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February 1, 2013

Why Applying Sarbanes-Oxley Is a Bad Idea

SOX.jpg

By Candace de Russy

Professor Benjamin Ginsberg's concern over the burgeoning administrative bureaucracies on many campuses is well-placed, but I fear that his proposed remedy of applying the provisions of the Sarbanes-Oxley Act (SOX) in the academy would be doomed from the outset and might even exacerbate the problem. SOX was designed to prevent corporate malfeasance and outright fraud by requiring corporations to bolster checks and balances, levels of control and sign-off, and to ensure full disclosure in financial reporting and transparency in governance. Administrative bloat on campuses is rarely the product of such financial chicanery on the part of campus boards, and state laws, comptrollers and attorneys general, in addition to whistle-blowers and vigilant education reporters, ought to be able to address cases involving dishonesty (for example, nepotistic hiring or the doling out of no-show jobs).

Bloat Is Created Quite Openly

On the contrary, when campus boards hire an unwarranted number of administrators, they do so legally and quite openly. Typically they engage in an elaborate, public, transparent process of declaring the need for the positions, advertising the jobs to be filled, consulting with various campus "shareholders," and touting the qualifications of their chosen candidates. Larding the academy with SOX rules and regulations (and, as Harvey Silverglate argues, a bevy of more lawyers) would do nothing to stem the growth of campus administrations. Indeed, the existing clusters of overseers might welcome an additional pillar of support from a new "SOX-ocracy" for their various enterprises, including more administrative hiring.

Psychology is in no small part a cause of such hiring. In this and other decision-making, trustees as a group often, as it were, "go native," adopting an attitude of excessive deference toward campus administrators and faculty councils. Once enmeshed in this culture of deference, boards become less inclined to consider critically the demands and proposals put before them and thus make poor management decisions. In the case of hiring, they become more likely to accede to the natural urge of bureaucracies to replicate themselves.

Moreover, more independent-minded trustees who object to these decisions are likely to be publicly chastised as "micromanaging" or "meddling," or, if daring to criticize curricula or other academic matters, as "trampling academic freedom." As I have argued elsewhere, undue deference by boards ill serves their institutions, students and the community at large, including taxpayers.

Is Costly Education Really Better?

Administrative bloat also stems from another, less recognized source. As Peter Salins, a former SUNY Provost, reminded me recently, the problem is also the result of the false but widely held opinion that more costly education is de facto better education. This accounts for the tendency in many higher-education institutions to emulate the most expensive private colleges and universities. In attempting to match the latter's same range of services, physical plant, and academic programs (frequently duplicative, politicized and even frivolous), the less munificently funded and endowed colleges and universities overreach. These often extravagant and wasteful expenditures of course require the services of ever more specialized, unaffordable administrators.

The Problem of Accreditors

A third cause of administrative bloat is the increasing interference in campus governance issues by the nation's six, federally recognized academic accreditation organizations. The campus leaders in toto  passively defer to them for fear of losing their institutional accreditation and thus access to federal student aid. As Hank Brown, a former U.S. senator and university president, rightly argued in The Wall Street Journal, these accreditors, in their zeal to protect the status quo, pass judgment on campuses on the basis of resources and process rather than educational quality. Among other examples of the heavy-handedness of these "gatekeepers" were their accusations against, and time-consuming interrogation of, the University of California Regents in 2007. And the board's crime? Attempting to address out-of-control administrative costs by modestly reducing salaries and benefits.

In short, SOX, geared to rooting out illegal activity, cannot even begin to address the administrative expansion that Professor Ginsberg laments, and even less could it help to bolster academic excellence. He correctly points out, however, that only campus boards have the fundamental powers to correct these problems. Only they, as I wrote in the Chronicle (citing Massachusetts guidelines for non-profit boards), can ensure "that their institutions are 'faithfully carrying out [their] purpose without extravagance or waste...in a way...most beneficial to the community.'" 

To accomplish this goal trustees must be well-informed about the purpose and workings of the academy as well as competent. They must also be bold in not deferring to the wishes of campus (and external political) forces that are not in the best interest of their institutions and the public. That is, to quote again the Chronicle article, "Trustees should reassert more forcefully their prerogative to stand apart from the many vested interests and factions on campuses and act as independent arbiters of their institutions' welfare."  

It follows also that the governors, voters and self-perpetuating boards that appoint or elect trustees have a solemn duty to select knowledgeable, independent and courageous board members capable of setting priorities and making hard choices.

Finally, I would be remiss not to stress the critical role of public scrutiny in holding trustees and those who appoint them accountable for boards' financial (and academic) decisions. The media must more truthfully and thoroughly report on the state of affairs on campuses, and in particular not thoughtlessly echo the releases put out by campus public-relations offices. And the public, once properly informed, must care more deeply.

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Dr. de Russy, a former trustee of the State University of New York, writes on education and cultural issues



Comments (1)

Jonathan Rodney:

From a broader perspective, the principles of the free market still apply. If students find the quality of education at a college inadequate, they can transfer. If various members of the public find the quality of education at a college inadequate, they can blackball the college by, for example, badmouthing law or investment firms which hire its graduates. If this happens systematically, it will create the only pressure which trustees understand: a threat to their egos. The reason this does not happen is that students and alumni subordinate their concerns for education to their egos: Students at Ivy League colleges, in particular, cannot comprehend the thought of transferring to better colleges, and graduates of Ivy League colleges cannot bear the thought that their college credentials could be embarrassments, even as they speak out against specific problems at their alma maters.

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