They were perhaps the biggest stories in ÖйúAƬ in the past year outside the research assessment exercise. The vice-chancellors of two large universities left their posts in acrimonious circumstances.

Observers poring over the cases of Martin Everett at the University of East London and Simon Lee at Leeds Metropolitan University quickly began to point the finger at governors, who became objects of intense scrutiny and speculation.

"Many people are watching the (UEL) story with interest as it strikes a chord on understanding the relationship of v-cs to their governing bodies," said a Times ÖйúAƬ reader in a recent online posting.

Lee was forced out after a row with the chair of governors over the level of undergraduate tuition fees charged by the university; Everett after complaints of poor leadership, despite 36 senior academics signing a petition demanding he be reinstated.

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The two departures left many questioning whether the priorities of the governing boards, the majority of whose members are businessmen and women, were sufficiently well aligned with academic priorities.

That question is unlikely to be resolved quickly because there are two opposing schools of thought on governance.

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To illustrate the divide, David Watson, professor of ÖйúAƬ management at the Institute of Education, cites two reports that thudded on to his desk last December.

The first was PA Consulting Group's latest report on the state of UK ÖйúAƬ, Keeping Our Universities Special, which makes the following damning remarks: "The governance of ÖйúAƬ is complex, arcane and often antipathetic to modernisation and outward-looking strategic change ... the driver for most governance arrangements has been the maintenance of due processes - whether to assure that public finance requirements have been complied with, or to ensure that all interested parties have been duly consulted on proposals for change."

Watson calls this the classic "outside-in" view of the sector, where universities are seen as "self-regarding, procedurally hidebound, risk averse, overanxious about process compliance and oblivious to risks and outcomes achieved".

The second report, What Are Universities For?, prepared by Geoffrey Bolton and Colin Lucas for the League of European Research Universities, takes an "inside-out" approach, according to Watson.

"The freedom to inquire, to debate and to speak truth to power, whether it be the power of government, of those who fund the university, or those who manage it, is central to the vitality of the university and its utility to society," the report argues.

"It is crucial that rectors and university governing bodies understand this essential source of institutional strength, that they are steadfast in its support, strong in its defence and are not seduced by the fallacy of managerial primacy: the things that make management difficult need to be removed or reformed. An easily governed university is no university at all."

The two reports go to the heart of the split in the sector about whether current governance structures are fit for purpose. Allan Schofield, head of governor development at the Leadership Foundation for ÖйúAƬ, pinpoints this divide in his recent report for the foundation, What is an Effective and High Performing Governing Body in UK ÖйúAƬ?

Some universities are considering reducing the size of governing bodies to streamline decision-making, a set-up that follows the "Carver", or "policy governance", model, Schofield says. Under this US template, a board of about seven members is responsible for setting the university's mission while management concentrates on the means to achieve the mission. The model, which aims to keep committees to a minimum, has been used by US community colleges and by some in the UK's further education sector.

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"Those taking this view find the current memberships of boards too large for effective meetings and see the membership of staff and students as a constraint on taking a more rigorous view of institutional sustainability," Schofield's report says.

"With its explicitly managerial thrust, Carver appears to sit uncomfortably in governance arenas where collegial or representational board structures are the norm, and arguably where organisational complexity is high. Nonetheless, many lay members of governing bodies who are non-executive directors of other bodies may have become accustomed to Carver-like approaches, and some ÖйúAƬ institutions are now starting to innovate in this direction."

Schofield's observations were confirmed by delegates at the Leadership Foundation's February conference on governance, who argued against the presence of staff governors on boards on the grounds that they are insufficiently independent. Staff governors find it difficult to hold to account members of senior management, who are often their own line managers, one delegate contended. Others have complained that staff and student governors tend to lack experience in the key areas of governing body responsibilities and that nomination and election processes are as likely to result in ineffective candidates as effective ones.

The Department for Innovation, Universities and Skills (DIUS) and the Association of Heads of University Administration (AHUA) are working on plans to make it easier for post-92 universities to adopt the Carver model and appoint smaller governing boards. This summer, DIUS hopes to amend Schedule 7A of the Education Reform Act 1988, having accepted changes drawn up by the AHUA and the law firm Pinsent Masons. At the moment, Schedule 7A stipulates that boards of ÖйúAƬ corporations, which include most post-92 universities, must have at least 12 and no more than 24 members. It also says that a maximum of 13 may be "independent".

