UVa's "Agency" Problem

by James A. BaconLast week the Ryan administration presented a graph to the Board of Visitors showing how tuition & fees for undergraduate Virginia students is lower at the University of Virginia than at any other Top 50 higher-ed institution in the country. As we noted in our post last week, the comparison comes with so many caveats as to be useless. But the implication was obvious as the Board undergoes the three-month process of setting tuition & fees for the next two years: UVa is a bargain.But maybe not. UVa officials have long basked in the university's reputation as one of the "best values" in higher-ed. That reputation takes a beating in a new Wall Street Journal ranking of "best values" based on a calculation of how many years it would take for someone earning the median earnings 10 years after graduation to pay off the net cost of attendance over four years. UVa ranks 74th nationally.Rankings vary widely depending upon how they are constructed, so the WSJ exercise in calculating educational value should be taken with a grain of salt. Public universities, which draw their student bodies disproportionately from smaller pools of talent in the states they serve, are at an inherent disadvantage compared to elite institutions that recruit nationally. UVa fares better in rankings using different methodologies. But the Journal's ranking should puncture any illusions that UVa offers a uniquely compelling educational proposition.When administrators share graphs like the one showing UVa as a spectacular bargain, it behooves students, parents, alumni and above all the Board of Visitors to understand the motives of those presenting the information. They are invested in protecting the status quo -- a status quo that is largely geared to serve their interests, values and priorities.In making that assessment, I am not singling out President Ryan and his leadership team for invidious comparison with any other university leadership. Higher education has a systemic governance issue. Economists call it the "agency" problem. In essence, the interests of "management" -- the administrative leadership of colleges and universities -- are not necessarily aligned with the interests of other stakeholders. In the corporate world, governance structures have evolved to ensure that management interests align with those of shareholders. No such structures have emerged in higher ed, in part because nonprofit universities have no shareholders.University presidents invariably are paid well, but they aren't in the game for the money. Men and women of their leadership caliber most likely would make bigger paychecks in the private sector. They have other motivations -- prestige and ideology. Senior university leadership enjoy prestige that is commensurate with the status of the institutions they serve. Accordingly, their incentive is to increase the prestige of those institutions; other considerations, such as affordability for the middle class, are secondary. University leaders also see themselves as social change agents, invariably with a left-of-center world view. Thus, at UVa, Jim Ryan's definition of making the university "great and good" means pursuing leftist social-justice and environmental goals at the expense of more traditional objectives.This doesn't make members of Team Ryan bad people. It just means that members of the Board of Visitors need to be attentive to how their interests are not necessarily aligned with those of the institution or the Commonwealth of Virginia. Accordingly, board members should be sophisticated consumers of the information they are presented and exercise an appropriate level of skepticism.Of course, none of these matters were explored last week during the discussion, led by former Bowdoin College President Clayton Rose, about Board of Visitors "best practices." That discussion focused exclusively on how board members should behave. Rose uttered not a word of the agency problem, not a word about the president's responsibilities.Whose interests were served by the way that discussion was framed? Perhaps Board members should ask that question as well.