Considering the ‘governed institution’

Yesterday I wrote about a thought exercise that I find helpful for thinking about higher education using my alma mater as an example: “When you think and talk about Penn State, do you view it more as a corporation to be managed or an institution to be governed?”

I wanted to highlight a practical example of the difference between the “managed corporation” and “governed institution” approaches. That example is student access. Specifically, cost.

Why have the leaders in higher education intentionally tripled or quadrupled the cost of learning in the past quarter century? Why are we comfortable with $1 trillion dollar student loan debt? Because we’ve been enculturated to the “managed corporation” approach, which blithely quiets the concerns about access and debt by pointing to demand.

As a society, we value access to food basics like milk. There’s high demand. And we’ve implemented both subsidies and price controls to encourage access.

I’m not sure anyone can make a credible argument that the quality of a college education has generally increased with tripling tuition, let alone that it has increased proportionately. Yet when we accept the demand-rationale that limits access and increases debt, we implicitly embrace the “managed corporation” approach rather than the “governed institution” approach.

What’s implicit in the “governed institution” approach, by contrast, is the idea that the “governors” (administration, faculty, and trustees) are responsible for something more than corporate health understood primarily through balance sheets. What’s implicit is the idea that they’re responsible for their corporation’s social mission, which is as much about practical tools necessary for learning (books, buildings, labs, etc.) as the intangible aspects of learning like personal encounter, cross- generational relationships, and centrality of physical place as the context for received knowledge in the first place.

A governed institution approach means that leadership won’t always decide an issue based on financial opportunity, but rather on social opportunity. They’re often different, though they are often conflated as one and the same, because financial costs can be papered over in the short term.

I’m concerned, for instance, that we’re reaching the point where donors who support scholarships, for instance, effectively underwrite the corporate spending of university leadership. When a donor supports student access through a scholarship, what related controls are there to lessen increases in tuition? If there are none, then the incentive for university leadership is to grow costs while relying on scholarship subsidies to alleviate their impact. So the utility of scholarships as a way to improve student access to education is probably decreasing, which is a shame.

There’s another thought exercise relevant to this that my State College friend has developed, which is to think about colleges and universities as places that embrace the “application of market forces where they don’t belong, and the absence of them where they do.”

This is evident in the way we’ve come to think about both access to and impact of higher education. Application of market forces where they don’t belong? “We can’t continue to underwrite the cost of sophisticated humanities programs given their lack of clear return on investment.” Absence of market forces where they do belong? “Student tuition more than covers the actual cost of the faculty and the education of the student, but without its continued growth we can’t subsidize our research aspirations.” The common theme in both instances? Little consideration of the impact on the level of the student as a human person. This is the “managed corporation” approach to higher education in a nutshell.

While corporate management should involve principled leadership, responsible institutional governance demands it. To promote the “governed institution” approach to higher education, a continuing Socratic type inquiry into the instantiation of the institution’s social mission is a necessity.