Harvard Corporation Revises Its “Composition, Structure, and Practices”
The Harvard Corporation’s self-review of its operations and organization—begun in 2009 and first disclosed to the community that December 15 in remarks by President Drew Faust to the Faculty of Arts and Sciences (FAS)—has culminated in a series of measures to modernize and, in part, refocus the work of the University’s senior governing board (formally, the President and Fellows of Harvard College). The changes, discussed with the Board of Overseers during the review and then aired and adopted jointly in a series of votes on December 4, are outlined in a five-page "Report to the University Community" by the Harvard Corporation Governance Review Committee, released today (along with a Q&A with President Faust and the Senior Fellow, a letter, and a news release). Structural changes include these principal steps:
• Membership on the Corporation will increase from the University’s president and treasurer plus five Fellows (as constituted ever since the Charter of 1650), to a 13-member group (the president and 12 others, including the treasurer). The appointments required to fill out the new membership are expected to be made within the next two to three years.
It has been long assumed that any such change in governance would require approval by the Massachusetts legislature. But according to Senior Fellow Robert D. Reischauer ’63, “We have reviewed the matter thoroughly, both internally and with outside counsel, and have determined that the University has full authority to make the changes voted this weekend by the governing boards. Harvard has also conferred with the Office of the Attorney General for the Commonwealth of Massachusetts, which saw no reason why the University could not exercise its authority to adopt these changes.”
• Term limits. There will be a presumption of terms of service (“[W]e envision that ordinarily members will serve for six years, with the prospect of their service being extended for up to six years”).
This is a modification of open-ended appointments and of the informal recent practice that Corporation members have tended to step down after a decade or so, or at or about age 70. (Although the report does not say so, the enlarged membership, the expectation of limited terms, and some specialization—see below—may in combination make Corporation service feasible for a broader range of candidates, at different stages of their careers.)
• Formal, substantive committees. The newly enlarged Corporation will form standing, substantive committees (as opposed to acting almost exclusively as a committee of the whole), including:
• a Committee on Finance;
• a Committee on Facilities and Capital Planning; and
• a Committee on Governance, chaired by the Senior Fellow, to address “matters of trusteeship,” ensure a smooth flow of work between and among the Corporation and its committees, and assure “periodic future assessments of the Corporation’s operations.”
Significantly, the first two committees will consist “principally” of Corporation members, but each “may also enlist the service of others with especially helpful professional expertise, drawn from among accomplished alumni, including current or former [members of the Board of] Overseers, and others.”
• Alumni affairs and development. With the Overseers, the Corporation will form a new Joint Committee on Alumni Affairs and Development. (It will exist alongside three already existing joint committees: on Inspection, which is the audit and risk-management committee; on Appointments; and, in an advisory capacity, on Honorary Degrees.)
As to practices, the report outlines several subtle, but significant, reforms.
• A lead trustee. The Senior Fellow will act as “a lead player within the board”—in effect, as the lead trustee or director, who will be “expected to take a more active part in framing Corporation agendas and setting priorities for its work,” a role that has heretofore been the president’s (as discussed in a 2006 Harvard Magazine roundtable, "Governing Harvard"). The Senior Fellow will, moreover, be chosen for the role by fellow Corporation members, rather than merely inheriting it through longevity; and will chair the new governance committee.
• Outreach and communications. The Corporation and its members “will engage more with a broader range of University constituents, in both formal and informal settings”—apparently an effort to improve its access to information and diverse views—and will through the president or Senior Fellow “report to the community at least four times” annually on “key aspects” of its work.
• Strategic planning. In conducting its work, the Corporation will endeavor increasingly to “focus its attention on strategic priorities and plans, high-level policy matters, and core fiduciary concerns.” Among those identified are “ways in which the different parts of the University can not only flourish individually, but draw still greater strength from one another.”
In a December 5 conversation about the changes, Senior Fellow Reischauer characterized the Corporation-Overseers meeting of the prior day as “a historic gathering in many respects.” President Faust, who is an historian, amplified, noting that the participants were “exhilarated”—fully aware that on the verge of the University’s 375th anniversary (next year), they were modifying a set of procedures, put in place in the 1650 Charter, to better “situate us for the next 375 years.” Reischauer, a former Overseer (as is the newest Corporation member, William F. Lee ’72, whose service began on July 1), said that the package of reforms was but “one step among many that we’ve taken” in the past few years that will lead to a closer relationship between the two governing boards. In voting to enact the changes (the two boards had never observed each other casting votes before), the appointed Fellows and elected Overseers sensed they were “all part of doing something they wanted to do for the best interests of Harvard, together.”
