How Private Universities are Operated

Three Key Differences

An earlier blog post on January 21, 2013 stated that: “Public and private universities differ in three (3) key ways, including: 1) How they are funded; 2) How they are governed; and 3) How they are operated.”

Two subsequent blog posts were entitled “How Private Universities are Funded,” and “How Private Universities are Governed.  This blog post will deal with the third key difference and is entitled “How Private Universities are Operated.”

How Private Universities are Operated

Operations are the things that a university does on a daily basis as its employees interact with its various stakeholders.  But every one of those countless interactions, with students and parents for example, are inspired and shaped down to the smallest detail by that university’s culture, that is, by its philosophical basis, its ethos, its values, its principles and fundamental beliefs.

Every other characteristic of a university flows from, and is a manifestation of, its institutional culture.

For private universities, institutional culture often stems from the principles and fundamental beliefs of its founder and/or most influential leader.  To paraphrase Ralph Waldo Emerson, "An institution is the lengthened shadow of its leader,” an insight which affirms what experience and history also teaches, namely, that institutional culture responds to and reflects institutional leadership, or the lack of same. 

Not surprisingly then, the culture of a private university founded, e.g., in the 17^th century is likely to be very different from that of a public university founded in the 18^th century.  But despite any differences and, because of the privatization—that is, rapid defunding—of public higher education, it has become increasingly important for public universities to willingly emulate private universities functionally, and especially in terms of their culture, even while being driven unwillingly to emulate them financially. 

The Institutional Culture of Private Universities

In general terms, an ideal institutional culture for all universities, both public and private, has been described by the Association of Governing Boards (AGB), an organization that serves over 1,250 member institutions—colleges and universities—both public and private.

The key characteristic of the institutional culture espoused by AGB is the idea that there should be a “fiduciary relationship” between the university and the student, and accordingly, that every governing board member should actually be a “fiduciary” in that relationship, and that every student should be a “beneficiary” in that relationship.  And while the definition of a beneficiary as “one who benefits” is very familiar, the definition of a fiduciary is much less so, hence the dictionary definition presented below:   

Fiduciary: A person to whom property or power is entrusted for the benefit of another.

The “fiduciary” represents one side of the relationship; the “beneficiary” represents the other.

Based on the dictionary definition of “fiduciary” above, there can be no question that property and power are entrusted—by the beneficiary—to every university governing board member, for the benefit of another (i.e., the “beneficiary”), and that this happens at every university, whether public or private.

The property in question is typically “financial property,” represented by the tuition and fees paid by students, as well as the donations provided by donors.

The power in question includes the legal authority to make all key decisions, including those involved in setting university policies, priorities and procedures that affect every university “entrustor/beneficiary.”

That such authority represents real power may be seen in fact that when governing boards raise student tuition each year, the students affected can do little more than grumble about it.  Having decided how to spend the students’ previously entrusted financial property this year, that same governing board can then require those same students to dig a little deeper into their pockets to pay their tuition next year!

In recognition of this power, and especially the great power differential between fiduciaries and beneficiaries, our society over time has developed both ethical and legal restrictions intended to safeguard the rights of beneficiaries against the potential wrongdoings of unscrupulous fiduciaries.

Note that every governing board member at every university is a fiduciary, according to the definition, simply because by accepting the position, they automatically and precisely meet that definition.

Now whether they perform, accept or even acknowledge the duties that come with that responsibility is another matter.  And the only remedy available to beneficiaries who believe their rights have been violated by unscrupulous fiduciaries is to seek all the ethical and legal redress our society currently offers.