Debate resumed from 2 June 2009.

The Hon. ROBYN PARKER [2.47 p.m.]: I lead for the Opposition in the take-note debate on the report by General Purpose Standing Committee No. 2 entitled "Governance of NSW universities". Although the committee's inquiry was relatively small, its progress was keenly observed by a great number of interested parties throughout Australia and overseas, particularly academics. The inquiry was established largely because several New South Wales universities had experienced conflict involving senior university managers and governing bodies. Conflict was not associated with any one university in particular, but appeared to have been generated largely as a result of a lack of clarity in relation to the roles of senior university leaders, including chancellors, vice-chancellors and university governing bodies. Media attention had been paid to a number of issues over the past couple of years, so it seemed to be the appropriate time to examine university governance closely.

The inquiry was undertaken not only to review university governance but also to discover the source of apparent confusion and devise ways to reduce conflict in some institutions. As the inquiry proceeded I discovered that universities are governed by a complex mix of State and Federal legislation and protocols. We received a number of written submissions. We also visited the University of New England, and the University of Sydney hosted one of our hearings. As I said, we heard from chancellors and vice-chancellors, as well as academics on various governing bodies as ex officio or staff representatives.

The committee undertook this inquiry with a great deal of goodwill. As always, I commend and thank members of General Purpose Standing Committee No. 2 for working hard and cooperatively. I also thank the committee secretariat staff who pulled this together in a comprehensive way. In particular, I acknowledge the work of Beverly Duffy, Madeleine Foley, Cathryn Cummins, Kate Mihaljek and Ian Thackery. We borrowed Ian Thackery from the Legislative Assembly for the purposes of this inquiry. I think he found the Legislative Council inquiry quite different from a Legislative Assembly inquiry.

In terms of our outcomes, I note the review of performance of New South Wales universities undertaken by the Auditor-General. He noted one important point about good governance—that is, it is about doing the right thing. In other words, it is about acting with honesty, impartiality, integrity, trustworthiness, respect for the law and due process. He believes that a commitment to ethical values is fundamental and that well-governed organisations are more successful than those that are not governed well. That is common sense but it is important in terms of focusing on governance arrangements that assist an organisation to flourish rather than hamper progress. In our inquiry it was important for the committee to recognise that individual universities had a need and wanted to tailor their governance arrangements to suit themselves. Various universities governed by university Acts had a variety of governance arrangements. However, that flexibility should not be unconstrained.

Universities need to act in accordance with the fundamental principles of good governance, which include transparency and accountability. A number of inquiry participants said that they wanted greater control over the size and composition of their governing bodies, and the committee made recommendations to that end. We support the call for greater flexibility but we are committed to ensuring that there is continued representation of a wide variety of stakeholders, particularly among the university staff, students and alumni. So our recommendations were aimed at making it easier for a diverse group to participate in a governing body rather than excluding anyone, while at the same time providing universities with flexibility in terms of the number of governing body members, how those representatives might be elected and how they might function on a day-to-day basis.

We also recognised the difference between more established universities and those in regional areas, and that is identified throughout the report. The committee also recommended that universities have access to an effective mechanism to deal with long-running disputes, particularly disputes between a chancellor and a governing body. An additional means for universities to affect the composition of their governing bodies is through ensuring that governing body members are of the highest calibre. That needs to be done by placing greater emphasis on performance development. We also recommended that governing body members be remunerated.

Performance development could range from support through a secretariat, as some universities provide for their governing bodies, to support in the form of training such as that provided by the Australian Institute of Company Directors, which trains people for board positions. That training program has been tailored specifically for universities, and is running successfully in a number of universities. The question of what a modern university provides was an overriding factor in this inquiry. One constant theme throughout the inquiry was how a university balances the competing needs of having to operate effectively as a business and an accountable recipient of government funding and research funding and having to generate half its income through commercial activities with the responsibilities that universities have always had, such as promoting scholarship research, free inquiry and academic excellence.

That theme was ongoing and it is a tension that is occurring within universities. Nevertheless it is something that needs to be acknowledged and worked through because universities play such an important part in society and—cliché as it seems—in our future. We discussed the size and composition of governing bodies, and provided an option for governing bodies. In particular, the University of New South Wales council was keen to have an option to reduce the number of alumni and academic staff representatives. Other universities wanted to retain the same number of alumni. The committee supported an option that universities could choose to have elections if they wished or to make appointments. That flexibility will be available, but universities should have the capacity to reduce the number of representatives without completely removing alumni representation. We spent a great deal of time discussing whether open elections are the best way to elect staff representatives and alumni representatives.