The revised schedule removes the upper and lower size limits, allowing the institution to fix the size of the board. However, it still requires that independent members, who are not university employees, form the majority.

The University and College Union says it had not been made aware of the forthcoming amendment to the schedule, although DIUS says it has consulted universities and stakeholders on "plans to remove restrictions on the make-up of their governing bodies".

According to a DIUS spokesman: "We do not want to dictate to the sector the exact make-up of their governing bodies, but we do, of course, expect ÖйúAƬ institutions to take account of good governance practice, in particular the Committee of University Chairs' Governance Code of Practice, which recommends that governing bodies should be no bigger than 25 (members) and should have an independent majority. As good practice, we would expect ÖйúAƬ institutions to include both student and staff members on their governing bodies."

But does smaller mean better? And are student and staff governors not essential to truly representative governance? One poster on the Times ÖйúAƬ website argued that the proposed reforms "look like a dangerous innovation that will further undermine the already marginalised voices of staff and students in these institutions"; another argued that "staff governors had been largely responsible for bringing governance problems to light, whereas lay governors remained unaware of the problems ... In my view, this proposal is a retrograde step."

Dennis Farrington, co-author of The Law of ÖйúAƬ (2006), echoes that view. He says that placing universities in the hands of a small number of lay governors would be "potentially catastrophic" for institutions and could "destroy decades of successful academic and student involvement in governance". He argues that academics should write to the Universities Secretary and object to proposals to revise Schedule 7A.

Farrington believes that many lay governors are inactive. Relationships between governors and academics are already poor in some cases and will deteriorate further if staff opinion can be circumvented altogether, he argues.

Schofield's report adds some weight to this view: it includes the results of a survey of 294 governors and 131 senior managers at UK universities. The survey revealed that almost half (45 per cent) of managers and 38 per cent of governors reported that there were "not at all", or "rarely" or "sometimes" constructive relationships between the governors and academic board - or that they did not know whether a constructive relationship existed. In some institutions surveyed, there was "almost no contact" between governing boards and academic boards "whereby not even minutes of the academic/board senate go to the governing body".

The report concludes: "It would certainly appear difficult for ÖйúAƬ institutions to undertake effectively their responsibility for determining educational character (whether formally defined or not) in such circumstances."

Moves to reduce academic input into decision-making at the highest level began in the 1990s. When the Further and ÖйúAƬ Act 1992 turned the polytechnics into universities and statutory corporations, it gave them governance structures that envisaged a mainly financial role for the board.

Gill Evans, professor of history at the University of Cambridge and an expert on university governance, explains that at the time of the 1992 Act, fear of conflict of interest and financial fraud was dominating decisions on all public-sector governance.

"The view was that one should put in charge people who had nothing to gain personally," Evans says. A structure was then created in which a couple of dozen senior individuals were invited to sit on a board as an act of public service and keep an eye on the activities of either the body or business in question from a purely supervisory point of view.

"The positive needs of particular enterprises were not much in the picture, so it was loosely assumed, but never tested, that a non-executive 'top person' recruited on reputation could run anything in this way by attending a few meetings a year and hearing from the executive directors how things were going," says Evans.

The same thinking - that ultimate authority should be kept in the hands of independent and external governors - acted to keep academics off the governing boards of universities.

The ÖйúAƬ Funding Council for England's Assurance Service said in a July 2007 report to the University of Oxford that "the modern governance consensus across all sectors is that it is beneficial for the effectiveness of governing bodies ... and for the independent scrutiny of outside investors' interests, that their membership should be largely non-executive, external and without conflicts of interests".

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All UK ÖйúAƬ institutions now have a majority of lay governors on their boards or councils, except for the universities of Oxford and Cambridge. But Peter Oppenheimer, former head of the Oxford Centre for Hebrew and Jewish Studies and a former non-executive director of electrical retail chain Dixons, says there is no such consensus.

While most publicly quoted companies "aim at a reasonable balance between executive and non-executive board members, this may or may not involve an external majority", he wrote in the February issue of The Oxford Magazine. And in the non-profit sector, there are no "outside investors". "There may be benefactors," Oppenheimer notes. "But any danger of insufficient regard for benefactors' wishes is balanced by the opposite danger of conceding to benefactors an improper degree of influence over the institution's policies."

