Shailendra Raj Mehta reports:
The key innovation was alumni control of the Board of Trustees. This is what made possible several desiderata on the Rosovsky (1991) and (Aghion, Dewatripont et al. 2007) lists in the first place. This is what simultaneously allowed autonomy, continuity of purpose, large endowments and the ability to weather turbulence. The role of alumni trustees has not been fully examined so far. Now, to be sure, Rosovsky does talk about the role of independent trustees. Certainly it is true that in one sense the trustees of US schools are often truly independent in that they provide a buffer against interference from the political and other domains. Further, they are usually able to take a view of the institution independent of the interests of the faculty. But, in fact, the trustees are not independent or uninterested observers at all. This is on account of the fact that the Board of Trustees, at least in the top US schools, consists primarily of alumni, the group which has the highest permanent stake in the reputation of the university.
…Therefore, whichever measure of school quality that we use – rank, school selectivity or endowment, we find that same result – the greater the degree of alumni control, the higher the quality of the school.
…so why is Harvard #1? This question, then becomes easy to answer. Except for a few brief years in its early days and a decade in the middle, for almost its entire existence, a period of nearly 400 years, Harvard has been controlled by its alumni.
The paper is here (pdf), interesting throughout.