Background This study examines the growing trend of ethnicized leadership in Ethiopian higher education institutions and advocates for a shift toward merit-based governance to improve institutional integrity and performance. Since 1991, with the introduction of ethnic federalism, leadership appointments in Ethiopian universities have increasingly been based on ethnic identity rather than qualifications. This has led to governance challenges, weakened academic standards, and reduced institutional efficiency. The study highlights the need for governance reforms prioritizing meritocracy to enhance the quality and sustainability of Ethiopia’s ethnically diverse higher education system. Methods The study utilizes a qualitative research approach, combining both primary and secondary data. Primary data were collected through semi-structured interviews with university administrators, faculty, and governance experts, while secondary data were gathered from institutional reports, government policies, and academic literature. Institutional theory, principal-agent theory, and meritocratic theory frame the analysis, providing insights into how ethnic-based leadership appointments affect university governance and performance. Results The findings reveal that ethnicized leadership has eroded governance structures, lowered academic quality, and compromised institutional efficiency. Leadership appointments based on ethnicity rather than merit have led to poor decision-making, weakened accountability, and reduced transparency. In contrast, merit-based governance improves accountability, decision-making, and institutional performance. The study emphasizes that transitioning to a meritocratic leadership model is vital for restoring institutional integrity and academic excellence in Ethiopian universities. Conclusions Ethnic federalism, while initially designed to empower regions, has politicized federal institutions, including universities, reducing them to regional entities rather than national institutions. This system of ethnicized leadership has fostered a culture of favoritism, rampant corruption, and ineffective governance, ultimately weakening Ethiopia’s higher education system. Recommendations Governance reforms that prioritize merit-based appointments are urgently needed. Legal reforms, transparent leadership selection processes, depoliticization efforts, and capacity-building initiatives are recommended to foster a meritocratic culture and improve institutional performance in Ethiopian universities.
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