institutions recently acted to rein in membership.
Birmingham-Southern College: Nearly half of the board's 72 seats were eliminated, bringing the total to 39 voting members. The Johns Hopkins U.: The board has approved a plan to decrease its maximum number of members from 65 to 35 by 2015. Transylvania U.: The board has been reduced from 65 to 36 voting members.