Fundamental to the success of the review, Faust said, was focused consideration of the simple but difficult question: “What is the work of the Corporation?” As Harvard has changed, in a world itself changed by closer international connections, information technology, and other factors, that question drove much of the thinking about changes in organization and processes. “Once we began our self-examination,” Reischauer added, “the nature of the agendas at the Corporation meetings began to shift”—toward strategic considerations bearing on the University five and 10 years hence.
Faust said that Richard P. Chait, research professor of higher education at the Graduate School of Education—an expert on higher-education governance and leadership who served as a counselor to the review committee (and was also a participant in this magazine's 2006 roundtable)—had spoken memorably of boards’ role as a source of “insight” and “foresight,” as well as “oversight.” Reischauer said that establishing committees focused on some of the Corporation’s foremost fiduciary obligations—groups that could “drill deeper” into financial and capital-planning issues, and distill information and provide options to the other members—would enhance “immeasurably” the Fellows’ capacity to deal with strategic priorities and longer-term issues.
Overall, Faust said, the Corporation-Overseers discussion of the changes had resonated with “the spirit of consequentiality and possibility” for Harvard. Reischauer said the formal changes in governance were of a piece with enormous changes within the central administration in the past few years—“in the capacity of the center to do good for the rest of the University” in spheres ranging from information technology to capital planning, to enhanced “rationality” in the budgeting process. All of those improvements, he said, were important to the core educational, research, and academic mission of Harvard. In this sense, Faust said, “Strengthening the Corporation strengthens the context in which to undertake those activities” at the heart of Harvard.
The committee’s rationale for these changes, the context in which they arose, and their implications are discussed below.
The Corporation’s Rationale for the Review
In its report, the Governance Review Committee (the Corporation members plus Frances D. Fergusson, Ph.D. ’73, president emerita of Vassar College and Overseers president in 2007-2008; Robert N. Shapiro ’72, J.D. ’78, a former president of the Harvard Alumni Association and now chair of the Overseers Committee on Institutional Policy; and Seth P. Waxman ’73, a former U.S. Solicitor General and current Overseers president) stressed the Corporation’s “principal fiduciary responsibility for Harvard’s institutional well-being” and noted that the review, begun by the Corporation in the fall of 2009, “focused on assuring its capacity to fulfill its role as effectively as possible.”
When she first broached the subject publicly, at the FAS meeting in December 2009, President Faust suggested that the review would encompass several matters of process and procedure: the Corporation’s agendas and use of its meetings, its access to information and interaction with University constituencies, its relations with the central administration and the Board of Overseers, and its use of advice made available to it (and see further comment here). In a conversation last September, she said the review would encompass what Corporation members and those with whom they consulted thought needed to be done in order to address “what the absences or omissions have been.” (As the new report indicates, the review committee had met for a two-day retreat just days before that conversation, in late August, and by then had articulated its view of the Corporation’s fundamental responsibilities and of the “concrete implications” of those understandings.)
The timing for the review was right, according to the report, as a matter of routine good practice; because the financial crisis had prompted all parts of the University to examine their roles and operations (and therefore, Faust said on December 5, it was fitting for the Corporation to model the same discipline itself); and because “the past decade has been a time of unusual challenge, growing complexity, and consequential change both for Harvard and for higher education at large.”
According to the report, changes in Corporation structure and operations are based on several premises.
• Capacity. The Corporation’s “collective capacity needs to be commensurate with the University’s scale, scope, and complexity”—suggesting that a body comprising the president, treasurer, and five Fellows is too small and too limited in expertise to fulfill its responsibilities relative to the twenty-first-century research university.
Note that the review did not recommend something wholly different. It concerned the Corporation, not Harvard governance or administration overall. The review did not call for a single, larger board of trustees superseding both the Corporation and the Board of Overseers, with or without elections for some or all of those trustees. Reischauer observed on December 5 that the dual board structure “is a strength of Harvard,” and has the potential to become even more so, given the boards’ different memberships, sizes (the Board of Overseers has 30 members, plus the president and treasurer), and skills.
Although the Corporation will grow, 13 members is not dozens, so the “collegiality and the ability to have frank discussions” that characterize the senior board’s operations will not be compromised, he said. In the meantime, the enlarged number of Fellows will “allow us to augment the Corporation with some specific skills and backgrounds and experiences that maybe we don’t have.” (For a description of the Corporation’s tightly knit culture and operations, see the discussion in the magazine's 2006 governance roundtable: two former Corporation members were participants, along with Professor Chait).
