Governance Briefing notes

This briefing note offers an introduction to becoming a governor. It briefly considers the reasons why someone might be invited to join a governing body, a typical selection process and the role and responsibilities of governors. Some of the typical challenges facing new governors are noted, and the role of governor induction and the opportunities for further development introduced.

This briefing note begins by considering what governance is. It introduces the different constitutional forms of higher education providers, before considering the boundary between governance and management. It flags the risk of agency, before noting that there has been a tendency for the demands placed on governing bodies and governors to increase.

This note considers the role and duties of the Chair of governing body, Chancellor, Pro Chancellor, the head of institution and the Secretary/Clerk. To be effective in discharging their duties governors need to receive appropriate and timely information, and have sufficient time at meetings for key matters to be discussed and agreed.

An important consideration is how a provider’s academic and corporate governance are linked. Historically, separate Bodies have been responsible for each element of governance. The relationship between Governing Body and Senate (or Academic Board) is examined. The balance of power between the two decision-making Bodies is not fixed, differs between institutions and has evolved over time. It may change again in the future.

Higher education providers operate in a complex and increasingly regulated environment. One of the duties if a Governing Body is to assure itself that the provider is fully compliant with the statutory and other regulatory requirements placed upon it. This is a significant task, demanding considerable time and attention from the Governing Body and its committees.

Commercial operations typically include the operation of campus-based services and facilities, including student accommodation; applied research, consultancy and training for private clients; and international recruitment. The purpose and operation of these activities vary. Each, however, impacts the successful operation of the provider.

The recruitment of international students wishing to study in the UK, international research collaborations and transnational education are all important aspects of international engagement in UK higher education. Each aspect involves opportunities and risk, and calls for effective leadership and governance.

The governing body exercises oversight of the provider’s risk management and seek assurances from the executive that key risks have been identified and are being effectively managed. This requires that risks are identified, their impact and likelihood assessed, and mitigation strategies adopted. To ensure there is a clear understanding of the extent to which risk is tolerated, the governing body should agree its risk appetite. 

Students are beneficiaries and stakeholders of higher education. When selecting a provider and course, students increasingly seek to make well-informed choices, especially in a market where higher tuition fees apply. More data to inform student choice, a demographic downturn, and rivalry between providers means that competition to recruit students has increased. Governing bodies need to be alert to these trends. Following enrolment, governing bodies should monitor student retention, progression rates and, finally, graduate destinations. 

A responsibility of Governors is to examine and agree the provider’s strategic plan. Normally, the head of the provider will bring forward a draft strategic plan for consideration, discussion and ultimately approval by the governing body. However, the actual process by which a governing body discharges its responsibility to approve the strategy plan varies between providers.

Once a provider’s strategic plan has been agreed, the role of the governing body is to monitor its delivery, and the achievement of the planned outcomes. To facilitate their role, governors will typically agree with management a set of key performance indicators (KPIs) to be monitored. Consideration may also be given to extent to which the KPI cover short- and/or longer-term time horizons.

The composition and characteristics of governing bodies,including size of membership and the knowledge, skills and expertise of the members are important factors affecting a governing body’s effectiveness. Mindful of the risks of ‘group think’, attention also needs to be given to the diversity of the membership.

Higher education has its own distinctive system of governance. For the overall system to be effective, not only must all of the individual elements be effective, but they must work in harmony.  Periodically, the governing body should undertake a review of the effectiveness of the system of governance. This may be assisted by use of an independent facilitator.

The audit committee plays a key role in offering assurance to the governing body with regard to internal controls, risk management and governance. Over time the remit of the audit committees has tended to become broader. As a result, there is a need for the committee to have members with a range of expertise and skills, rather than only a background in finance. To discharge its responsibilities, the committee relies upon the work of internal and external auditors.

The nominations committee advises the governing body on the appointment of new ‘lay’ members, and on the membership renewal of ‘lay’ governors who are eligible to serve for a further term, but whose current term is about to expire.  When considering the appointment of new members, the committee will need to consider what knowledge, skills and expertise the governing body needs to have at its disposal.

This briefing note summarises the work of the remuneration committee. The committee’s work includes determining the remuneration of the head of the institution and other designated senior post holders. The committee operates with delegated authority, reporting and making recommendations to the institution’s governing body for its approval.

The governing body’s responsibilities extend to matters of employment, including appointing the head of the provider and acting as the employing authority for all staff. Governing bodies should ensure that, linked to the strategic plan, that there is a human resources strategy and an associated action plan. They should further keep under review the strategy and action plan, and monitor the outcomes arising from their implementation.

This briefing note examines the area of finance. Higher education institutions (HEIs) are independent entities and governing bodies need to oversee the institution’s financial health. They need to ensure the institution is both solvent and sustainable.

The provider’s estate typically consumes significant amounts of capital expenditure, and forms the large non-pay item in most provider’s revenue budgets. Capital expenditure to maintain or improve the asset base, plays an important role in attracting staff and students to a provider. A provider’s estate, its built environment, is an area of ‘fundamental concern’ to the governing body and one where it is expected to take all final decisions.

Providers of higher education (HE) are required to comply with a wide range of statutory and regulatory requirements. Governing bodies and their members are expected to exercise appropriate oversight, seeking assurances that the provider is complying with the statutory and legal requirements placed upon it.

When performing their duties as a Governor, members of a governing body need to be mindful of the standards of behaviour expected of them.  For members of ‘public’ providers the Nolan Principles offer clear guidance on the standards of behaviour that individuals are expected to demonstrate. Additionally, as many providers are a charity, members need to consider their responsibilities as a charitable trustee. As external factors make discharging the responsibilities of a Governor more demanding, the question of whether to remunerate Governors is receiving attention. 

Corporate ethics and values underpin the manner in which a higher education (HE) provider operates. A provider risks receiving adverse publicity and incurring reputational damage if its conduct and standards do not reflect the ethics and values expected of it. Governing bodies need to ensure that the provider’s reputation is not placed at risk by actions which are not aligned with acceptable ethics and values.

While higher education (HE) providers are independent and autonomous entities, the policy decisions of government exert a major influence on the operating environment of most providers. As part of their stewardship of the provider, governing bodies and the executive team need to sense and assess changes in the operating environment and decide how to respond.

Higher education (HE) providers engage in a wide range of activities meaning that assessing the specific benefits can be challenging. There is a range of questions that should be carefully considered, such as whether to look at the total benefits created or the benefits that are generated by specific activities. The basis of the assessment may also need to be changed depending on the question being considered. Finally, we need to assess who gains these benefits, whether it is a single individual or business, or if the benefits shared more widely by society. In practice, HE leads to both private (individual) and public (wider) benefits.

What factors influence whether governance is effective? Higher education (HE) governance is not only about the work of the governing body; the governing body is also part of a system of governance, which contains several different components. For governance to be effective, all these elements need to be aligned and operating well. Similarly, to discharge their responsibilities, governors need to understand the provider’s system of governance and where they sit within the system.

 

The Higher Education and Research Act 2017 (HERA 2017) introduced a new regulatory approach to higher education in England and led to the establishment of a regulator, the Office for Students (OfS). The provisions of the HERA 2017 will become fully effective from 1 August 2019. The academic year 2018-19 represents a transition from the previous system of regulation to the new.

The culture of a higher education provider is vital to understanding how the organisation works and is fundamental to how a provider operates: if only to seek to make changes. As such is something that governors should give attention to.