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Harvard and MIT Innovate: Rest of HigherEd Should Take Note

Something happened this week in higher education that you may have missed. Harvard University and Massachusetts Institute of Technology (MIT) teamed up to announce a $60M investment in “massive online courses,” known as edX. This initiative was said by the Atlantic to be “The single biggest change in education since the printing press.” In this nonprofit venture’s pilot course on “Circuits & Electronics” developed to test the market, there were 120,000 students. 120,000! Signing up for electronics! There were more students registering for this single online course than MIT’s entire entire alumni base, it was said in a press conference attended by both university presidents and the press. See the impressive video here.

Technology has come a long way in the last five years. Platforms are not clunky, but enjoyable, robust and user-friendly. Just as boardrooms are becoming paperless, through the use of portals and tablets, so should classrooms. However, more change is coming in the delivery of learning and access to global students in emerging markets. For universities, this means competition is now global, beyond the bricks and mortar of their campuses. Of course, companies compete globally already, but boardrooms too will change. Global directors will be able to participate in board meetings without leaving their home country, and without a decline in meeting quality. Shareholders will have access to boards and companies directly through their computers or even smart phones. Technology makes interactive, instantaneous communication and voting possible in ways we may not even imagine.

Do the numbers bear out a $60M investment in online learning and digital media by Harvard and MIT? Consider this as a real sample: I am scheduled to teach Corporate Governance this summer at Harvard University. The course currently has 33 students enrolled. A governance course I taught last year at Osgoode Hall Law School also had 33 students. A course I taught to undergraduate law students had only 6. However, my LinkedIn group, Boards and Advisors, now has 2,689 members and is climbing at a rate of 7-10 new members every day. We are not constrained by class size. We have group members from the Securities and Exchange Commission, the Office of the Superintendent of Financial Institutions, and Industry Canada (in the past week). I post everything I read and interact with members on a daily basis, facilitating discussions, stimulating peer dialogue and insight, and ensuring the proper tone. This group has more members than even those of the National Association of Corporate Directors in Washington and the Institute of Corporate Directors in Toronto (at 2,043 and 1,293 members respectively). Directors thirst for content, dialogue and networking, all of which occur in this group.

Consider this too: Of the total universe of corporate directors, most do not attend in-person conferences at director associations or universities. It is too costly and not a wise use of their time. At the NACD annual conference, about 800 directors attend. But there are 10s if not 100s of thousands of directors on public, private and nonprofit boards, within the US alone. Would these directors want to have access to learning that was convenient, interactive and customized to them, at a reasonable price? Hmm, I wonder.

Harvard and MIT are banking on the fact that students in India, China (with 100s of millions of people and ~ 8% growth rates) and all over the world will use home and office computers to take their courses, without having to come to Boston as residential students. They are investing in a nonprofit venture to ensure robust platforms, customized learning to suit each student, processing of big data and tests in real time (which will assist research), and internal controls over academic integrity – all with a view to come as close as possible to the classroom experience in real time, and in some respects superior. Even instantaneous language translation may be possible. Mouse or cursor analytics tracking may tell teachers and researchers how students learn and what works and doesn’t. Courses will be free and universally accessible, but eventually users may likely pay. Certificates and degree programs are also possible.

Speaking of brand and the ability of universities to deliver online education, it is also debatable whether private companies or associations are best to deliver education. They may be conflicted with service providers who pay-to-participate in programs, which affects the curriculum. Private for-profit companies may not devote resources keep platforms or curricula current, or ensure internal controls over marking and integrity. The best programs may ultimately be academic-practitioner team-teaching where the academic brings rigor and proximity to research, and practitioners bring real world experience.

This movement by Harvard and MIT is a game changer that signals potential obsolescence of traditional educational delivery that refuses to change. But it also points to governance shortcomings of universities who are behind the curve and bloated. Technology should bring costs down to the end user, not up. However, costs to students even with technology to date continue to rise, as does class size. Students graduate with crippling debt. Witness the student demonstrations in Quebec, which have received worldwide attention. Boards of universities are too large and should be populated with more hard-hitting businesspeople with a stellar track record and mindset of innovation and value creation, who not only see the future but have helped shape it, and who can tell university presidents which way to part their hair.

