Monday, July 23, 2012

Freeh report, Penn State, and the role of Boards of Directors

There are a lot of interesting things about the Freeh Report (technically the "Report of the Special Investigative Counsel Regarding the Actions of The Pennsylvania State University . . . .") along with the many tragic conclusions reported elsewhere. Several of the findings should concern Boards of Trustees. One of the them is that Penn State's top leaders "concealed Sandusky's activities from the Board of Trustees . . . " among others. But the report concludes that the Board itself bears some of the blame:
 The investigation also revealed . . .
* A failure by the Board to exercise its oversight functions in 1998 and 2001 by not having regular reporting procedures or committee structures in place to ensure disclosure to the Board of major risks to the University.
* A failure by the Board to make reasonable inquiry in 2011 by not demanding details from [President] Spanier and the General Counsel about the nature and direction of the gran jury investigation and the University's response to the investigation.
 * A President who discouraged discussion and dissent. . . .
The report continues, but it's the last point that interests me. The President (or other executive officer like an Executive Director) is the person who sets the tone by his or her behavior, and is the person most responsible for embodying an organization's culture. And from the perspective of the Board of Trustees, it's really the culture of Penn State that was at issue. As the Chronicle of Higher Education put it in an article:
The findings of the 267-page report could be seen as evidence of a changing university climate in which the corporate brand—and a blind faith in big-time athletics—is often seen as more important than the educational mission.
And in that circumstance, a successful football coach might seem to be more important, and is certainly better known, than the university president. Combining the important football program with a president who discouraged questions and discussion meant the Board of Trustees were part of the culture. To some extent, they should be, because the Board of Trustees should be part of protecting and furthering the culture, if it's healthy. (For a further description of the culture, see this CNN article.) But not to the extent that allows the Freeh report to conclude:
The board also failed in its duties to oversee the president and senior university officials in 1998 and 2001 by not inquiring about important university matters and by not creating an environment where senior university officials felt accountable.
To be sure, this kind of football-centered culture is not limited to Penn State. And the NCAA may force a change if it shuts down the football program for a few years, or imposes some other severe penalty, as now appears likely.

Along with a recommendation to examine and change the culture of Penn State, the Freeh Report recommends that the Penn State Board revamp its committee structure to add a Committee on Risk, Compliance, Legal and Audit matters, and to add a subcommittee on Human Resources to its Finance, Business and Capital Planning Committee - and require regular reports about risk management, compliance, and internal audits. These are laudable suggestions, but no committee in the world would have been able to find out about the incidents at Peen State without questioning the people making the report and risking dissension and discussion. In other words, it's the culture that needs to change.

No comments:

Blog Archive

Popular Posts