• Fiduciary responsibilities, broadly defined. Given its statutory responsibility, and its self-understanding, as the University’s “principal fiduciary body” (as the new governance review puts it), the Corporation places “special emphasis on the stewardship and development of the institution’s financial and physical resources” and on matters of “organizational design and dynamics.” Reiterating the point, the review says that fulfilling the institution’s core academic purposes “depends integrally on securing and maintaining the resources entrusted to us, and on continually seeking a proper balance between serving immediate needs and assuring the institution’s long-term health.”
The latter responsibility is a familiar one: stewardship of the endowment through the Harvard Management Company’s investment activities, and determining the funds to be distributed in support of current operations.
The other role, of “securing” resources, perhaps differs at least in emphasis from past perceptions of the Corporation’s work. Some Harvard presidents have lamented that Fellows and Overseers have not, or not sufficiently, engaged in fundraising. (Robert G. Stone Jr. ’45, who served on the Corporation for 27 years and was Senior Fellow from 1995 through 2002, was a legendary fundraiser—at the end of the University Campaign, in 2000, President Neil L. Rudenstine joked about how Stone’s long shadow gave prospects time to “dive…into the surrounding shrubbery, or simply scatter indiscriminately” at his approach—but was often cited as the exception who proved the rule.) Elsewhere in the new report, in discussing the new Joint Committee on Alumni Affairs and Development, explicit reference is made to preparations to “mount an ambitious University-wide campaign.”
In light of recent financial reverses and current ambitions, it is understandable that the Corporation might want to be more clearly organized for and involved in fundraising—and more directly supportive of the president, on whom the enormous task of raising billions of dollars ultimately falls. On the other hand, as Chait has pointed out in a different context, a great strength of Harvard's governing boards is that they have managed to separate "governance and philanthropy" to a degree unique among nonprofit institutions. “Most other boards that deal with governance are…warped by issues of philanthropy,” he said in 2006, with donors gaining board seats for their wealth and generosity, not for the expertise and experience they might bring to governance. The Corporation, counseled by Chait, surely appreciates and intends to maintain the separation he identified, while simultaneously building bridges to important alumni and donor constituents through the new joint committee, which will comprise Fellows, Overseers, and “selected others.”
• Strategic vision. Fiduciary matters and attending to “pressing issues of the moment” aside, the governance review reports, it is “imperative” that the Corporation make time to “weigh the major strategic challenges and opportunities facing Harvard.” The Corporation must be vigilant against paying too much attention to “matters transactional, transient, or tactical.”
• Governance. Consistent with these views of its responsibilities, the Corporation is “fundamentally a governing board, not a management committee.” Governance can “monitor, guide, and enable sound management, without conflating the two.”
This issue has arisen repeatedly in recent Harvard history. President Faust said that Neil Rudenstine described the Corporation functioning as a “plural executive” during his presidency, meeting frequently and engaging in all sorts of transactional and other matters. She said that during the past few years, that “collective-executive” role had lessened, in her experience, as the Corporation appropriately prepares to undertake a different, more strategic, kind of work.
• Managing risk. Following a decade in which Harvard propounded ambitious visions for growth, but suffered when it discovered it had assumed unrecognized risks (notably, financial risks), the Corporation restated its need to be “attentive not only to opportunity but also to risk.” Accordingly, “ambition and innovation must go hand in hand with carefully calibrating and managing risk, especially as the University navigates a more constrained and volatile economic environment and faces rising outside scrutiny of higher education.”
• A mutual opening-up. Finally, the Corporation took note of “the desire on the part of many members of our community to understand better” what the board is and does, and of “the value the Corporation derives from its members’ opportunities to hear and learn directly from people across the Harvard community.”
The Review in Context
To an almost eerie extent, many of the issues raised by the current Corporation review echo observations made 40 years ago. Summarizing the circumstances then and now may lend some useful perspective—suggesting how acute issues illuminate perennial problems of governance and administration at Harvard. In this light, it is also possible to better understand the significance of the newly announced changes, and how quickly they are being implemented: an 18-month review and reform of a 360-year-old governing entity.
Although the current report does not detail ways in which the past decade has been “a time of unusual challenge and consequential change” for Harvard, certainly the institution has been affected by matters that involve the Corporation’s fiduciary roles. The controversial presidency of Lawrence H. Summers ended prematurely, with his resignation in 2006. The ambitious plans to develop expansive new academic facilities in Allston on an accelerated schedule have been brought to a halt, and are being reconsidered completely. And the steps then taken to manage the anticipated financial risks associated with that accelerated development strategy instead greatly magnified those risks during the national and global economic reversals and crises of 2007-2009—causing Harvard additional multibillion-dollar losses as the endowment’s value declined $11 billion during fiscal year 2009.
