1. G OVERNANCE, Q UALITY A SSURANCE, AND H IGHER E DUCATION Prepared by Abir Takieddine

2. G OOD G OVERNANCE D EFINED Good Governance is defined as a system through which the performance of institutions is guided and supervised so as to achieve the required objectives. Purpose: protect different stakeholders via 1) Accountability 2) Credibility 3) Transparency 4) Integrity of data and information

3. G OVERNANCE IN H IGHER EDUCATION Governance in higher education refers to the means by which higher educational institutions are formally organized and managed; it is the way universities are operated.

4. T HE B ACKGROUND OF M ODERN G OVERNANCE The phenomenon of corporate governance has been practiced long ago without the term being used. Plato Adam Smith (1776) Berle and Means (1932)

5. The term of corporate governance emerged in the literature in the nineteen eighties and became a well established field of literature in the nineteen nineties. Major financial scandals in corporation (e.g. Enron and WorldCom) Managers misused their authorities and lead to the bankruptcy of the enterprise with thousands of employees losing their jobs and shareholders losing millions in investments.

6. M ODERN G OVERNANCE Shareholders/owners and managers have two main conflicts: 1) Different horizons 2) Different risk preferences.

7. Numerous definition of corporate governance all of which referring to the existence of conflicts of interest between insiders (mainly management) and outsiders (shareholders/owners).

8. M AIN T HEORIES Two main theoretical views govern the discussion of modern corporate governance. 1) The Agency Theory that views the corporation as a private property of its shareholders 2) The second known as the Stakeholder Theory that considers the corporation as a social entity that is open to new diverse influences.

9. T HE A GENCY T HEORY Corporation = a contract in which a principle party (external owner) makes use of a second party (an agent/manager or entrepreneur) for the purpose of using his skills or knowledge. The agency theory addresses two problems. 1) When the goals of the principle and that of the agent divert. 2) The difficulty with monitoring the agent.

10. T HE S TAKEHOLDERS T HEORY It emerged in the nineteen eighties to challenge the Agency Theory. It introduced a group of stakeholders besides the shareholders who have a stake in the objectives of the company such as employees, clients, and the public interest.

11. C ONFORMANCE VERSUS P ERFORMANCE Regardless of which theory is applied, two principles need to be consistently applied: performance and conformance. Performance issues: promote a less legislative view and focus on the output/performance of the firm. Conformance issues: promote regulation for directors about the ways things should be done. Recently, the trend is to keep an eye on both issues for successful corporate governance.

12. G OVERNANCE IN H IGHER E DUCATION Adopting the Agency Theory is not valid for educational institutions since many stakeholders are involved in this sector namely: Students Staff Faculty members Job market Moreover, a new player besides the principle and the agent is added: the REGULATOR in the form of the State.

13. The concept of governance in higher education refers to the internal structure, organization and management of autonomous institutions. The organization of internal governance is generally composed of 1) a governing board (board of trustees, board of directors) 2) the university president (executive head, CEO) 3) a team of administrative staff, faculty members, academic deans, department chairs 4) some form of organization for students representation.

14. C OMPLEX S TRUCTURES The organizational structures of higher education institutions are becoming more complex since institutions themselves have become increasingly interdependent with external forces and accountable to external organizations governmental and market based.

15. A MONG THE I SSUES TO BE A DDRESSED The role and responsibilities of the board should be well defined. The boards relationship with faculty decision makers, the delegation of authorities as well as practices of communication with the internal management should be clearly defined. An effective internal control system should be set and continuously reviewed

16. M ORE ISSUES Timely and accurate disclosure should be made on all material relevant to the institution including its financial situation, performance, ownership and governance structures. The nature of institutional relationships with external stakeholders is to be clear. Staff and faculty should be encouraged to participate in promoting corporate governance. Academic freedom maintained

17. OECD G OVERNANCE VERSUS Q UALITY A SSURANCE IN H IGHER E DUCATION A study performed by the Organization for Economic Cooperation and Development (OECD) tried to investigate the differences between good governance and quality assurance guidelines in higher education. The principles of corporate governance by the OECD : an international benchmark.

18. G OVERNANCE AND Q UALITY A SSURANCE IN H IGHER E DUCATION (D IFFERENCES ) The governance guidelines work on clarifying the institutional structures and procedures of the board whereas the quality guidelines focus more on the planning processes themselves and the nurturing of a quality culture within the institution. They have thus different perspectives, the former an institutional framework whereas the latter focus more on the procedural aspects.

19. G OVERNANCE AND Q UALITY A SSURANCE IN H IGHER E DUCATION (S IMILARITIES ) However, the study showed that even though the guidelines vary in terms of the form, details, and aim, they have the same direction. Quality assurance and governance share several key issues namely; defining the mission, the institutional structure, planning, participation, and transparency.

20. G LOBALIZATION AND G OVERNANCE Governance is one of the most serious challenges facing higher education institutions working within the new WTO framework. The country will see a overflow of foreign institutions entering the market; local ones will face fierce competition from foreign counterparts. They have to improve their decision-making system and enhanced internal-control and pay key attention to training and human-resource management.

21. C ONCLUDING R EMARKS Formulating good governance guidelines for higher education in a country like Lebanon where higher education is a vital sector of the economy is recommended. The sector consists of 39 private institutions (70% established after 1990) in addition to the Lebanese State University (MHE, 2009) and includes 13770 teachers and 4557 staff members (CRDP, 2009). Good governance is expected to improve the quality of the service being provided and enables higher education institutions to better compete once Lebanon becomes a member of the WTO.