Governance structures, voluntary disclosures and public accountability

Collins G Ntim,Teerooven Soobaroyen,Martin J Broad

doi:10.1108/aaaj-10-2014-1842

Abstract

PurposeThe purpose of this paper is to investigate the extent of voluntary disclosures in UK higher education institutions’ (HEIs) annual reports and examine whether internal governance structures influence disclosure in the period following major reform and funding constraints.Design/methodology/approachThe authors adopt a modified version of Coy and Dixon’s (2004) public accountability index, referred to in this paper as a public accountability and transparency index (PATI), to measure the extent of voluntary disclosures in 130 UK HEIs’ annual reports. Informed by a multi-theoretical framework drawn from public accountability, legitimacy, resource dependence and stakeholder perspectives, the authors propose that the characteristics of governing and executive structures in UK universities influence the extent of their voluntary disclosures.FindingsThe authors find a large degree of variability in the level of voluntary disclosures by universities and an overall relatively low level of PATI (44 per cent), particularly with regards to the disclosure of teaching/research outcomes. The authors also find that audit committee quality, governing board diversity, governor independence and the presence of a governance committee are associated with the level of disclosure. Finally, the authors find that the interaction between executive team characteristics and governance variables enhances the level of voluntary disclosures, thereby providing support for the continued relevance of a “shared” leadership in the HEIs’ sector towards enhancing accountability and transparency in HEIs.Research limitations/implicationsIn spite of significant funding cuts, regulatory reforms and competitive challenges, the level of voluntary disclosure by UK HEIs remains low. Whilst the role of selected governance mechanisms and “shared leadership” in improving disclosure, is asserted, the varying level and selective basis of the disclosures across the surveyed HEIs suggest that the public accountability motive is weaker relative to the other motives underpinned by stakeholder, legitimacy and resource dependence perspectives.Originality/valueThis is the first study which explores the association between HEI governance structures, managerial characteristics and the level of disclosure in UK HEIs.

Highlights

The past decades have witnessed rapid changes and/or reforms in the higher education (HE) sector (Bennett, 2002; Taylor, 2013a, b)
The international HE environment has been characterised by large student numbers, low government funding often driven by public sector budget cuts, but tight control and regulation, high levels of national and international competition, more enlightened multiple stakeholders, and mass importation and application of neo-liberal economic ideas mainly in the form of new public management techniques into higher education institutions’ (HEIs) (Shattock, 1998, 1999; Dearlove, 2002; Middlehurst, 2004; Kim, 2008; Trakman, 2008; Melville-Ross, 2010; Parker, 2011; Parry, 2013; Rowlands, 2013)
The implementation of the recommendations of the 2010 Browne Report on UK HE funding precipitated largely by the 2007/2008 global banking crisis and subsequent deep cuts in HE sector funding in 2010 by the UK central government has led to concerns about financial sustainability, efficiency, effectiveness and competitiveness (UUK, 2011; Higher Education Funding Council in England (HEFCE), 2011) This has motivated us to first consider how HEI voluntarily disclose information in their annual reports as a mechanism of external accountability and transparency, and secondly whether extant governance structures, borne out of several UK HE reforms, play a role in improving public accountability

Summary

Introduction

The past decades have witnessed rapid changes and/or reforms in the higher education (HE) sector (Bennett, 2002; Taylor, 2013a, b). Drastic cuts in the further and higher education budget of about 29% in 2010 by the UK central government following the 2007/2008 global banking crisis and the subsequent implementation of the recommendations of the 2010 Browne Report on HE funding and student finance has further heightened the importance of financial management, governance, and accountability within UK HEIs (Hordern, 2013; Middlehurst, 2013; Rowlands, 2013; Taylor, 2013a, b), thereby offering an interesting and natural setting to examine these aspects. The key aims of this paper, are to: (i) investigate the public accountability and transparency of UK HEIs by focusing on the extent of voluntary disclosures in their annual reports[1]; and (ii) examine whether internal governance structures influence the level of disclosures by such institutions in the face of recent HEI reforms, especially those that have been akin to the introduction of ‘market’ or ‘quasi-market’ conditions

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Results

Conclusion