|
|
Speech
NATIONAL CONFERENCE ON UNIVERSITY GOVERNANCE
OLD PARLIAMENT HOUSE, CANBERRA
4PM, TUESDAY 10 0CTOBER 2006
Thank you Professor Schreuder.
I am pleased to open this conference and to share my thoughts on where we – the Australian Government and our universities – have made progress in achieving more effective university governance. I will also talk about how we can advance our efforts in the future.
Let me start with the University Governance Professional Development Program, which is a key contributor to our efforts. Established with funding of $200,000 from the Australian Government, the program organised this annual conference, and also supports a number of initiatives helping universities to develop “best practice” in their governance arrangements. The program’s ongoing operations are funded through subscriptions and training fees.
I am pleased to learn that 26 universities are now members of the program, up from 18 a few months ago and I hope other universities will join in the near future so there can be greater sharing of practices and ideas.
In 2002 when the Australian Government undertook its major review of the sector, Higher Education at the Crossroads, there was no or little evidence of a culture of good governance.
During the Crossroads consultations, consistent concerns were raised about the effectiveness of universities’ governing bodies, and whether the centuries-old collegial model of governance was adequate, let alone good practice.
One concern was whether governing body members had the skills needed to oversee modern Australian universities, some of which now had annual budgets of around a billion dollars. Collectively our universities have cash reserves and investments of over $7 billion. Higher education finance is a sophisticated enterprise.
A second concern was that intractable differences often arose between Council members who represented different constituencies within the university, leading to a third issue of the unwieldy size of some governing bodies – up to 35 members in one case, and in the high 20’s in several others.
Fourth, there were doubts about the ability of governing bodies to effectively monitor universities’ commercial operations.
The Australian Government moved to address the concerns identified in the Crossroads report and introduced the National Governance Protocols.
All universities have either complied with the Protocols, or should have completed promised action to comply within the allowable transition period, which has just ended. But what impact have the Protocols had on university governance, and what more needs to be done?
It concerns me that there is a feeling that the protocols are now behind us, and there appears to be a culture of complacency creeping into the governance of universities. A large proportion of the community of university governance practitioners across Australia appear to believe they have done their job.
I am concerned there is a belief that meeting the bare minimum requirements of the National Governance Protocols is enough. It’s not enough! The protocols were established to help kick start universities in the right direction. They were established to provide an incentive for universities to significantly improve their governance - not for universities to only meet minimum expectations. It was not an invitation to accept the lowest common denominator. Good governance makes good business sense.
It concerns me also that this complacency is reflected in the poor uptake of opportunities for professional development. So far this year, only six universities have undertaken the professional development workshops through the University Governance Professional Development Programme. It concerns me that another course has had to be cancelled due to lack of interest, and the website established to facilitate the national exchange of ideas, papers and policy templates has remained largely unused.
There are some encouraging signs though. A handful of universities have gone well beyond the minimum requirements of the Protocols, and demonstrated a commitment to achieving “best practice”.
These may not be the universities that many would expect – such as some of our most prestigious – but they are universities that have enthusiastically embraced an active culture of commitment to improved university governance.
These universities are appointing people with first-class financial skills to their councils. These are not just people with generalist management experience, but people with direct responsibility for handling large budgets within their own organisations – chief financial officers and the like – and who would quickly tell from a university’s budgetary papers whether dangers are looming. They are the kind of “financial experts” the National Governance Protocols were hoping would come onto councils.
The universities that have embraced a culture of good governance contrast markedly with other universities which have taken a minimalist approach to good governance.
For example, the Protocols seek to promote renewal of council membership, to achieve a balance between experienced members and new members who may bring fresh ideas. The protocols limit service to 12 years, unless the governing body agrees to grant a specific exemption. Some universities have granted extensions to many governing body members at once. This is not the way to achieve balance.
Similarly, there is a Protocol requiring universities to have grievance procedures, and to publish them. This Protocol aims to make such procedures transparent. Many universities do have robust procedures which can easily be located on web sites, for example. Other universities comply with the Protocol because the procedures exist and are available, albeit hard to find – but they do not appear to be fully committed to transparency.
Against this background, let me share some thoughts about what constitutes best practice and what could be done.
A fundamental criterion in my view is that all governing body members should be fully committed to their duties. They must have enough time to attend the meetings, read documentation, attend appropriate induction and training sessions, and represent the university when required. Nor should people be appointed to councils solely as a reward for generous donations or just because of extensive networks. Membership of the governing body should involve dedicated hard work.
The Corporations Act has what is known as the “business judgement rule” which requires directors of a company to inform themselves about matters upon which they are to make judgements. It would be appropriate for governing body members to have a similar duty.
Members of the governing body need appropriate skills and background knowledge. There is scope to be more explicit in the Governance Protocols about the qualifications and experience requirements for the members who must have financial expertise.
If universities need to pay governing body members to attract people with the necessary skills and commitment, then this is something all universities should consider.
Elected members must make decisions in the best interests of the university as a whole, rather than representing the interests of a particular constituency. This is not a simple issue, because elected members can bring important perspectives to the governing body’s deliberations, and the views of their electors and the overall best interests of the university are not necessarily incompatible. But elected members must put the university’s overall interests first.
It is worth considering whether it would be preferable to have a smaller governing body with advisory bodies comprising those representing specific interest groups.
It is intolerable to have an instance where one university has to withhold confidential documents from its council members because it expected them to be leaked to the media. (I say this as a member of Cabinet!) Universities’ enabling legislation should impose on governing body members the duty to maintain confidentiality and prohibit improper use of information.
