Monday, December 10, 2012

Equal Representation for the State-Related Universities

Stakeholder Share vs. Governance Share
Most people are familiar with the concept of majority and minority stakeholders.  As the names imply, majority stakeholders provide a majority share of the funding to create and operate an enterprise, and minority stakeholders provide a minority share of that funding. 
When an enterprise is first created, each stakeholder typically receives a share of the available seats on the governing board roughly equal to their share of the total investment made by all the stakeholders.

And should the respective funding shares of the various stakeholders change over time, their respective shares of the seats on the governing board would change proportionately as well.  The net result of this democratic process is that the stakeholders who contribute the largest share of the funding get to have the largest number of seats on the governing board, the group that then makes all the major decisions.
While the connection between stakeholder share and governance share is most evident in the world of business, it once existed in higher education in Pennsylvania, as applied to the state-related universities.

It is a little known fact today that three of the four state-related universities in Pennsylvania (Pitt, Temple and Lincoln) had all been private universities until the mid-60s and early 70s when legislation was enacted awarding them “state-related” status.  Penn State’s case was very different in that, as the only Land Grant University in Pennsylvania, it had received state funding since its founding in 1855. 
In exchange for the millions of taxpayer dollars given to state-related universities, a set number of seats on their Governing Boards are filled with individuals appointed by elected state officials.  For example:

·         At Penn State, six (6) out of 32 seats on the Board of Trustees are filled by individuals appointed by the Governor.  In addition, the Governor plus three Cabinet Secretaries (Agriculture, Conservation and Natural Resources, and Education) sit as ex officio members of the Board of Trustees.

·         At Pitt, twelve (12) of 36 voting members of the Board of Trustees are appointed by elected state officials: four (4) by the Governor; four (4) by the President Pro Tem of the State Senate; and four (4) by the Speaker of the State House of Representatives.   In addition, the Governor, the Secretary of Education, and the Mayor of Pittsburgh sit as ex officio members of the Board of Trustees.

·         At Temple University, twelve (12) of 36 voting members of the Board of Trustees are appointed by state officials in the same way as at Pitt.  In addition, the Governor, the Secretary of Education, and the Mayor of Philadelphia sit as ex officio members of the Temple University Board of Trustees.    

·         At Lincoln University, twelve (12) of 36 voting members of the Board of Trustees are appointed by elected state officials in the same way as at Pitt and Temple.  In addition, the Governor and the Secretary of Education sit as ex officio members of the Board of Trustees.
In becoming state-related, the three formerly private universities agreed to allow one-third of their governing board seats to be appointed by elected officials.  In exchange, the state agreed that these institutions would receive state appropriation, which had previously been unavailable to them.   

The data show that, at the time of the awarding of state-related status to the four state-related universities in Pennsylvania, the state’s funding share of their operating budgets was, as one would expect, roughly equal to the one-third share of governing board seats appointed by elected officials. 
The data also show that, in the 40+ years since state-related status was negotiated and granted, the state share of funding has fallen steadily over the last 30 years to less than one-fifth (20%), but with no proportional reduction from the one-third (33%) governance share, which continues till today.

In governance terms, a drop in funding share from one-third to one-fifth corresponds to a loss of 5 seats on a 36-member board.  In order for equal representation to be maintained, the number of board seats appointed by the minority stakeholder would need to be reduced from 12 to 7, while the number of board seats appointed by the majority stakeholders would need to be increased from 24 to 29.
 

2 comments:

  1. What is keeping the appropriate change from happening or was 33% the contract instead of writing it as a share of the board equal to the amount of support given?

    ReplyDelete
    Replies
    1. My understanding is that, as the years passed, the state found it harder and harder to come up with the 33% share to the state-related's (because of other budget priorities) and just gave less to all the public universities until now, when the state share to the state-related's is less than 20%. The state share to the state-owned (like Cal U) is now about 27 percent, down from 63% in 1983 when the state colleges became state universities.

      Delete