He highlights a risk that external lay members may be motivated to become university governors "less from a desire to promote ÖйúAƬ and research than in the hope of getting their own names into a future Honours List". The presence of academics on governing boards acts as a bar to the pursuit of personal agendas, he says. "These internal interests are the nearest equivalence of shareholders in the university."

The battles to maintain an academic majority on the councils of Oxford and Cambridge have been well documented. So far, they have been successful: Cambridge is continuing with four external members of council, and Oxford dons saw off a proposal in 2006 by John Hood, the vice-chancellor, for a lay majority. A recent report from Oxford's Audit and Scrutiny Committee says that academic governors "give a depth and breadth of involvement in decision-making and supervision that facilitate good governance".

But that committee then went on to recommend that the 25-strong council, which has a rank-and-file academic majority of 14, should be increased to 32 members by adding two external governors and five pro vice-chancellors. This would place "ordinary" academics in the minority. The report also suggests that the chair of council should be an external member. The university's council has yet to respond to the proposals.

Voices opposing the corporate model exist outside Oxbridge. Schofield's report notes that some have questioned the extent to which boards with a majority of external members can ever be informed enough about institutional affairs to provide a check on the executive. Others point out that the drive to reduce staff and student presence on the board of some institutions may be related to their tendency to raise awkward questions.

Speaking at the Leadership Foundation's February conference, Tim Melville-Ross, a member of the board of Hefce, recalled that during his time as chairman of council at the University of Essex, a student governor had tabled to council a motion to oppose the introduction of variable tuition fees. Ivor Crewe, the vice-chancellor at the time, was publicly promoting the case for the fees. Melville-Ross chose not to give a strong lead, but the motion fell after much debate.

In the case of UEL, it was Jim McKenna, the chairman of the university board of governors, who suspended Everett on grounds of alleged "lack of leadership and vision". The board's three staff governors opposed the suspension, but they were excluded from decisions over the vice-chancellor's fate. Gillian Slater, the former vice-chancellor of Bournemouth University and a lay governor, resigned in protest against Everett's treatment, leaving the board staffed largely by business people.

Everett resigned in February, and the representative of the professoriate on the board lost a subsequent election after managers decided that nominees should be elected by the deans and the professors rather than the professors alone. A dean is known to have complained about Everett when he was appointed.

In a letter seen by Times ÖйúAƬ, in which he rejected an offer of a payment to leave UEL before he was suspended over questions about his leadership, Everett told McKenna: "There have clearly been serious failings of process and governance ... I do not believe that the governing body of an institution can simply buy its way out of compliance with required lawful and proper behaviour in this way."

At Leeds Met, observers say, a rift opened between Lee, who, with the backing of staff and student governors, fought against any increases in tuition fees, and other members of the board and the executive, led by chairman Ninian Watt. In January, Lee was asked by the chairman of governors to resign or face suspension over "serious complaints regarding his treatment of staff". His resignation was followed by the resignation of the chancellor, Brendan Foster, who, sources say, had tried to act as a mediator between Lee and Watt.

In an interview with Times ÖйúAƬ in February, Lee argued that post-92 institutions were in urgent need of new governance structures. But unlike DIUS and the AHUA, he does not believe they need a stripped-down board composed largely or exclusively of lay governors. He favours a model closer to that of old universities. "There is a lot to learn from the traditional universities. I like the idea of a university visitor (a quasi-judicial arbiter) who can adjudicate in these kinds of disputes."

Not all recent disputes between governors and vice-chancellors have ended in defeat for university heads. At City University London, where the 18-member council includes three professors, a union representative and a student, a dispute between Malcolm Gillies, the vice-chancellor, and Sir John Stuttard, the chair of council and Lord Mayor of the City of London, was followed in late 2008 by Sir John's departure.

A council member - who asked to remain anonymous - told Times ÖйúAƬ the dispute centred on the degree of involvement of the chairman in university management, although this is denied by the university, whose spokesman says: "Sir John did not resign over a dispute with the vice-chancellor."

City University's council is debating whether the new chair should continue to be drawn from the ranks of Lord Mayors of the City of London, or whether the appointee should have more ÖйúAƬ experience.

Supporters of academic involvement in the boards point to several high-profile failures in the 1990s of "Cadbury" structures (which were based on the findings of the 1992 Cadbury report that made recommendations on the arrangement of company boards to improve governance).

Michael Shattock, visiting professor of ÖйúAƬ management at the Institute of Education, noted in 2006 that staff governors had been largely responsible for bringing severe governance problems in universities to light in the past, while lay governors remained unaware of the problems or were inactive.

