Moody’s: UVA Incident Will Be Repeated at Other Schools

Moody's Investor Services is warning its clients in the wake of the University of Virginia's well-publicized clash over president Teresa Sullivan's job that more universities will soon deal with similar conflicts between the faculty and its governing boards. Although the UVA issue was resolved when the board voted unanimously to reinstate Sullivan as the president, two weeks before, in a surprise move, several members of the board had voted to ask for her resignation — and the subsequent turmoil extended outside the UVA borders into education and mainstream press.

Ironically, the clash between the president and some members of the University of Virginia board highlights the stabilizing effects of the counter-intuitive "shared governance" model still in place at leading US universities. Under this model, which is dramatically different from top-down corporate governance models as well as electorally-driven government models, the tenured faculty, and to a lesser extent the alumni, students and donors, have a powerful role to play in major university decision-making

Colleges and universities around the U.S. are facing an unprecedented level of budgetary difficulty with state subsidies of education falling to new lows. Therefore, to resolve funding questions, the faculty and staff typically in charge of the school's academic destiny and the governing board charged with putting it on the sound financial footing will be butting heads more and more as time goes on.

Although faculty doesn't take direct part in the fiscal decisions involving their school, the Sullivan incident proves that they, nevertheless, have significant implicit power that they can effectively wield. This is particularly true in the cases when the school's reputation is heavily based on its researchers, as is was the case with UVA in particular.

However, the faculty's power is on the wane at the large majority of public and private US colleges and universities which operate with small endowments, weak selectivity, and high dependence on student tuition and/or state funding. Many universities are reducing the percentage of faculty that have tenure, a form of nearly guaranteed employment. This reduction erodes the implicit power of faculty and typically strengthens the hand of the board and president to deal with economic challenges quickly.

One of the main issues behind both the UVA ousting and reinstatement was the slow pace — set by Sullivan — of adoption of online classes into the university curriculum. Members of the board felt that the new medium provided an opportunity for significant operating savings when the university was being increasingly financially squeezed. Sullivan, on the other hand, was concerned that the quality of online courses wouldn't match those set in the traditional environment and preferred to move cautiously. Moody's expects that a similar disagreement could be the focus of conflict between governing boards and faculty and staff at other universities throughout the country.

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