Consequential as those concerns continue to be for governance, they may pale by comparison to the threat many felt was posed to Harvard’s very existence, or at least its nature, during the Vietnam-era turmoil that swept this campus (and many others) in the late 1960s. In response, a University Committee on Governance, chaired by Professor John T. Dunlop, examined all parts of Harvard’s governance and administration and invited wide discussion of expansive papers on the selection of a new president, governance, finances, and even fundamental matters such as “the nature and purposes of the university” and the fundamental “rights and responsibilities” of members of the community.
• Administration vs. governance. The Dunlop committee’s discussion memorandum on the governing boards and the presidency found that Corporation members had become “auxillary officers of the staff of the President” on a wide range of administrative matters. That review concluded that the enormous growth of the University in the 1950s and 1960s had overwhelmed the president’s staff, and recommended strengthening that staff—in part because doing so was the “only practicable alternative for freeing the Corporation from over-involvement in the administration of the University.” (The staff was augmented substantially under President Derek C. Bok, through the creation of new vice presidencies—perhaps the most visible outcome of the committee’s work. The discussion memorandum did not encourage Corporation members’ immersion in administration, and in fact worried that it compromised the Corporation’s capacity to provide “semi-objective evaluation" of Harvard’s chief executive and of the University’s well-being.)
• Financial challenges. The current review committee highlights “a more constrained and volatile economic environment.” The Dunlop committee offered this assessment of Harvard’s financial situation as the country stood on the verge of the “stagflation” that afflicted the U.S. economy and depressed financial markets for years on end: The University had become remarkably reliant on an unstable source of income (recently, endowment income; then, sponsored research, which accounted for more than 36 percent of 1969 revenues, up from 19 percent a decade earlier). Economic circumstances were uncertain at best (“[M]oney is likely to be scarcer relative to widely perceived needs than during the past two decades”). Academic costs regularly outstripped other costs (“Assuming that costs will continue to increase at a rate significantly faster than inflation in the economy as a whole…”). And after the distressing confrontations on campuses, a war-weary society heightened its scrutiny of higher education.
• Communication and contact. Concerning the most perennial of concerns, the Dunlop committee observed bluntly that “the effectiveness of the Corporation is needlessly made suspect by the secrecy surrounding its proceedings”—and advocated measures such as permitting deans, faculty members, and students to sit in on relevant sessions. Further, “closer contact” between Corporation members and University constituents “would not only be informative to the principal Board in terms of first-hand contact with the attitudes of faculty, administration, and students, but probably most reassuring to the latter three constituencies.” (At times of crisis, informal means of encouraging such contact were improvised. In the late 1960s, Corporation member Hugh Calkins took the unusual step of coming out from behind the then-pervasive veil that hid the Corporation’s activities to meet with members of the community, aiming to understand and diffuse the divisions then plaguing the University. And in 2005, following FAS’s lack-of-confidence vote in President Summers, Corporation members began meeting with faculty members and department chairs to listen to their concerns.) A principal idea emerging from this magazine's roundtable on governance was that the Corporation ought to routinely overcome the "warping effects of opaqueness" (in Chait's term) by issuing statements on its activities, briefing the community on its operations and priorities, or otherwise instituting regular channels of outreach.
These diverse concerns about twenty-first-century governance were summarized in the 2006 roundtable:
Might the Corporation be more transparent about its work, and if so, how? Beyond choosing and evaluating the president, should the Corporation participate visibly in the making of or communication about major University decisions or priorities—expansion into Allston or growth in the sciences—and again, how? More generally, how can a relatively small governing body which operates informally and through personal connections maintain good sources of information and perspective when its members increasingly come from farther afield and have other important duties to fulfill—and when Harvard itself has grown vastly larger and more complex in recent decades?
To a degree not telegraphed a year ago in President Faust’s initial description of the Corporation’s current self-examination, the Fellows have now tried to enhance their performance on all of those matters, as they arise in the current context.