Council meetings must be a challenging time for senior executive staff – for them to know that they must be thoroughly prepared for the meeting and have the facts ready. In particular, the Chief Financial Officer should expect a tough grilling about the university budget! Of course, the governing body should not conduct fishing expeditions or interrogations, but if there are real problems it should be aware of them. No-one should ever see the governing body as a rubber stamp.
While on the subject of university finances, governing bodies might need to take a more proactive role in looking at the management of assets.
My department’s Institution Assessment Framework data has suggested that some universities may not be making enough provision for maintenance, and that in time they may face significant costs to bring their facilities up to a satisfactory standard. The National Governance Protocols could be strengthened to require the governing body to approve a strategic asset management plan.
Delegations of governing body responsibilities should be granted with care. Governing bodies are still accountable for delegated matters and should require some form of report on the exercise of the delegation. Governing bodies should not be able to delegate responsibility for decisions that have the potential to affect the financial viability of the university.
Governing bodies need information. They must have statistical data and performance indicators so that they know how their university is faring. I think that the Annual Report approved by the governing body should report on performance indicators set by the governing body. The governing body should be required to consider performance and comparative performance data produced by my department. Enormous effort goes into supplying data by institutions and I would like to see it better utilised.
Governing bodies may need upgraded Secretariats, to provide this information and advice on responsibilities and legal issues. I suggest it should be mandatory that there be a council secretary or similar officer separate to the Vice-Chancellor or Chief Executive Officer.
I would like to see service beyond about 8 years become rare. Whatever the skills and benefits long-serving members have delivered, there comes a time to move on and make room for fresh ideas. Membership shouldn’t just roll over year after year because of entrenched expectation.
12 years should be the maximum term. Terms beyond 8 years should be on the basis of an explicit assessment of the member’s capacity to discharge his or her duties effectively. Maintaining a dynamic vitality, a creative tension is important in any governing body.
There is a need for further improvements in the oversight of controlled entities. It is not good when an Auditor-General comments that a university’s finance department “identified two new controlled entities during the 2005 financial reporting process that it had not previously been aware of.” Governing bodies need to be rigorous in providing this oversight, as the National Governance Protocols require.
With regard to the size of governing bodies, I don’t think the limit of 22 in the National Governance Protocols has gone far enough. Good practice models suggest that 10 to 15 members is the ideal size for such a body – large enough to benefit from a diversity of viewpoints, while small enough to facilitate effective decision making.
My inclination is to have a limit of 14 that must continue to have a majority of external independent members who are neither enrolled as a student nor employed by the higher education provider. Specialists can be invited for particular information or additional perspectives on issues.
In recent months I have spoken of the need for greater diversity in the university sector in Australia. Some commentators have suggested that I am overlooking a great deal of diversity that already exists. I do recognise that there is a level of diversity, but there is a need for more.
By focussing on the things they do really well, and putting more of their resources into their strengths, universities will provide higher quality outcomes and improve their standing in an increasingly competitive international environment. Being just average in most things will not be good enough in the medium and longer term.
Governing bodies should lead their universities in setting their directions in this regard. It would be a valuable enhancement of the National Governance Protocols to require the governing body to take the distinctive role of the institution into account in approving the mission and strategic direction, annual budget and business plan. What is distinctive about my university’s course offerings, mode of delivery, mission, what do we do best? What will make my university competitive?
I am watching developments in relation to university governance with great interest, and I may need to change the Protocols to deliver the reforms they were designed to bring about. But I do not see the Protocols as the only driver.
University Chancellors are taking a much more proactive role than in previous years – they are engaging more systematically with their universities, and with other Chancellors. Their statements and activities in relation to their universities are being much more frequently reported in the media, and they are leaders rather than figureheads. Chancellors have a vital, if not lead role to play in enhancing the philanthropic and alumni efforts of our universities.
What the Australian Government is seeking to bring about is a change of culture within university governing bodies. While there has been much movement in the right direction, cultural change cannot be expected to occur overnight because it involves shifting attitudes, and attitudes can be notoriously hard to shift.
There’s no shortage of advice in this portfolio, and I am often reminded of the reporting demands placed on universities by the Government.
There will always be accountability requirements – with more than $7.8 billion of taxpayers’ money paid by the Australian Government to the higher education sector each year, that is only fair. But if the Government can be confident that universities are responding to the diverse educational and research needs of the nation, there is less need to prescribe requirements to universities. A high standard of governance is a key component of this quality assurance.
Federal, state and territory education ministers have agreed to a review of the impact of the National Governance Protocols and the scope for their enhancement. The review is to report to ministers in 2007.
I will be raising with state and territory ministers a number of the issues I have mentioned today, to be considered for inclusion in a revised set of Protocols. At the same time I will of course welcome the ideas of people on governing bodies or within the universities. Certain changes will be needed, but I would also like to consider constructive suggestions from those who are committed to the improvement of university governance.
The Australian Government’s role in the governance of universities
I would have hoped that as billion dollar enterprises that are now educating a record number of students – almost one million students - universities would have had governance best practice as an important organisational goal.
The Crossroads review showed otherwise - that university governance practices were dangerously unwieldy and inappropriate, and so the National Governance Protocols became a necessity.
The Australian Government has provided an opportunity for universities to improve their governance – an incentive to seek best practice. For some universities, this has proven an invaluable contribution to their strategic management. For others, there is still a long way to go.
I trust that in the course of this conference, you will consider a range of opportunities for enhancing governance arrangements within your universities, and learn from each other’s experiences and initiatives.
Thank you
|
