Sunday, December 19, 2010

Governing Harvard

Two weeks ago, Harvard announced that it was making the first significant change to its governance structure since the 1600s. Several people have asked me what I think.

First a bit of background. After I left the deanship in 2003, I wrote a book called Excellence Without a Soul, in which I gave my views of higher education at places like Harvard, and at Harvard in particular. I was critical of Larry Summers' record as president, but I was more critical of the group that hired him and to which he was answerable, namely the Harvard Corporation--which consists of six "Fellows" in addition to the President. Writing in 2006, I said:

During most of the Summers years, the Corporation was a leadership vacuum. Its members were rarely heard from in public and rarely spoke to those who make the university run, except the president and his staff. If Harvard were a publicly held corporation in today’s climate of intensely scrutinized corporate governance, the shareholders would have been up in arms about the failure of the directors to care responsibly for the institution.

n the great financial meltdown of 2009, Harvard fared worse than many universities. On December 12, 2009, just more than a year ago, together with my colleague Fred Abernathy in Harvard's Engineering School, I published an opinion piece in the Boston Globe that echoed what I had written in my book three years before:

IF AN ORDINARY corporation had the kind of fiscal year Harvard University just had, some of its directors would be gone. Long-term investments down $11 billion; another $1.8 billion lost by top management speculating with cash accounts; another half-billion gone in an untimely exit from a debt rate gambit. The institution left so illiquid that it was forced to sell assets and issue bonds at the worst possible time, just to pay the bills. A publicly held company would have experienced a shareholder rebellion - especially after the Globe reported that the chief investment officer had repeatedly warned the president about the risks he was taking with the institution’s cash.

The blame had to be traced back to the Corporation, and it was time to do something about it. The Harvard Corporation is a dangerous anachronism. It failed its most basic fiduciary and moral responsibilities. Some of its members should resign. But the Corporation’s problems are also structural. It is too small, too closed, and too secretive to be intensely self-critical, as any responsible board must be.

Two days later, on Monday, December 14, senior Fellow James Houghton announced his resignation. This was obviously a coincidence; though we knew nothing about it, the report that Houghton had informed Corporation a week earlier was surely accurate. Ironically, when the Globe accepted our piece on December 9, the editor told us it would run sometime the following week. Things would have looked different had our piece run as originally scheduled, since that would have followed rather than preceded the announcement about Houghton.

A regularly scheduled meeting of the Faculty of Arts and Sciences occurred on Tuesday, December 15. The President, after discussing Houghton's planned retirement and the protocol for replacing him, also mentioned that the Corporation had begun discussing how it could most effectively carry out its roles and responsibilities. In fact, the President continued, Mr. Houghton had been instrumental in kicking off these discussions.

Just a month later, as a favor to a friend who had a book coming out about power elites, I wrote a piece for the Huffington Post about the Harvard power structure, entitled Harvard's Secret Seven. In it I again called for greater transparency: The modern power elites thrive by forgetting any regrettable past. This amnesia is easy at Harvard, where the legal fiduciaries operate in secret and need not answer for their acts. They are the antipodes of the selfless institutional servants who built Harvard and other great American enterprises, and they bear close watching.

The deliberations mentioned by the President in December had by spring grown into a very public process, reported in detail by the alumni magazine. They resulted in the report of two weeks ago, which makes three dramatic changes. First, it increases the size of the Corporation from seven to thirteen (including the President in both cases). Second, it ends life tenure for Fellows. And third, it creates a functional committee structure, whose members will include individuals who are not Fellows.

All three changes are exactly right. In fact, the third may prove to be the most significant. Opening up critical discussions to a larger group of individuals will require the Fellows to explain and defend themselves. The Corporation will be less likely to function as an echo chamber, accepting the authority of one or two supposedly knowledgeable experts.

What was the effect of the piece Fred and I wrote for the Globe, and my subsequent piece for the Huffington Post? Perhaps nothing; as I said, there is no doubt that Houghton had already decided to step down before our piece appeared. On the other hand, I received enough supportive comments from alumni as well as faculty to know that we were saying things that others thought obvious. So while it is possible that everything might have played out as it did without our criticisms, I suspect that we may have encouraged others to speak along the same lines, more quietly but directly to the decision-makes.

Either way, it doesn't matter. I am much more optimistic about Harvard's future now. I suspect that a good deal of the credit for these changes should go to the President and to the energetic new Fellow, Bill Lee--not a man to leave things alone just because they had always been done that way at Harvard.

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