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.
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?
ReplyDeleteMy 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.
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