Governance reform in healthcare has started, but needs to extend to education. In hospitals, for example, there was a survey that revealed that most hospital boards do not pay the CEO for performance. (This is the most important responsibility a board has.) Shortly thereafter, the Premiere of Ontario in 2010 enacted legislation (see “An Act respecting the care provided by health care organizations”) to compel boards and senior management to measure quality for stakeholders, and link these quality metrics to executive pay. (See summary slides here.) These reforms are now under way and the Ontario Hospital Association is commended for its efforts in pay for performance (see March 2012 slides here and a backgrounder here), and focus on governance (see the OHA’s Governance Centre of Excellence here). This is exactly the type of reform that is sorely needed in universities. There are layers of administration without any visible linking of pay to performance. Costs are being passed on to students, who can least afford it. Quality metrics should center on innovation and the classroom for universities, similar to wait times for hospitals. Value and cost savings are being left on the table for universities.

Just yesterday I walked by another bookstore in my neighborhood that has closed. Change is afoot and the longer higher education waits to innovate, the more compromised they – and society – will be.

Boards and Sexual Assault on Campus

“As the graduate assistant put the sneakers in the locker, he looked into the shower. He saw a naked boy, Victim 2, whose age he estimated to be ten years old, with his hands up against the wall, being subjected to anal intercourse by a naked Sandusky. … The graduate assistant left immediately, distraught.”

I apologize to all readers for quoting this alleged abhorrently heinous criminal conduct from the Grand Jury report to what is reputed to be several young boys.

Universities are historic institutions, steeped in tradition. Many however have sorely outdated governance practices. Penn State is a good example. What can we learn?

Penn State prides itself on not changing the size or composition of its board since 1951. What this means is that the entire organization is not keeping up with the times.

Thirty-two directors is not a board: it is a theatre. A board this large means management dominates and decisions are made in advance rather than at the table.

The board of trustees should immediately disestablish the Executive Committee chaired by the President. An executive committee means a “real” board where management controls rather than the board and its committees.

The board size should be reduced to half: sixteen directors maximum and preferably fewer. Multi national corporations have fewer directors.

The university president, or any other member of management, should have no influence whatsoever into director selection.

Penn State does not even have an audit or risk committee. What good board does not have an audit committee? The audit/risk committee should oversee conduct and compliance reporting. Where is this obligation overseen by a committee of the Penn State board, I wonder? No committee charters are available, which is another red flag.

A nominating and governance committee should also be established. So should a human resource committee. It is remarkable that audit, nominating or HR committees do not exist and this again suggests undue influence by management who does not want this oversight.

Penn State’s governance statements are verbose, pompous, self serving and ineffective, as are those of many colleges and universities, deliberately so and written by management who write for a living. Key governance documents are missing, such as the competencies and skills of each director linked to their responsibilities; the code of conduct; compliance procedures for the code; whistle-blowing provisions; a position description for the president; and position descriptions for the board and committee chairs.

These are now requirements for publicly listed companies all over the world and leading not-for-profit institutions. Is Penn State or are other universities immune from such best practices?

If these governance and ethics oversight practices exist, they should be documented and accessible on Penn State’s website. That they are not leads me to believe they are ineffective or non-existent. (Note: the Penn State website appears to have changed slightly as of Sunday, November 13, 2011, to include backgrounds of 32 (was 35) directors.)

Next, more to the alleged sexual assaults on campus property by football coach Sandusky.

There needs to be greater rotation and succession planning at many universities and Penn State is no exception. The same director, employee, coach, dean, or otherwise at the helm for 20-30+ years – regardless of performance or money or donations being attracted – is wrong governance. Joseph Paterno was coach for 45 years and is 85 years old.

Inadequate succession planning like this would never fly in public companies, where CEO tenure is 4-5 years and good board tenure is 9. People don’t have time to get comfortable and start capturing people but need to do their job. On boards, retirement age is 72+ and good tenure is 9. In professional service firms, it is even earlier, from late 50s to early 60s to make way for the next generation of leaders.

No one is irreplaceable or larger than an institution. Incumbents create power and fiefdoms, currying favors – such as free sports tickets and equipment to young boys (as was alleged) – or protecting colleagues (also being alleged) – where they become so dominant they cannot be resisted, within pockets of toxic culture and risk – with management and even boards of trustees acquiescing instead of governing.

All allegations have yet to be proven, but if true this is likely what happened here: People become afraid to speak. If they speak, they will suffer enormous reprisals, even loss of their jobs or banishment. The board is at fault if this is the case as a result of a flawed structure (see above) and decisions it took or did not take.

