As a field of academic study and public policy, corporate governance has focused its attention largely on the affairs of larger companies, those listed on stock exchange, and their relationships with investors. The world of organisations is larger than that, and yet corporate governance has set the language of the debate about how other organisations are governed. Whether the lessons from the corporate arena extend to charities, public sector bodies or private companies is a matter of considerable debate, not least because the purposes of such organisations diverge from the norm of profit-maximisation, if not perhaps from the goal of value creation. So how might the governance of different entities – say, universities – differ from what happens in corporations? Role of boards: In the corporate setting, boards hold legal, fiduciary responsibility for the corporation, and so for the twin goals of controlling the activities of managers and striving to ensure that the company creates value. The first of these – reflected against a history of dramatic corporate failures – has brought about codes and rules to bolster the ability of boards to challenge management. The standard recipes involve greater independence in structure and composition, involving strong committees, and greater accountability to shareholders. This approach hasn't necessarily solved the problems, as what in 2003 Paul MacAvoy and Ira Millstein called the "recurrent crisis" of corporate governance just had another recurrence – concentrated in the financial sector. Nor it is clear that mechanisms to focus attention to shareholder interests have parallels in other parts of the economy.
The case of universities: Places of higher education mainly take the public form of charities, with internal governance more akin to partnerships. Notions of academic freedom – and in some countries, academic tenure – are designed to protect the independence of the scholar. Students are really customers. The beneficiary of whatever "charitable work" they do is, vaguely, knowledge. Often heavily dependent on government funding, universities increasingly face demands for accountability to a public that gets little direct benefit from the expenditure. Indirect benefits accrue to society at large, though we're rarely sure where or how. In a time of economic strain, the strain on university governance increases. How might universities organise their boards, committees and controls to monitor the quality and performance of academics and to help them create value? In short, how should we govern the university?
Malcolm Gilles is vice-chancellor – CEO, in effect – of London Metropolitan University, an institution that has seen more than its fair share of fiscal stress and governance strain over the past half-dozen years. He joined it a little over a year ago, a year or so after having left neighbouring City University after what was said to be differences with the board over governance issues. Now, with all universities in England facing radical cutbacks in government funding, he has collected his reflections in a report for the Higher Education Policy Institute, and issued a call for a radical rethinking of university governance.
The governance issues: By 2015, he writes, the sector will be in a state of state denial: Students will be the undisputed majority funders of most English universities. Government will take on the (considerable) risk on student loans. But the risk to universities themselves will rise, and that comes after poor financial control at several universities, where their boards of governors seem to have failed. Meanwhile, universities are "increasingly mixed businesses", working in a variety of educational and research fields, and needing entrepreneurial activity to capture market niches, to respond rapidly to changing international trends, and even to close down selective operations. This is not the right place for what he calls the "slower forms of civic-minded external and collegial internal governance".
Governance through alumni: His remedy isn't a simple one – complex problems rarely have simple solutions – but it involves a crucial shift in thinking. Instead of assembling group of civic-minded individuals, universities need to find entrepreneurial sorts of people to keep the academic leadership on its toes. In current arrangements, governors can be too disengaged, and then, in times of stress, too concerned about their own reputations to solve the problems of the universities. Universities need risk-takers with a serious stake in maintaining the reputation of the institution. The former provides a focus on strategy and direction, the latter a readiness to challenge, monitor and control. Who better than the alumni?
Source document: The HEPI report "University Governance: Questions for a New Era," by Malcolm Gillies, is a 16-page pdf file.
The European Corporate Governance Forum, a body that advises the Commission of the European Union on company law, wants to see tighter measures to let shareholders know about transactions that companies undertake with related parties. Directors, it says, should provide leadership, but that authority is not absolute. It "should be balanced with a requirement to inform shareholders of important developments and in certain instances to seek authorisation for their actions either from independent agencies or from the shareholders themselves". It suggests a variety of rules, including: 
That question underpins a consultation undertaken in the UK by the Financial Reporting Council, the accountancy watchdog, and the Financial Services Authority, still for a while the market regulator. The answers it received voice many of the usual platitudes, but some interesting insights appear, not least about how difficult it is to strike the balance. The accounting firm KPMG, for example, wants to support measures that enhance "well informed scepticism", but it then explains why it's so difficult. Being well informed is a requirement of the auditors. They must understand the businesses they audit – and understand them well – if they are to be able to judge accurately the accuracy of the accounts. But getting close to the business means getting close to the company. So "a balance needs to be struck to prevent the auditors become so familiar that they lose their sense of objectivity or professional scepticism", it writes. Moreover, the main "downside" of time and cost seen by the FRC and FSA in their paper isn't particularly important, KPMG says, when set alongside the risk that "unwarranted overt scepticism" will be perceived by the client as "aggressive" and "translated as a lack of trust". Such a defensive reaction by the client can result in a lack of openness and a poorer quality audit. 
The president of the United States has a term limit: two four-year terms in office. Why not the president of United States Steel Corp.? That's the gist of the question posed in a think-piece by a US legal scholar. Charles Whitehead isn't particularly advocating term limits, but rather asking why they seem never to be considered. After all, we've contemplated term limit for auditors and audit partners. In UK corporate governance since 2003 there has been an implicit term limit of nine years for independent non-executive directors. Why is the CEO any different? "The traditional answer," Whitehead says, "has been that CEOs are agents of the corporation, subject to control by the board, which holds primary responsibility for the firm's business and affairs." Senior managers are therefore shielded from outside interference. They can get on with executing long-term business strategies under the watchful eye of the board. The tenure of the CEO is therefore at the discretion of the board. Private ordering within the board, rather regulation or even shareholder democracy, determines when it's time to change course. 
Since the dot-com collapse in the early 2000s – and with greater impetus after the 2007-09 financial crisis – policy-makers have come to think that credit ratings are deeply flawed. The response, however, has been somewhat tentative, since there's no easy solution to the conflicts of interest inherent in the business of hiring someone to say bad things about you in public. In the European Union, credit rating agencies now have to register and be regulated directly by the European Securities Market Authority, a new piece of the EU bureaucracy that replaced the talking-shop known as European Committee of Securities Regulators in January. In the US, the Dodd-Frank legislation last year marked the latest in a series of policy-led attempts to ease the conflicts through tighter regulation. The US is something of a special case, but it's also an interesting hot-house for experimentation. There, credit ratings have long been enshrined in regulation. Municipalities needing to issue bonds were required by law to get credit ratings from a handful of nationally recognised statistical rating organisations. Widening the circle of NRSROs was one of the first responses to the dot-com crisis. Taking away the requirement for ratings – and with it quasi-official status of the agencies – is underway now.