The investigative process described in, and the findings and recommendations of, the report issued July 12, 2012, by the Special Investigative Counsel regarding the actions of Penn State with regard to child abuse committed by Gerald Sandusky (commonly known as the Freeh Report) are instructive to governing boards of all organizations.
In terms of process, Penn State’s board delegated authority to conduct the investigation to a task force, and the task force hired the law firm of Freeh Sporkin & Sullivan, LLP to carry out the investigation independently of the university. None of the attorneys or investigators of the Special Investigative Counsel had attended or had any, past or present, professional relationship with the university. The Special Investigative Counsel had secured workspace and computer systems separate from the university’s that were also not accessible by the public.
The Special Investigative Counsel conducted over 430 interviews, analyzed over 3.5 million pieces of pertinent electronic data and documents, and established a toll-free hotline and dedicated email address to receive information from all sources.
Findings Regarding Penn State’s Board
Failures in Oversight and Reasonable Inquiry
According to the Special Investigative Counsel, “[a]n effective board exercises objective and independent judgment while overseeing systems to ensure that the institution operates according to the law and its governing framework. Under Pennsylvania law . . . board members have not only a duty of loyalty, but also a duty of care, including ‘reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances’. . . It has a continuing obligation to require information or answers on any University matter with which it is concerned.”
“A board can breach its duty when it ‘utterly fails to implement any reporting or information system or controls’ or having implemented such system or controls ‘consciously fails to monitor or oversee its operations thus disabling themselves from being informed of risks or problems requiring their attention.’ The board breaches its duty not because a mistake occurs, but because the board fails to provide reasonable oversight in a ‘sustained or systematic’ fashion.”
The Special Investigative Counsel found that the Penn State Board failed to exercise its oversight functions in 1998 and 2001 because “the Board did not have regular reporting procedures or committee structures in place to ensure disclosure to the Board of major risks . . . by [President] Spanier and other senior University officials…” Special Investigative Counsel also found that the board failed to perform its duty of inquiry in 2011 by not asking for reports on the special grand jury’s investigation. After a May 2011 briefing by the university’s president and general counsel, the Board did not independently access information or demand detailed reporting on this serious matter [in which four senior Penn State officials had been called to testify]. “The Board did not inquire about the details of the Attorney General’s investigation, including the request for subpoenas seeking historical email information…”
Failure to Set a Tone at the Top for Accountability of University Officials
“[B]ecause the Board did not push [the President] and other senior officials on such an important matter, [the President] did not feel accountable for keeping the Board immediately informed on serious developments, such as advance notice that [three key university officials] faced criminal charges. The Board allowed itself to be marginalized by not demanding ‘thorough and forthright reports on the affairs of the University.’” “The Board did not create a ‘Tone at the Top’ environment wherein . . . senior University officials believed they were accountable to it.”
Failure to Have Crisis and Communication Plans in Place
The Special Investigative Counsel also found that the Board failed to have a plan in place to handle the crisis when the president and two other senior University officials were terminated or resigned, and without those officials, the Board poorly handled the firing of Coach Paterno, which resulted in “severe reaction by the Penn State community and the public to the Board’s oversight of the University.”
Recommendations Regarding Penn State’s Board
The following are the Special Investigative Counsel’s recommendations regarding Penn State’s Board:
- Appoint a university ethics officer to provide advice and counsel to the president and the board on ethics issues and adherence to Penn State principles.
- Evaluate “the span of control of [the senior University officials] and make adjustments as necessary to ensure [their] duties are realistic and capable of [the officials’] oversight and control.”
- “Develop a mission statement for the [University’s office of General Counsel] that clearly defines the General Counsel’s responsibilities and reporting obligations to the University and the Board.”
- “Review . . . the structure, composition, eligibility requirements and term limits of the Board [and] the need to include more members who are not associated with University.”
- “Review, develop and adopt an ethics/conflict of interest policy for the Board that includes guidelines for conflict management and a commitment to transparency regarding significant issues.”
- “Increase and improve the channels of communication . . . [to] ensure that the University President, General Counsel and relevant members of senior staff thoroughly and forthrightly brief the Board of Trustees at each meeting on significant issues facing the University.”
- “Increase and publicize the ways in which individuals can convey messages and concerns to Board members [including to provide] Board members with individual University email addresses and make them known to the public [and use] common social media communicates tools to communicate with the public on various Board matters.”
- “Establish and select an individual for a position of ‘Chief Compliance Officer’ [to] head an independent office equivalent to the Office of Internal Audit [and] have similar access to, and a reporting relationship with the Board.”
There is no happy conclusion to the Special Investigative Counsel’s report. “One of the most challenging tasks confronting the Penn State community is transforming the culture that permitted Sandusky’s behavior, as illustrated throughout this report, and which directly contributed to the failure of Penn State’s most powerful leaders to adequately report and respond to the actions of a serial sexual predator. It is up to the entire University community – students, faculty, staff, alumni, the Board, and the administration – to undertake a thorough and honest review of its culture. The current administration and Board of Trustees should task the University community . . . to conduct such a review. The findings from such a review may well demand further changes.”