Overall, the committee believes in flexibility. We made strong representations in terms of the capacity to dismiss a chancellor or a deputy chancellor, such as that which exists at the University of Sydney. We recommended that the Minister conduct a review of professional development practices in New South Wales universities with a view to encouraging best-practice approaches. We also looked at performance evaluation, which is crucial to the effectiveness of governing bodies. Based on the evidence, it appears that the performance evaluation of practices varies significantly across the universities in terms of the regularity of such reviews and whether the performance of a governing body is reviewed by the governing body itself or by an external consultant.

As for professional development, the committee supports a greater focus on performance evaluation. We believe that the New South Wales Minister for Education and Training should review the performance of evaluation practices and examine whether individual members of the governing body, including the chancellor, should be subject to performance evaluations. In terms of clarifying governance roles, members of university governing bodies have a good understanding of the roles and duties required for effective governance. The committee considered that the Acts governing universities provide a clear framework, which can be improved. Universities need to make clear the roles of the chancellor and the vice-chancellor and ensure that those roles are distinct and do not overlap.

If conflicts are to be reduced, people must be aware of their roles. Some of the instances presented to the committee definitely involved a misunderstanding about role delineation and responsibilities that had catastrophic, long-term results—particularly for the morale of staff and students at one university. Universities play an important part in our economic and social progress, and it is important that we are forever conscious of our role in the New South Wales Parliament of overseeing the Acts that govern universities. It is important that we make sure they operate in the best way they can because the quality and performance of the higher education sector will be a key determinant of Australia's economic and social progress. Australia's universities have a combined operating revenue of $17 billion so universities are quite substantial corporations.

In our overseeing role we have a duty to staff, students and the broader community to ensure that universities do their very best. This report gives strength to universities and their governing bodies with regard to clarity, transparency and overall accountability. I thank those who participated in the inquiry who presented in such a thoughtful way. I encourage members of governing bodies to keep up their good work, for which the committee has great admiration. All members should support this report, which contains some very comprehensive and reasonable recommendations. I recommend the report to the House.

Dr JOHN KAYE [3.01 p.m.]: I speak to the report of General Purpose Standing Committee No. 2 into the governance of New South Wales universities. I was a substitute member on that inquiry for Ms Lee Rhiannon. The inquiry grew out of turmoil at the University of New England when then Chancellor John Cassidy over-stretched his authority and sought to intervene in the day-to-day management of the university. The impacts on the functioning of the University of New England were dramatic, particularly with respect to both the council and management of the university. The council became deeply divided into factions, particularly those elected representatives who felt highly excluded by the management culture put in place by Mr Cassidy. Such was the turmoil and impact upon the day-to-day functioning of the university that at a staff meeting in June 2008 300 members voted no confidence in the chancellor. By August 2008 the number had increased to 678 members of staff calling for the council not to reappoint Mr Cassidy or, if the council reappointed Mr Cassidy, for a parliamentary inquiry into the governing body.

The specific issues at the University of New England resolved themselves by the time the committee commenced its hearings, but a number of very important issues with respect to the governance of universities were left unresolved. Broadly they fell into two categories. The first related to the turmoil that resulted at the University of New England as a consequence of a systematic flaw in the governance structures of New South Wales universities—in particular, whether there was ambiguity in the roles of chancellor and vice-chancellor that created a potential for similar conflicts to evolve at other universities? The second related to whether the move towards a more corporate structure in university management had created a situation in which we had gone too far down the path of trying to make universities emulate large corporations.

Mr Cassidy famously compared the management of universities to running a fish and chip shop. He came from managing a large construction corporation. He saw the non-commercial aspects at the University of New England as a challenge to be dealt with rather than as an essential aspect of an institution focussed on learning, free inquiry and scholarship. The inquiry heard evidence from a variety of people—university management, governance experts, academic and general staff and student representatives. Broadly speaking, witnesses and their evidence fell into two distinct categories. First, those whose management perspective focussed on the corporate nature of the university and sought to improve and enhance that corporate nature; and, second, those whose commitment to the intellectual undertakings of universities and service culture of institutions caused them to resist further corporatisation of universities.

It should be noted, however, that not a single witness argued against the idea of financial accountability and budgeting, even down to the departmental level or good management practises. This is not an issue about whether universities should be poorly managed—everyone wants them to be well managed. The issues are: What is a university, what is its purpose, and how should we achieve that purpose? Does a university exist to be an economically successful entity or does it exist to provide intellectual scholastic leadership to the community? And how is that best achieved? For the record, the Greens feel very strongly that moving further down the path of corporatising universities and making them emulate large commercial undertakings will rob from society essential ingredients of free inquiry, scholastic undertakings, quality learning and service to the community.

The committee's recommendations grew out of the evidence it received. Most of the recommendations appear to the Greens to give sensible direction for the improvement of the functioning of governing bodies. It is important when governing bodies lose confidence in their chancellor that they are able to dismiss that chancellor. The series of recommendations with respect to codes of practises, increasing minimum terms with respect to professional development and induction programs, and performance evaluations and reviews are sensible and, if implemented, will improve the functioning of university governing bodies. However, I want to put on record the Greens dissent to one recommendation and its disagreement with another.

