Monday, December 17, 2012


Corporate Governance, Shared Governance, and Higher Ed

The only thing scarier than higher education with administrators is higher education without them.

Last week, Lee Skallerup Bessette and Paul Fain both had thought-provoking pieces in IHE about StraighterLine and the possibility of “freelance” higher education.  It’s sort of a supply-side version of Anya Kamenetz’ DIY U.  Instead of students breaking free from the shackles of individual colleges, the idea is that faculty will break free from the shackles of individual colleges.  Absent such dead weight as institutional identity, curricula, student services, marketing departments, unions, and outcomes assessment, the theory goes, faculty will be free to capture the fruits of their labor on the open market.  Let the bureaucrats shake in their uninteresting shoes as the glorious market-based revolution restores all power to the workers.


Anyone with a sense of history will detect familiar echoes in this story.  

Adolf Berle and Gardiner Means anticipated much of the twentieth century American economy in their classic The Modern Corporation and Private Property (1932).  Berle and Means suggested that the model of corporate governance then ascendant was a fundamentally new and different thing.  They pointed out that the rise of a distinct “managerial” class -- neither proletarian nor owner -- effected the separation of ownership from control in the modern corporation.  Stockholders owned the company, but managers ran it.  Aligning the interests of the two groups was not a trivial endeavor.

Managerial capitalism created some weird issues for theorists of the market.  When ownership is relatively dispersed among stockholders around the country, but managerial authority is centralized in a relatively small group, it becomes easy for the managers to run the company for their own benefit, rather than for the benefit of the stockholders.  And there’s a good case to be made that during the halcyon days of the American corporate economy -- call it 1946-1973 -- that’s what they did.  They bought labor peace by negotiating contracts with unions that were more generous than they strictly needed to be.  They accepted salaries much lower, proportionally, than either their predecessors or their successors.  They favored a certain stability over pure profit maximization, sometimes to the frustration of stockholders.

That arrangement started to crack in the 1970’s, and to transform in the 1980’s.  Mutual funds aggregated scattered stockholders into single voices.  “Raiders” used newly available credit to “liberate shareholder value,” which is to say, to sack existing management and replace it with people who wouldn’t be so soft on workers.  401(k)’s, stock options, and quick trigger fingers worked wonders to align management’s goals with those of stockholders, even if that meant teaming up against workers.  

Now, private sector union membership is in the single digits, and concentrated mostly in shrinking, older industries.  Median wages have been stagnant for decades, even as rewards for those at the top have skyrocketed.  And the image of the peace-seeking manager as a pillar of the community is remembered, if at all, as quaint.  

I suspect that higher education may be following a similar script, with its characteristic tape delay.

In this version, though, the management was what held together -- through carefully balanced frustration -- the centrifugal desires of students, faculty, and taxpayers.  Doing that well means annoying a lot of people a lot of the time.  Each of those groups is only vaguely aware of what the others want; what it sees more directly is those annoying bureaucrats always putting on the brakes.  Each group imagines, at some level, that it could liberate value by attacking the institution as an institution.  Call it expropriation, call it shareholder democracy, call it unbundling; it’s all the same move.  It’s all about undoing restraints on the market.

Be very, very careful what you wish for.  The market has no respect for “shared governance” or “life tenure” or “unions” or “academic freedom.”  It wants what it wants when it wants it.  Imagine three hundred different professors you’ve never heard of, each offering some variation on Intro to Psychology online, each naming her own price.  How, as an 18 year old of average talent and no special inside information, do you choose?  Until recently, you chose an entire institution, and it assigned you instructors, and advisors, and counselors.  Now, you can be on your own.  Power to the people!

If the rest of the economy is any guide, moving away from institutions will involve a much more dramatic polarization of wealth among people in the industry.  It will mean much more instability, much more cutthroat competition, and, yes, a few incredibly well-paid superstars.  It will mean much less coherence in courses of study, and an explosion of fraud.  

And I say all of that knowing full well many of the flaws of the current system.  

My modest proposal: let’s learn from the past.  We don’t have the option of simply digging in our heels and refusing to change; Kodak tried that, which is why it’s now worth less than Instagram.  But we do have the option of navigating that change actively rather than just being buffeted by it.  Taxpayers are anxious, students don’t want huge debt but do want good jobs, and employers want capable employees.  There’s validity in each of those.  If we can adapt, rather than just refuse, we may be able to thrive and to do well.  That will involve making some difficult choices, but we still have the option of making those ourselves.

Until recently, there wasn’t really an alternative to the old model, which is probably why it lasted so long.   But now there is.  Whether StraighterLine or someone else does it is beside the point; the point is that interesting and intelligent alternatives are springing up almost weekly.  

Administrators are the enemy if we think of institutions as total.  But they aren’t total.  They’re porous, and they’re fragile.  The alternative isn’t blank checks written by grateful students; it’s digital adjuncting.  We’ve seen this movie.  We can change how it ends.

I think the various levels of our government (federal, state, and city) and the citizens of our country must put the welfare of citizens first: healthcare; education (preschool through baccalaureate); economic regulations; and safety regulations for guns, water, air, medicines, food, and cars as a base for any changes. Until the base is strong, any proposed changes will only remain wishes and "if only".
We already have freelance college education in the form of Excelsior College, Charter Oak State, and Thomas Edison State. In the extreme case, you could take 40 different courses from 40 different colleges and graduate with a regionally accredited degree from any of those 3.
Dean Dad’s description of the “freelance” model of StraighterLine was extremely thought-provoking. Is this the way that higher ed is going? It would be sort of like a return to the way higher ed was in the Middle Ages, with professors and teachers getting paid directly by the students that attended their classes rather than by the institutions where the worked. The more students that a professor could attract and the more popular they were, the higher their income. In the present environment, faculty members would be reduced to a status not unlike free-agent sports stars, free to move at a moment’s notice from one team to another.

Under such a system, professors would not be formally attached to any university or college—they would not be employees in any sense of the term and they would simply rent classroom space for their lectures. They would not be members of any department, and their classes would be less subject to approval or disapproval by administrative academic authorities. In addition, there would be no such thing as tenure or shared governance any more.

I can imagine that some professors might actually like such a system. But as Dean Dad says, it would probably quickly degenerate into a two-tier caste system, with just a few superstars doing quite well but with the vast majority struggling to cobble together some sort of living. If you are perceived as being a charismatic rock star in the classroom—sort of like Peter Abelard or Richard Feynman—you will do very well, and students with lots of cash in their hands will flock in droves to your classroom. But if you are just of ordinary ability in the classroom and you have a deficit in charisma, your income will drop as you find that fewer and fewer students come to your classes, and you will not have tenure or union membership to protect you. The system will degenerate into some sort of popularity contest reminiscent of show biz, where professors will not want to displease any of their customer students, and will certainly not want to risk lowering their incomes by insisting that high standards be met or by failing too many of their students.

As Dean Dad says, I can imagine that there would be a great danger that widespread fraud and abuse could take place under such a freelance system. Since these freelancers would have no formal employment relationship at any college or university, it would be difficult to maintain and enforce meaningful academic standards. In addition, no accrediting agency would be able to ensure that the academic programs being offered by this chaotic set of freelancers were actually coherent and up to standards. The system could quickly degenerate into a set of freelancers that are little more than mountebanks that are able to easily separate students from their cash by offering substandard classes that are little more than diploma mill offerings.

Gotta love all the things that happen in colleges. I went up to Newfoundland. Few people there had government grants, but not everyone. Guess some things are more fair than others.
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