Exploring Corporate Governance Around the World

By Allison Garrett, Senior Vice President for Academic Affairs at Oklahoma Christian University

Tuesday, August 03, 2010

University Presidents on Corporate Boards

The New York Times ran an article last week about academic types serving on corporate boards. The article, The Academic-Industrial Complex, discusses several examples of academic administrators and professors who serve on the boards of directors of large corporations.

As the top academic official at a midwestern university, a former Wal-Mart executive, and a former lawyer for the SEC, this article struck a chord with me. The thesis of the article is that, although academics can bring some value to boards, most academics are really not well qualified to serve on corporate boards and many of them serve on too many boards to be effective.

Here are a few of my thoughts about the issues discussed in the article:

1. Back scratching -- The back scratching occurs in many ways. Academics can bring new perspectives to the boards on which they serve and can add prestige to the board if they are with a well-known university. They can also add to the board's diversity. In a time when the most senior executives at most corporations are still white males, the diversity that is more common in academia means that the board can be more diverse if they search out members from outside of the corporation's industry.

The academics make money and make contacts that can be both personally useful and useful for their institutions.

2. Lack of understanding -- The article makes much of the fact that many academics really don't have the backgrounds to understand much of what happens in the boardroom. I do agree to some extent based on my experiences. There are undoubtedly many in academia who could contribute in meaningful ways on a corporate board, but those whose careers have been solely academic would not -- at least initially -- be as able to understand and contribute on certain types of issues. They could, however, be able to give sound guidance on certain types of issues and, in time, could become sufficiently knowldgable about the industry to weigh in on industry-specific issues.

3. Conflicts of interest -- The lucrative pay for some board positions is more meaningful to an academic than, say, to an executive with another corporation who already makes a seven-figure salary. I don't believe that the level of board compensation has been held to impair someone's ability to act in a fair and unbiased manner, but it is of some concern. In addition, if the corporation donates to the academic institution, then the academic might not be a disinterested director for purposes of serving on the Board's compensation committee.

4. How many boards? -- There are examples of university presidents who serve on several boards of directors. Running a university is a demanding job and taking the time out to prepare for and attend board meetings can be difficult. I have trouble imagining someone serving as a university president, while also serving in a meaningful way on more than a couple of outside boards (and this includes non-profit boards or other similar activities).

5. Academic freedom -- The authors note that some might have concerns that a university president's service on a board would have a chilling effect on academic freedom at the university among faculty who might otherwise criticize the corporation. It could be that there are some universities where this might be a legitimate concern, but at most academic freedom is held sacred and tenure provides protection against reprisals.

In the long run, a university president or senior academic official who has had business experience can get up to speed much more quickly and is more likely to be a contributor on a corporation's board. Other academics can provide some valuable insight over time, provided they are not stretched too thin.

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