Academic journal article Academy of Educational Leadership Journal

Who Has the Most Skin in the Game? a Stake Owner Theory of Tenure

Academic journal article Academy of Educational Leadership Journal

Who Has the Most Skin in the Game? a Stake Owner Theory of Tenure

Article excerpt


Applying agency theory and a concept we call preferred economic interest to the governance of institutions of higher education, we propose a stake owners theory which holds tenured faculty members to be principals of the institution with administrators and trustees as their agents. Combining literature from management, economics, and public policy, this paper establishes the primacy of tenured faculty in the governance structure.

Keywords: Academic tenure; higher education; governance; agency.


The institution of tenure in the academy is a long standing, widespread practice, though not universal. In the nearly century long existence of tenure systems, the true place in the institution of tenured faculty members has not been made clear. Though there is no doubt faculty who have earned (as opposed to granted) tenure are stakeholders, the exact nature of their stakes is not well defined. We propose a theory which casts tenured faculty members as super ordinate stakeholders, whom we call stake owners, whose stakes are a preferred economic interest which is superior to the status of all other stakeholders' interests. In other words, this stake confers a property right in the institution and is analogous in the for-profit sector to an employee who is also a stockholder, that person both an employee and part owner. Our theory leads to the conclusion that tenured faculty are in fact principals, whereas administrators and trustees are agents at institutions having tenure systems.

As long ago as 1936, Alchian recognized that not-for-profit colleges and universities are special kinds of organizations because they have neither owners nor clearly defined property rights (Alchian, 1977). When institutions have no clearly defined ownership, the identity of major stakeholders and their rights are unclear. We hope to help clarify the identification of rights of tenured faculty who have earned a preferred economic interest in the institution by virtue of their tenure.

Our argument is, once having earned tenure, faculty members are the group having characteristics of owners, residual claimants Brown, (1997) calls them. No other groups share these characteristics. Furthermore, because, unlike a share of stock in a corporation, tenure is neither portable nor transferable, it is doubly important that tenure owners have a significant voice in institutional governance.


Attas (2004) defines a stake as, "... a sum of money, or other valuable, wagered on an event." (p. 315). He continues, "The stakeholder is a person who has much to lose - financially, socially, or psychologically - from the failure of the firm." (Attas, pp. 315) Attas clearly links the value of a stake to the continued success of the organization. Furthermore, Attas stresses he is talking about long-term stakeholders and not those with transient, casual interactions with an organization. Tenured faculty clearly fit Attas' vision of a stakeholder, i.e., a stake owner.

Because it is not our purpose to review the vast stakeholder theory literature, we will simply refer those interested to the godfather of stakeholder theory, R. E. Freeman, (1984) who began the formal, academic treatment of stakeholder theory. Since Freeman, many veins of stakeholder theory have been deeply mined. For a succinct look at some of the relevant literature, see Post, Preston, and Sachs (2002), for a list of several others who have thought about stakeholder theory as it pertains to higher education.

As to our place in the literature, there is nothing in the scholarly literature overtly ranking the interests of stakeholders, certainly none making the assertion that tenured faculty have super ordinate status among stake holders. Some authors imply a ranking of stakeholder interests (Bess, 1988, Brown, 1997, McPherson and Shapiro, 1999, Trakman, 2008, and Fassin, 2009 for instance) but none makes the case for the primacy of tenured faculty. …

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