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.