Recommendation 2 calls on the Minister for Education and Training to amend the Universities Act to provide all university governing bodies with the flexibility to either appoint or elect their alumni or convocation members. The problem with doing that is that it will open the floodgates to disenfranchising alumni members who no longer feel they have a connection to the university and who feel that they are being shut out from the democratic process of that university. The second undesirable consequence is that it would increase the extent to which university governing bodies are self-appointing and hence will become vulnerable to domination by a single interest group. The recommendation contradicts the evidence given to the inquiry about the importance of the alumni to a university. Removing the voting rights of former members of the university will lessen their sense of ownership and their willingness to contribute to the university, materially, intellectually and spiritually.

Throughout history, self-selecting governing bodies have a poor track record in serving the organisations they govern. Self-selection inevitably leads to increased uniformity of views, a loss of diversity in the backgrounds and attitudes of members and a decline in the value afforded to the opinion of stakeholders. It has been argued by other members of the committee that it was desirable to create consistency across the State's universities but, given the variety of arrangements at other universities, there will be no consistency in outcome, besides which there has been no case mounted for desirability of uniformity. In fact, to the contrary, flexibility is an important outcome.

The only other argument that has been used in favour of this recommendation is that relating to the relatively low proportion of eligible alumni members who vote. The committee received evidence that approximately 10,000 alumni at the University of Sydney voted compared with 2,000 who voted at the University of New South Wales. Clearly the University of New South Wales needs to get its act together and learn from the University of Sydney and encourage more of its alumni to engage in the process of selecting their representatives on the university's governing body.

Recommendation 2 talked about reducing the number of alumni at the University of New South Wales. This recommendation was driven by evidence given to the committee by the Vice-Chancellor of the University of New South Wales, Fred Hilmer. The only way to interpret his evidence was that it was a power grab by one group on council. In fact, no evidence was presented to say that the alumni members in any way contributed to an inability of the governing body at the University of New South Wales to operate. If the Government implements this recommendation, the governing body, the council, at the University of New South Wales will become more and more like a self-appointed body with all the consequences I spoke about earlier.

Apart from those two recommendations, which I think were a step in the wrong direction, the inquiry served as a reminder of the importance of universities; not just as degree factories but as the keepers and builders of the knowledge base that creates a civilised society, as institutions that contribute to culture, as institutions that deliver in some sense to wisdom. It is important that we respect universities and that we not be dragged into believing, for ideological reasons, that by making them more like corporations they will be more efficient or effective in their important mission.

I conclude by thanking my colleagues for their contributions, particularly the Chair, the Hon. Robyn Parker, who conducted the inquiries, which were sometimes quite interesting, with great charm and respect for witnesses. I join with Ms Parker in thanking the committee secretariat, Beverly Duffy, Ian Thackeray, Madeleine Foley, Cathryn Cummins and Kate Mihaljek, for looking after us. Mostly I thank the university staff members, academics and general staff, who came forward and quite fearlessly gave evidence in support of their institutions. In many cases they would have faced some degree of recrimination when they returned to their institutions, but such was their commitment to the academies and to the ideal of the universities serving the community that they were prepared to put their careers on the line and speak up publicly to tell the committee, very strongly, what they felt was the important future for universities in New South Wales.

The Hon. MARIE FICARRA [3.11 p.m.]: Firstly, I thank the Hon. Robyn Parker for chairing this inquiry. I thank the staff and the honourable members of the committee for their dedication and expertise. I thank also the University of New England and the University of Sydney for their hospitality and those who helped to make the committee's external sitting days run so smoothly. I remind all members that the Coalition initiated this inquiry in an effort to explore the reasons behind the past instances of governance problems at many universities across New South Wales and to find ways to go forward to enable universities to function in a more civil and professional manner.

Governance at New South Wales universities has changed significantly since the transition to fee-based learning. Under the new funding schemes universities are now shifting focus and becoming less reliant on government handouts while moving forward in adopting a more sustainable corporate model. This has meant that about 50 per cent of total income for most universities now comes from controlled entities and investments. This new goal of self-sufficiency will ensure that universities truly become and remain independent.

The Coalition is committed to ensuring that New South Wales universities are centres of excellence in both education and research. To achieve this, universities must have stable governance committed to ethical values and appropriate corporate development. The fundamental principle of good governance, which ensures transparency and accountability, is the key to success for all Australian universities. In New South Wales we have at times seen this fundamental principle neglected, and some universities have become major corporate bodies acting like the Government with cloak-and-dagger tactics. The Coalition recognises the need for sensitive corporate information to remain confidential and that New South Wales universities are public institutions where openness in decision-making is key.

