Yale and Harvard have endowments larger than the GDP of many countries. They shape federal research priorities through grant capture, public discourse through faculty appointments, and the labor market through credentialing. They receive substantial tax subsidies that depend on their classification as public-benefiting nonprofits. They are nevertheless governed as private corporations, with self-perpetuating boards accountable to no external constituency.

This is the central observation of Legitimate University Governance, my forthcoming article in the Dartmouth Law Review, which closed editorial review this week. The paper introduces a category I call sovereign charities. These institutions exercise the influence of public bodies and enjoy the autonomy of private ones, while answering to neither the accountability mechanisms of government nor the discipline of markets. The architecture is novel. The governance failures that follow are predictable.

The companion argument

The paper is the structural companion to Exclusive Inclusion, which documented systematic identity-based exclusion at elite universities across a range of groups: Jewish students, Women of Color in STEM, Black students at liberal arts colleges, conservative faculty, students with disabilities. Exclusive Inclusion showed the pattern. Legitimate University Governance explains why the architecture produces it.

The mechanism is straightforward once named. A self-perpetuating board hears only the constituent voices it chooses to amplify. A fiduciary duty owed to nobody in particular is enforceable by nobody. A tax exemption granted on the basis of public benefit, with no operational test for whether benefit is delivered, becomes a transfer without a return. Universities have all three.

Three reforms

The paper proposes three structural responses, each adapted from a working analog in another body of law.

First, stakeholder standing modeled on corporate derivative suits. If a fiduciary duty exists in name, someone must be able to enforce it.

Second, enforceable mission specificity. Charitable purpose has historically been interpreted so broadly that it ceases to discipline anything. Narrowing the operational meaning of a stated mission, and requiring institutions to live within it, would restore content to the fiduciary obligation.

Third, an operational test for tax exemption adapted from the hospital community benefit standard. Nonprofit hospitals must demonstrate community benefit through specific operational measures. Universities, with comparable subsidies and comparable claims to public benefit, currently do not.

The article will appear in the Dartmouth Law Review later this year. SSRN draft: Legitimate University Governance.