At least half of the Penn State board should be businesspeople with clout. The board should have the same transparent recruitment that companies how have, with directors who are independent, have run businesses and can tell colleges who are behind the times, or who resist reform, that this is what has to happen. Having alumni, the governor, or even agricultural societies (likely a historical artifact) appoint or elect directors does not necessarily result in competent directors being at the table or staffing key committees. There needs to be a greater link – clear and transparent – between directors, their skills, and what is required to govern. The days of ceremonial appointments should be over. Clearly they are not.

Next, all colleges should have whistle-blowing procedures at the same level or above as companies are now obliged to do. This puts the heat under management to have proper procedures, as employees can go directly to an external ombudsperson or the regulator to get protection.

A code of conduct should be developed by all colleges and universities, as is the case for any leading organization. It should be signed off on by each and every trustee, employee and key supplier and be a condition of serving and employment, including for the president. Code compliance should be part of the president’s contract. Everyone has to sign that they do not know of any wrongdoing, directly or indirectly, anywhere on campus, every year. The sign-off statement should include obligations on how to report, protection mechanisms, and assurances of a proper independent investigation.

All code compliance should be reported directly to the audit committee of the Penn State board (note: non-existent at Penn State), and independently assured. The code must include conflicts of interest statements, treatment of assets, fair dealing and harassment. Training and education should also occur, for each employee. The code should be paramount and override defensive union agreements or guises of academic freedom.

Lastly, Penn State’s internal audit charter – if it exits – should be available on its website. The design and effectiveness of internal controls, including approvals, access to restricted rooms, campus security and lighting, keys, locks, areas of vulnerability, and potential for override – most of which were likely deficient in this case – should be reported directly to and overseen by the audit committee.  The audit committee should be able to insist upon independent assurance for any risk, based on the audit report. Good audit committees know and do all this. They direct the president, CFO and finance and risk personnel to comply with best practices.

Why would Penn State management do all this, under this resistance? Simple. The board tells them to. Or they get fired. This is why a strong board is so essential. The tone at the top starts – and stops – with the board. Sandusky is not a rogue any more than a rogue trader is at a bank. He is operating within a defective system, put in place by defective management and overseen by a defective board.

Conclusion: Reform to collegiate governance

Educational institutions are complex organizations, with interdependent stakeholders and many moving parts. They are sometimes more complex to run than a large company. In the vast majority of cases, they are staffed by committed and well-meaning people. They are however, hard to manage and especially difficult to govern, given defensive unions, historic tradition and tenured, specialized academics and staff. They are however taxpayer-funded entities from which leadership and accountability are expected. Indeed, they are supposed to set the example and practice what they teach.

It is very important that governance standards and practices be current and not myopic, and this is why colleges need strong, proper, effective independent boards to counteract resistance, have the clout to direct management and staff, and impose proper governance, risk management and internal controls are is being done for public companies.

Here, Penn State, and perhaps many other universities have much to learn.

What Does it Take to Be a Corporate Director? The minimal requirements will surprise you

What are the requirements to be a director of a major public corporation, where you are required to oversee and approve complex financial statements, compensation packages, business risk appetite, internal controls and regulatory compliance? It will surprise you to know that the requirements are minimal.

To be a company director, you need to be over 18, not insane (or at least found to be insane by a judge), and not bankrupt. That’s it. You can sit on a major board of directors, and not know anything about the company, its industry, or even know how to read a financial statement.

When you see an accountant, a doctor, an engineer or a lawyer, that person has a rigorous code of professional practice with which he or she must comply, ongoing professional development obligations, a common body of knowledge as a barrier to entry, a body of peers that oversees any complaints or misconduct, and must pay an annual fee in order to practice.

There are more than 22 million private and 17,000 publicly traded companies in the US. Each of these companies requires a board of directors. If the average board size is nine directors, that means that there are about 150,000 directors of publicly traded companies alone, and several million directors of private companies.

Perhaps we should require more of directors as fiduciaries. They oversee the management of major corporations that, if or when they fail or engage in inappropriate or illegal conduct, the consequences can be disastrous. There is ample evidence that directors did not (and do not) fully understand the risks and products they were approving of investment banks. At a recent directors conference in Washington, Michael Oxley, co-drafter of the “Sarbanes-Oxley Act,” admitted publicly that even he did not understand what a “synthetic CDO” is.

