Cahier de recherche N°14 - ESC Pau

anks’ obsession with growth and revenue was sparked by accountability to shareholders – this shouldnot be the same problem in universities as there is no explicit requirement to grow or increase revenue,other than HEFCE guidelines for a minimum 3% annual surplus. However, in some respects the oppositeproblem might be true. State-formulated policies (Shattock, 2006) pre-determine strategic decisionsthat might not always be the right ones and prevent initiatives. This reminds us of the risks of detachinggovernors from strategy so that their job becomes more about ‘process and compliance’ (Shattock, 2006:39) and stops them managing the real business.5. Regulatory ComplianceKirkpatrick (OECD, 2009) identified a focus on internal controls and a ‘box-ticking approach’ wherebanks followed ‘the letter rather than the intent of regulations’. The Financial Reporting Council (FRC,2009) has also identified the Combined Code’s ‘comply or explain’ approach as an area for improvement.In both cases, the conclusions are that the pressures exerted on banks by regulations discouraged themfrom taking a holistic view of their business risks and that there should have been more emphasis ontesting outcomes rather than a focus on systems and controls (FSA, 2009).In universities, Shattock notes that the ‘formal demands on governing bodies have multiplied’, and that‘governance at all levels has tended to become less about initiative and new development and much moreabout process and compliance’ (2006: 35, 39), using elsewhere the term ‘state micro-management’(2008). The PA Consulting Group report (2009) confirms the real or perceived burden and cost of accountabilityfor the HE sector, concluding that university governing bodies are asked to understand andoversee an increasingly complex, growing and changing regulatory context costing £163m (the equivalentof 34 staff per HEI) and responding to some 45 specific stakeholder accountability demands linked towide-ranging sector-specific and general public interest obligations.Universities are therefore just as exposed to the hidden risks of regulation, and it should be unrealisticto expect increasingly overwhelming compliance issues to be dealt with effectively by over-committed,non-specialist lay governors. Governing bodies therefore risk not ‘monitoring the underlying health of thebusiness’ (Aldous and Kaye, 2003 quoted in Shattock, 2004), and over-compliance with regulatory frameworksneeds to be checked. In the case of the banks, it is argued that an obsession with “getting overthe Basel II finish line” (OECD, 2008) to meet the requirements of regulators lead to the crowding outof scarce internal resources that should have been directed to more urgent and specific problems. King(2007) on the HE sector, implicitly warns of the perverse effect of transparency – what he calls the ‘globallytriumphant principle’ of regulation, whereby in trying to tick all of the compliance boxes institutionsrun the risk of missing out on what is really important to their business. It has also been suggested thatboards in both sectors should encourage institutions to adopt frameworks that are adapted to their uniquebusiness model or institutional context and not just to an industry-wide model that runs the risk of weakeninginstitutional performance and stifling innovation (Kuritzkes, 2009; Salter, 2002; Shattock, 2004).40CAHIERdeRECHERCHE N°14