Conflicts of interest have caught the attention of the Association of Governing Boards of Universities and Colleges. In December the group released guidelines that describe how to manage trustee ties, including colleges’ financial relationships with companies linked to board members.
Richard D. Legon, the association’s president, recently spoke with The Chronicle about those guidelines and the importance of having transparent dealings.
Q. Why do so many colleges have business ties to trustees?
A. It’s virtually impossible, I think, for a board to be fully devoid of individuals who have some level of conflict, either actual conflict or the appearance of conflict or a little bit of both. Institutions have a challenging time recruiting the best and the brightest men and women who are able to give their time and to volunteer in these important responsibilities. And you have large, prominent research institutions who have prominent alums who’ve been successful and who the institution may be cultivating for membership on the board or who actually stepped forward on their own. You have smaller, more locally or regionally based institutions who have, perhaps, a smaller pool or even geographic area from which to choose, or alumni base, so it is a challenge.
Q. If that business relationship is so important, why can’t trustees just serve institutions off the board, as influential donors and friends of the college?
A. It’s a great argument, and in a perfect world there would be enough talent and people willing to serve, who are totally free of any conflict situation. I myself don’t see that as that big an issue. It’s important, but the priority is getting the right people on the board—people who understand what the voluntary responsibilities of a trustee are today and then being sure, not so much that you are completely free of any individual who has some level of conflict with an institution, but that there are strong and effective and current policies in place that protect, first and foremost, the institution.
Q. Is managing trustees’ financial relationships to colleges a key part of good governance?
A. Yes, it is an important part of governance because we have got to demonstrate to policy makers that this concept of citizen control of higher education that’s predicated on independent boards ... functions well. ... If we get it wrong, then it exacerbates the public’s concerns about how well we govern our institutions.
Q. What about disclosure? There is a big range of what colleges put forward. Some name names, and some don’t. What’s the best approach?
A. I always lean toward transparency. If we can demonstrate—again, through accountability—expectations that we are open about our dealings within our institutions and how they’re governed, I think that positions us well. I would also opt, as our principles suggest, to make sure that a board’s conflict-of-interest policy encourages the sharing of information by members of the board, by trustees, both annually and even more frequently where in fact they recognize that an actual or even the appearance of a conflict might exist.
Q. What are the key points of the association’s new guidelines on trustee conflicts?
A. The one that is most essential to me, or the ones that are most central to me or that deserve attention, include the board recognizing that, ultimately, it’s their responsibility that there is a current policy in place and that it is adhered to by the board.
Secondly, that in cases where conflict exists, that the process is managed from recusal to inclusion of an individual who might have a conflict or an appearance of conflict in certain conversations, or even suggesting that that board member might, on occasion, need to be absent from a conversation that is related to the area in which he or she has a conflict. Another element has to do with making sure that despite everything we’re saying, that in the area of investments, there is additional care given to the standard by which conflict of interest is understood and managed in that particular area. Today, especially, boards would be wise to give focused attention on how that’s addressed in their boardroom.