Abstract

The managers of colleges and universities have to make decisions on a wide range of issues with regard to goals and how they may be pursued. “Managers” refers to such positions as the president, provost, vice president dean, and director of a university. This paper lays out the theoretical basis for the right answer for these decisions. It does so by setting out the fundamental function of an academic institution, linking this function to a duty, and explaining how to satisfy this duty in hard cases. This article’s thesis is that university managers have a duty to shareholders alone. Shareholders are those who own the university. This duty is satisfied when managers satisfy the fundamental project shareholders assign to a university. My overall argument supports two theses: the shareholder theory is true and university managers’ duty is to satisfy the fundamental function shareholders assign to a university. The argument for the first thesis rested on the notion that a university needs a fundamental function if managers are to have a defensible criterion by which to make decisions and that the shareholder theory best accounts for that function. Along the way, the stakeholder theory were found to be inadequate. The second thesis applies the first thesis. The article then considered some objections. With regard to the shareholder theory, one objection is that the shareholder theory suggests that a manager owes duties to a university’s owner, and not its students, and this is distasteful. A second is that on the shareholder theory, a university can have as a fundamental function something like maximizing the endowment associated with the university, maximizing profits, or promoting a Christian lifestyle, rather than focusing on creating or distributing knowledge. A third is that a university manager has role-based duties. None of these objections is fatal to shareholder theory.