Australia’s higher education system is standing at a crossroads.
The Federal Government’s review of university governance has laid bare a simple truth:
too many institutions (public and private alike) are governed by structures that blur the line between accountability and control.
While much of the media focus has been on public universities, the lessons apply just as forcefully to the independent sector, where a significant governance problem is hiding in plain sight.
The Governance Model Nobody Talks About
Across the independent higher education landscape, we see the same structural flaw repeated: a Governing Council masquerading as the corporate governing body, often filled with well-intentioned external members, reporting to a Board of Directors that consists of the owners.
While superficially the arrangements appear to meet the standards that set the quality framework for higher education in Australia, dig a little deeper, and the arrangement begins to crumble.
The issue is the legitimacy of a devolved corporate governing body. The Higher Education Standards Framework (Framework Standards) 2021 (HESF) Framework Standard 6.2.1.a requires the corporate governing body of a higher education provider to ensure that they and the entity comply with the requirements of the legislation under which it is incorporated and any other legislative requirements. Given that most independent higher education providers are incorporated as companies they are established under the Corporations Act 2001 (Cth).
The construct of a devolved governing body, separate from and subordinate to the directors of a company, raises several questions as to how such a body would meet all the requirements of the HESF as there are limitations on what directors can delegate. For example, directors cannot delegate their powers and responsibilities to:
- be familiar with the operations and business fundamentals of the company;
- monitor and remain informed as to the company’s operations;
- maintain a reasonably informed opinion of the financial status and solvency of the company;
- understand the company’s financial status;
- approve the company’s financial statements; and
- pass an annual solvency resolution.
As these are non-delegable powers and responsibilities, it is difficult to see how a governing body separate from the Board of Directors can be accountable and take responsibility for the matters listed above, notably ensuring the entity’s financial viability (HESF 6.2.1.c).
The Legal Reality
As noted above, the Corporations Act is clear:
Directors cannot delegate their fiduciary and statutory duties, only functions.
That means if the Board of Directors is composed entirely of owners with limited higher education expertise, and the Governing Council below them purports to be the corporate governing body for the purposes of the HESF, the organisation’s governing body of record (the Board of Directors) may not actually be governing.
Worse yet, should the business fail, the Council members are ‘deemed directors’ and will fall just as hard as the directors of record.
And it’s not apparent that TEQSA sees this gap, since the structure has been allowed in multiple initial registration assessments, as well as renewals.
Under HESF Standard 6.1.1, the provider must have a formally constituted governing body that exercises effective oversight of all the entity’s higher education operations.
“Effective” means competent, independent, and informed.
A board of owners cannot simply receive reports from a devolved Governing Council and claim compliance.
Oversight cannot be outsourced.
What the Government’s Review Has Signalled
The Government’s university governance review (prompted by concerns over governance failures, financial opacity, and weak accountability in public institutions) is a wake-up call for the entire sector.
It’s saying, in effect:
Governance must be transparent, independent, and fit for purpose.
That message cuts across ownership models.
If public universities must strengthen the independence of their councils and separate management from oversight, then independent providers (many of which rely on a handful of directors who are also shareholders) need to apply the same mirror.
It’s not about regulation tightening around independent higher education providers. It’s about recognising that good governance is universal, and that integrity is the foundation of credibility.
The Structural Fault Line
Here’s the pattern that creates risk:
Board of Directors (Owners)
↓
Governing Council
(purporting to be the governing body for the purposes of the HESF)
↓
Academic Board
At first glance, this structure gives comfort to TEQSA auditors and owners alike. But it hides a deep problem: independence is illusory. The Governing Council reports to those with a direct financial interest in the provider’s success. The Board of Directors is, in practice, reviewing its own performance through another layer. And the Academic Board, the guardian of academic integrity, sits two steps away from the only legally responsible body.
This is not oversight. It’s circular reporting.
What a Better Model Looks Like
A sound, defensible structure separates commercial interest from governance judgment:
Board of Directors
(Independent + Owner Representatives)
↓
Academic Board
In this model:
- The Board includes independent non-executive directors with higher education expertise.
- The Academic Board is chaired by a genuinely independent academic, with direct reporting lines to the Board.
- The owners participate in governance, but do not dominate it.
- Delegations are clear, transparent, and regularly reviewed.
- The members of the corporate governing body are actually those who are empowered by law with the authority to oversee the governance of the company.
That’s what “effective oversight” looks like in practice, and it’s what both TEQSA and the Government’s review are implicitly demanding.
Why Independence Matters More Than Ever
Governance failures in universities, from financial mismanagement to cultural collapse, have reminded policymakers that governance determines institutional culture.
The same applies in the independent higher education sector.
When owners sit as directors, they must resist the temptation to treat governance as an extension of management or marketing. When academic boards report upward, they must be empowered to speak truth to power, not just produce compliance paperwork.
Independence isn’t a luxury; it’s a safeguard.
A Call to Reconsider
The Government’s review has opened the door to a national conversation about what good governance really looks like in higher education.
Independent providers should not wait for new regulation to arrive. They should seize this moment to restructure, rebalance, and renew their governance arrangements.
Ask the hard questions now:
- Does your Board include independent members with sector knowledge?
- Is academic quality genuinely insulated from commercial pressure?
- Would your governance structure withstand the scrutiny now being applied to public universities?
Because if your Governing Council reports to your owners, your governance may already be compromised… and it’s time to fix it before someone else does.
Emeritus Professor Clive Smallman is a non-executive director, Academic Board chair and advisor working with several independent higher education providers.
Professor Peter Ryan is a non-executive director on the corporate boards of a number of independent higher education providers.