In one sense, the Corporation review is an exercise in modernization. Instituting committees dedicated to finances and to facilities and capital planning is a sound practice for a fiduciary board of trustees—all the more so after the jarring financial experiences of the past two years. Moreover, these committees align with improvements in Harvard’s administrative practice, of the sort that Senior Fellow Robert Reischauer mentioned. A University-level Financial Management Committee now coordinates budgeting, financial planning, cash management, and Harvard Management Company’s investment operations. And as reported, executive vice president Katie Lapp has made creating a capital-planning and -budgeting process one of her highest priorities; a new vice presidency has been created, and an appointment made, to get the planning process under way. These steps, in the central administration and on the Corporation, should make uncoordinated or especially risky construction and financing decisions less likely than in the past; put positively, the University should be in a better position to identify and pursue some of its highest priorities for critical facilities and other investments, come what financial circumstances may.
Turning to the present, the Corporation is emphasizing the importance of a large capital campaign—both because Harvard’s last campaign concluded in 1999, and because current circumstances (the reduced endowment, increased scholarship support, and the likely pressure on federally sponsored research funds) make it urgent. Faust said on December 5 that the Corporation’s discussion of its work yielded a strong sense that fundraising was part of its mission: that along with financial oversight and financial decisionmaking came the critical role of helping to assure that adequate resources were available. Reischauer added that, as a campaign would require all the other parts of the University to align their interests and efforts, so should the governing boards; the Overseers, he said, were enthusiastic about having the Corporation join their efforts in this sphere.
The arrival of new Fellows, in short order, could be energizing for the Corporation, while the cycling off of current members, in future years, would create a more standardized, understood sequence of succession and renewal, Reischauer said. As new members arrive and acclimate themselves to the Corporation, their perspectives and questions might naturally propel the work of the new governance committee, helping the Corporation to keep itself and its practices fresh. (The new membership and renewal processes will also assure some Corporation continuity between presidential administrations, while affording each president the opportunity to be involved in recruiting and appointing some Fellows.)
What today seems perhaps the fuzziest of the Corporation’s professed new aims—the commitment to “weigh the major strategic challenges and opportunities facing Harvard”—may, in time, become the most important outcome of this self-examination. The University president is always enormously busy—all the more so as students, scholars, and alumni are active around the world, and particularly during preparations for and then the subsequent launch of a major capital campaign. Harvard remains highly decentralized academically. There is rarely enough time for administrators to undertake thoughtful, deliberate strategic planning.
And yet, there is experience in doing so, in the administration and among Corporation members. In her first perch at Harvard, Drew Faust as founding dean devised and carried out an institutional strategy for the transformation of Radcliffe College into the Radcliffe Institute for Advanced Study. As president, she invited Lawrence University Professor Michael E. Porter, perhaps the foremost scholar of competitive strategy, to join her first retreat with her deans—in July 2007, just a dozen days after taking office; and Harvard Medical School dean Jeffrey Flier recently undertook a strategic-planning exercise for his school (which might have been the first in a series until the financial crisis derailed such work). Corporation member Nannerl O. Keohane, LL.D. ’93, conducted highly successful strategic-planning efforts at Duke University when she was president there; the results were published, the priorities linked to fundraising—and new programs resulted, backed with hundreds of millions of dollars of support. Even when the markets collapsed in 2008, the plan proved an invaluable framework for necessary budget reductions on that campus.
The University has much to gain from the president and administration engaging broadly in such strategic planning—above and beyond whatever work is done to identify immediate priorities for a capital campaign. The Corporation is organizing itself to look forward strategically. And the Overseers have progressively broadened their oversight visits from focusing on individual departments and schools to examining overarching subjects, such as the libraries, the College, the social sciences, the natural sciences, and so on (a change that was explicitly encouraged in the Dunlop committee’s review four decades ago). There is no reason for the Overseers not to extend their perspective still further.
It cannot be predicted how the community will react to the Corporation Governance Review Committee’s work overall or its specific decisions: it was conducted almost entirely in private, in contrast to the expansive, participatory exercise led by Professor Dunlop in the crisis atmosphere of four decades ago. But there has been at least some faculty enthusiasm for a more expert, and accessible, Corporation.
Looking further ahead, the Harvard of 2020 will likely be still more international than it is today, its libraries more digital and accessible, its departments and disciplines both deeper and more collaborative. The University may have made tangible progress in realizing Faust’s vision for extensive growth in a wide range of creative and performing arts within the curriculum. And it may be on the verge of identifying wholly new priorities as well.
How well it pursues those opportunities depends of course on the caliber of its faculty members, the engagement of its students, and the size of its purse. But those outcomes also depend on successful governance. After a period of “introspection and review,” Reischauer said, the governing boards are now in a stronger position to help the president and other Harvard leaders. Together, the governing entities should be “better able to meet the needs of the University as they evolve and change over time.”