|
« AAUP Homepage
|
From the General Secretary: Sarbanes-Oxley
By Roger W. Bowen
Martin Michaelson, a Washington, D.C., lawyer, wrote in the May–June 2005 issue of Trusteeship about the applicability of Sarbanes-Oxley to college and university governing boards. Sarbanes-Oxley is the 2002 federal statute that regulates publicly held companies and their officers and directors in the wake of the Enron scandal.
Although Sarbanes-Oxley does not currently apply to colleges and universities, it has created a climate in which many colleges and universities are considering ways to increase transparency and accountability in their financial operations. Hearings by the Senate Finance Committee on new regulations to govern nonprofits, including colleges and universities, leave open the possibility that something like Sarbanes-Oxley could begin to shape higher education in the United States. As Michaelson points out, 85 percent of all governing boards have reported discussing the statute as it might apply to their college or university.
Sarbanes-Oxley deals extensively with governance, especially the financial integrity of corporations. It requires chief executive and chief financial officers to testify to the accuracy of financial statements, excludes managers from the membership of audit committees, calls for companywide codes of ethics, protects whistleblowers, and is designed to preclude conflicts of interest from shaping policy or governance.
Michaelson writes as if Sarbanes-Oxley will affect universities, but he does so from the vantage point of a trustee. He makes the point that “trustees know a great deal less about universities than most big company directors know about big companies,” a point with which I do not quarrel. But he also warns that governing boards have “cede[d] to the faculty a greater sway over institutional life than any constituency has in the large business corporation.”
Why might this be a problem? Michaelson says that “as a public company officer or director, the trustee has been indoctrinated on the potentially calamitous consequences of failure to comply with” Sarbanes-Oxley. Ergo, trustees will be less willing to grant the faculty its traditional right to co-govern, because to do so lessens trustee control and may expose trustees to greater liability. Trustees will also be more inclined to involve themselves with “campus business affairs” and less likely to permit “suboptimal management” of universities.
In brief, Sarbanes-Oxley indoctrinated trustees will be tempted to micromanage executive functions and nullify or lessen the right of faculty to share in governing the university. If that happens, the corporatization of the academy will advance, with the predictable consequence that faculty will be treated as “at will” employees—intellectual workers who teach for low pay and long hours and are accountable corporate managers. The university will become a “knowledge factory” producing not thoughtful students but uncritical human widgets.
If Sarbanes-Oxley insinuates itself into the academy, either by force of law or by “indoctrinated” trustees, it will only advance what the Council of Independent Colleges has called “federalization.” What we need instead is “localization,” a process whereby faculty budget committees, working within a framework of shared governance, serve as the preferred mechanism for guaranteeing administrative transparency and accountability for institutional financial operations. I suspect that most presidents and financial vice presidents would prefer to deal with a faculty budget committee rather than corporate leaders acting in the capacity of trustees.
What can the faculty do to prevent Sarbanes-Oxley from serving as a mechanism for trustee assumption of all budgetary oversight? First, the faculty should work with administrators against attempts by governing boards to undermine the rights of administrations and faculties to co-govern. Second, faculty, especially the AAUP, can work with the Association of Governing Boards of Universities and Colleges and other executive-oriented higher education associations that oppose more federal intrusion into college and university governance—which Sarbanes-Oxley represents. Finally, faculty members should stand their ground: appeal to the libertarian streak in American culture, which says the government that governs least governs best, especially in intellectual realm, where the quality of our ideas legitimizes our pursuit of truth, unmediated by ideology, positive law, or cultural bias
|