In Managing Good Governance in ÖйúAƬ (2006), Shattock refers to events at the University of Huddersfield in 1994. Kenneth Durrands, the vice-chancellor, had persuaded his board to reduce its number to 12 members and to remove the staff and student governors. The potential danger of such a move, as Schofield noted in his report, is that the board becomes over-dependent on the vice-chancellor for its information about the university and ceases to act as a check on him or her. "This was certainly felt to be the case at Huddersfield (where several of the members of the board had been recipients of honorary degrees from the university)," Shattock explains.

The exclusion of staff and student representatives from the board of governors led to uproar on the campus and a vote of no confidence in the board in a staff and student ballot, and resulted in the resignation of the vice-chancellor. The board then decided to backdate a large salary increase for the vice-chancellor, prompting an inquiry by the National Audit Office.

The Huddersfield debacle, coupled with governance problems at the University of Portsmouth, led the Government of the day to ask the Committee of University Chairs (CUC) to take up the governance issues. It was made clear that if the CUC did not improve matters, legislation would follow.

Shattock, who was CUC secretary at the time, says: "The Department for Education and Skills was unwilling to take the necessary legal steps to make staff and student membership mandatory, but in our guidance we prescribed that any board wishing to exclude them from membership must face the disincentive of formally minuting its reasons, publishing them on the campus and reporting them to the funding council." This requirement has been repeated in each successive version of the guidance.

"We have seen how easily in the present banking crisis boards have apparently been led by the nose by powerful and persuasive chairs and chief executives," Shattock says.

"Huddersfield provided ample evidence of how a small board can reach such an identity of views with a chief executive that it becomes guilty of 'groupthink' and abandons the important function of bringing an external vision to complement the internally generated visions of a university's leadership and of its staff and student body. Effective governing bodies need a diversity of views, with a culture that allows such views to be reconciled, not a built-in unanimity," continues Shattock.

Whether it is via the pages of Times ÖйúAƬ or elsewhere, academics continue to express their frustration at the exclusion of their voice from institutions' governing bodies. At a UCU workshop on governance at UEL in March, delegates complained that even where staff governors are present on boards and councils, they are often ineffective because they are banned from key committees such as finance and human resources, have little say in the appointment of vice-chancellors and none in the appointment of lay members, and are prevented from discussing any documents labelled confidential by management. The delegates asked the union to provide legal advice for staff governors in order to give them more confidence about what they can share and with whom.

In his speech to the gathering, Alastair Hunter, president-elect of the UCU, criticised the undermining of the university senate or academic board in many universities. "They have been systematically stripped of their powers and generally reduced to talking shops over the past three decades," he said.

Hunter recalled his time as a member of senate at the University of Glasgow. "A group of prominent, well-informed and rumbustious professors could hijack the agenda and reduce even the vice-chancellor to quivering ineffectiveness," he told workshop attendees. "Later, when I served for four years as dean of my faculty, much had changed." Although votes still needed to be won, he said, the voice of dissent was largely silent.

"My informants tell me that now even the appearance of debate has gone; and I know from court, where at least dissent sometimes appeared, that matters rightly of academic concern were disposed of as though the senate had no role to play," Hunter observed.

"Is this a true trahison des clercs, a selling of the pass by an academic establishment too alienated from politics to care or too worried about their careers to take a risk? Or is it the death by a hundred cuts that has crept up on us when we weren't looking? It hardly matters, for the result is the same - power in the hands of those whose interests are driven not by the pursuit of knowledge but by the pursuit of wealth."

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OVERSEERS

University governance typically consists of:

• A governing board (or council in pre-1992 universities) consisting of 17 to 30 members, the majority of whom are lay, or external, members. Separate board subcommittees usually take responsibility for appointments, remuneration and other human resource issues. External members may be paid, although most are not.
• An academic board (or senate in pre-1992 universities) with responsibility for teaching and research-related issues.
• A senior management team or vice-chancellor's executive group, which is responsible for management and is headed by the vice-chancellor or principal.
• A registrar, secretary or clerk who is answerable to the chairman of the board and the vice-chancellor.
• Some universities also have a court, which is a forum of up to 300 members, that is meant to act as a bridge between the institution and the wider community, and to represent the public interest. Members can include students, staff, members of the professions, local businessmen, local authority members and others. The court meets annually.