Director industry associations are not the answer. These bodies are well meaning and professional, but are voluntary and member-accountable and have no sanctioning authority. Codes of conduct are perfunctory at best and the vast majority of directors who attend educational offerings are a slim minority of the total directorships. The people who do not attend are the ones who should.

After Enron and WorldCom, requirements of financial literacy and expertise were introduced within audit committees, which has resulted in their professionalization. Perhaps it is time to implement similar requirements for compensation, governance and risk expertise. This would also help to diversify boards and retire directors whose skills are outdated.

The strengthening of professional requirements for company directorships should be self-evident. As someone who teaches and advises in the field and has an obligation to keep current with emerging developments, given the significant rate of change in the last ten years, I could not imagine how a director of a company could remain current without ongoing requirements rather than passing familiarity or osmosis (I am speaking here of directors who have chosen not to upgrade their education). I often notice a disconnect – to put it mildly – between the resources and expertise that management has and those of directors.

Professional qualifications, a code of professional practice, peer review of misconduct, and disclosure of director expertise are all areas that would strengthen the governance of corporations.

Good Teaching: The Top 10 Requirements

The following originates from a previous article I wrote that was recently republished:

One. Good teaching is as much about passion as it is about reason. It’s about motivating students not only to learn, but teaching them how to learn, and doing so in a manner that is relevant, meaningful and memorable. It’s about caring for your craft, having a passion for it and conveying that passion to everyone, but mostly importantly to your students.

Two. Good teaching is about substance and treating students as consumers of knowledge. It’s about doing your best to keep on top of your field, reading sources, inside and outside of your areas of expertise, and being at the leading edge as often as possible. But knowledge is not confined to scholarly journals. Good teaching is also about bridging the gap between theory and practice. It’s about leaving the ivory tower and immersing oneself in the field in talking to, consulting with, and assisting practitioners and liaising with their communities.

Three. Good teaching is about listening, questioning, being responsive and remembering that each student and class is different. It’s about eliciting responses and developing the oral communication skills of the quiet students. It’s about pushing students to excel and at the same time it’s about being human, respecting others and being professional at all times.

Four. Good teaching is about not always having a fixed agenda and being rigid, but being flexible, fluid, experimenting, and having the confidence to react and adjust to changing circumstances. It’s about getting only 10 percent of what you wanted to do in a class done and still feeling good. It’s about deviating from the course syllabus or lecture schedule easily when there is more and better learning elsewhere. Good teaching is about the creative balance between being an authoritarian dictator on the one hand and a push-over on the other. Good teachers migrate between these poles at all times depending on the circumstances. They know where they need to be and when.

Five. Good teaching is also about style. Should good teaching be entertaining? You bet! Does this mean that it lacks in substance? Not a chance! Effective teaching is not about being locked with both hands glued to a podium or having your eyes fixated on a slide projector while you drone on. Good teachers work the room and every student in it. They realize that they are the conductors and that the class is their orchestra. All students play different instruments and at varying proficiencies. A teacher’s job is to develop skills and make these instruments come to life as a coherent whole to make music.

Six. And this is very important, good teaching is about humor. It’s about being self-deprecating and not taking yourself too seriously. It’s often about making innocuous jokes, mostly at your own expense, so that the ice breaks and students learn in a more relaxed atmosphere where you, like them, are human with your own share of faults and shortcomings.

Seven. Good teaching is about caring, nurturing and developing minds and talents. It’s about devoting time, often invisible, to every student. It’s also about the thankless hours of grading, designing or redesigning courses and preparing materials to still further enhance instruction.

Eight. Good teaching is supported by strong and visionary leadership, and very tangible institutional support—resources, personnel, and funds. Good teaching is continually reinforced by an overarching vision that transcends the entire organization—from full professors to part-time instructors—and is reflected in what is said, but more importantly by what is done.

Nine. Good teaching is about mentoring between senior and junior faculty, teamwork, and being recognized and promoted by one’s peers. Effective teaching should also be rewarded and poor teaching needs to be remedied through training and development programs.

Ten. At the end of the day, good teaching is about having fun, experiencing pleasure and intrinsic rewards … like locking eyes with a student in the back row and seeing the synapses and neurons connecting, thoughts being formed, the person becoming better, and a smile cracking across a face as learning all of a sudden happens. It’s about the former student who says your course changed her life. It’s about another telling you that your course was the best one he’s ever taken. Good teachers practice their craft not for the money or because they have to, but because they truly enjoy it and because they want to. Good teachers couldn’t imagine doing anything else.


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