Where Most Needed

The theme this week seems to be bumpy relationships between government and the charities it sets up to carry out specific tasks.  The Washington Post tells us that Sen. Charles Grassley has been unsuccessful in persuading some board members at American University to step down after criticism of the $3.75 million severance deal with former president Benjamin A. Ladner.  The talks followed the submission of a report by the trustees in early March that admitted that change was needed, but that "we have learned much from our mistakes" and more study was needed about reform. 

The trustees fired Mr. Ladner after an audit confirmed a huge amount of university expenditure for his personal benefit, much like last weeks dismissal of Priscilla Slade at Texas Southern University.  Unlike Ms. Slade, however, the trustees elected not to make it a firing "for cause," which meant that Mr. Ladner kept his severance.  Sen. Grassley wants the trustees who pressed for that outcome to step down. 

Despite some tough talk about enforcement after the severance came to light last fall (reflected in this article from the Chronice of Higher Education), the influence of government over private boards it creates is limited.  This is particularly true in these severance situations that are always revealed after the deal is done.  A better solution is to require disclosure of executive compensation arrangements (including severance terms) when they are made, as is required of public companies.