The introduction of the voluntary code of best governance is a good first step, but as the name clearly points out it is voluntary. The Coalition is committed to ensuring the stability of New South Wales universities and, in government, will regularly monitor governance operations and continue to encourage universities to adopt the code. This Labor Government has neglected New South Wales universities for far too long and has allowed irresponsible and inappropriate conduct at universities to go unnoticed through a lack of State Government oversight and a lack of ministerial intervention.

The issues raised in the inquiry were many and as it progressed a few significant concerns were identified, such as a lack of clear guidelines for the dismissal of the chancellor or deputy chancellor or a governing body after the chairperson had lost the confidence of the governing body. University of Sydney by-law 1999 gives us a clear way forward for amending the legislation of New South Wales universities to permit a proper process. The second issue that came to light was that of professional development and the minimum length of time that a member can serve.

The Minister for Education and Training must ensure that appropriate levels of professional development and learning take place when external and internal members of university governing bodies are appointed or elected. Professional development should be geared towards each respective member's needs and capabilities. Universities are increasingly left open to liability and discord when members have little or no previous experience with regard to public and private boards of governance. Respect, discipline and fairness must be maintained on public boards as trustees of these State institutions. This must extend also to members representing constituencies, and it is to be instilled in them that they act in the best interests of the university as a whole, whatever their disagreement.

Following on from this issue, the Minister must ensure than an investigation is carried out with regard to university boards using inappropriate interpretations of conflict-of-interest declarations. No member of any board or committee should be excluded from debate on the ground of the nature of their appointments or representation of specific constituencies. At a time when democracy at universities is now guaranteed through voluntary student unionism, it is significant if governing bodies choose to discriminate or eject members from debate on unreasonable grounds.

Feedback has been received that external members of governing bodies at regional universities are not participating in social or cultural activities. It is optimal that such members participate in the cultural and academic activities at universities to be able to understand the effect of their decision-making and respect the institutional qualities of the community they serve. To offset the costs incurred with training and induction, the committee recommended that the minimum term of any member of a university governing body should be increased from one year to two years to facilitate improved functioning of these bodies in a cooperative and cohesive manner. The committee recommended also that the university Acts be amended to allow for flexibility in electing or appointing alumni members and to position numbers to suit the needs of individual universities. This will enable universities to change their composition and allow them the opportunity to gain specific expertise when needed without having to go through the process of a ministerial appointment.

New South Wales needs a strong university sector, and we need to continually encourage the diversification of universities into the corporate sector to maintain their viability without losing focus on their primary educational objectives. To do this we need fair and balanced processes with appropriate internal and external oversight. Australian universities contribute $17 billion to the national economy and their self-sufficiency should be encouraged. New South Wales universities have to adopt strategies to effectively compete with both domestic and international universities in an increasingly global environment. The development of new technologies has enabled new methods of study and the establishment of open learning and online universities.

New South Wales should be at the cutting edge of these methods and technology. To do this we must have stable and productive governances at all New South Wales universities. The only way to ensure that universities are acting in the public good is to have appropriate government oversight. The Minister must conduct a review of university performance evaluation practices and develop appropriate timeline processes for regularly reviewing the performance of all New South Wales universities. How can we ensure that our tertiary students are getting the best education if we cannot be assured that the university is acting in their best interest?

On this issue, the Coalition is committed to ensuring that all students at New South Wales universities have the best educational standards and value. I call on the Government to adopt these recommendations and to keep our universities functioning optimally. The recommendations stemming from this inquiry provide the next steps for New South Wales universities to improve the quality of governance, and the Coalition will hold the Government accountable for their progress and implementation.

The Hon. ROBYN PARKER [3.18 p.m.]: I thank Dr John Kaye and the Hon. Marie Ficarra for their comments. I am sure that if the Hon. Christine Robertson were able to be here she too would have made a number of comments. The members of the committee worked well together, although we had differing views on a couple of points. However, that related to recommendations that universities could choose to adopt or not. Interestingly, I note that since the report was tabled the University of Sydney has responded to the committee by letter to say that it has chosen not to take up an option of election of its alumni representation by appointment but will maintain the existing system, which has worked very successfully for the university. The whole purpose of the recommendations was to say to individual universities that they had an option and it was up to them to decide which way they wanted to go.

In conclusion, I urge all members to read the report on the governance of New South Wales universities. I am sure the Hon. Trevor Khan will grab a copy to read tonight. It makes for good reading. I also reinforce the comments of Dr John Kaye and say that we had some terrific representations from a broad cross-section of universities. They are doing a great job and we look forward to their continued progress, accountability and transparency and their contribution to the future of both New South Wales and Australia. I commend the report to the House.

Question—That the House take note of the report—put and resolved in the affirmative.

Motion agreed to.