Unequal Representation

State-Related Universities

Previously, I introduced the concept of ‘stakeholder share vs. governance share,’ in which stakeholder share is measured in terms of the percent of total funding provided by that stakeholder, and governance share is measured in terms of the percent of total governing-board seats provided to that stakeholder. 

Although both the “state-related” and “state-owned” universities in Pennsylvania are considered to be “public,” there are some similarities as well as strong differences between the two types of institutions, mostly as far as the governance share of their respective majority stakeholders is concerned.

For both the state-related and state-owned universities, their majority stakeholders are basically the same, i.e., their students, parents and donors, primarily alumni; in both cases, it is primarily these individuals who provide the majority of the revenue needed to operate their respective institutions. 

For state-related universities, the majority of the individuals on the governing board is usually elected by, and is elected to represent, the majority stakeholders, that is, those who, as a group, pay the largest share of the institution’s operating costs by directly supporting these universities financially.  And for that reason, the voice of these majority stakeholders is clearly heard and is, in fact, the dominant voice.

The data show that the majority stakeholders at the state-related universities provide over 80% of the annual operating revenue.  The data also show that the majority stakeholders at the state-owned universities provide over 70% of the annual operating revenue.

In a very real sense then—in terms of who pays—it is fair to say that the state-related universities are already 80% private, and the state-owned universities are already 70% private! 

The fact that both types of “public” universities in Pennsylvania have been forced, over the past 30 years, to function more and more like private universities—as far as funding is concerned—is critically important, primarily because the private-university model increasingly appears to represent the most likely future facing the “public” universities in Pennsylvania, as State funding continues to decline.      

We earlier described how, some 40+ years ago, the state-related universities began with roughly equal representation between stakeholder share and governance share.  Back then, the State was contributing about one-third of their annual operating budgets and was, appropriately, then appointing one-third of the members of their governing boards.

But with the steady erosion of State funding over the past 30 years, the State share of state-related university operating budgets fell from one-third (33%) to less than one-fifth (20%).  But despite the large drop in State funding, elected officials continue to appoint one-third of their governing board seats.

In short, the state-related universities once (a long time ago) had equal representation, but no longer do.  Fortunately, however, they still continue to appoint a majority (two thirds) of the board seats so, in that sense, their student, parent and alumni stakeholder-group voices can continue to be heard and can thereby continue to strongly influence, if not actually dominate, their board’s decision-making process. 

For the state-related universities, it is also important to remember that the State, in the person of the elected officials who appoint one-third of their board seats, has always been the minority stakeholder—both in terms of funding and governance.  This means that these universities have always been able to control their own destinies, not only before the State, in effect, ‘bought in’ to become a legitimate one-third partner in exchange for state-related status, but even now as the State continues to hold one-third of the board seats, even though its funding level has fallen below one-fifth of their operating budgets.

Despite the State’s failure over time to hold up its end of the financial bargain, the state-related universities can nevertheless continue to control their own mission-specified destinies, since two-thirds of their governing board members owe their allegiance, not to the elected officials who appointed the one-third minority members on the governing board, but to the university’s mission and its majority stakeholders--that is, to its students, parents and donors, primarily alumni.