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January 20, 2013

A Bit of Sarbanes-Oxley for Universities, Please

Todd Zywicki:

The impulse to impose Sarbanes-Oxley on universities is tempting. Indeed, formal legal mandates on conflicts of interest and the other attributes of good governance might be even more appropriate for universities than for public corporations, as universities lack many of the safeguards of good governance, such as the ability to measure performance through profitability and engaged shareholders with incentives to monitor performance.

It has traditionally has been assumed that universities, as ostensibly charitable organizations, would be run with an eye on the public good, thus formal restraints on self-dealing, conflicts of interest, and rules that apply to private corporations would not be necessary. Today, however, universities are big businesses riven with self-interest. And there is little evidence that charitable purpose plays any role in their behavior. University president's salaries routinely reach into the seven figures--Dartmouth's recent president, for example, earned over one million dollars a year and demanded millions of dollars of renovations to the college president's house and access to a private jet as part of his compensation package, even while laying off dozens of staff members and issuing hundreds of millions of dollars in debt (to be financed by future generations of students and parents) to close a massive budget deficit caused when the endowment cratered in the wake of the financial crisis.

Posted by Jim Zellmer at January 20, 2013 2:27 AM
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