This article addresses the issue of change in the government‐university relationship. As has become increasingly clear for both analysts of higher education policy and for administrators in higher education institutions, a fundamental shift in the relationship between national governments and higher education institutions is taking place in many western European countries. In some countries, these changes are occurring at greater speed than in others, but the movement to what has been labelled “state supervision” is quite dominant. The first part of the article analyzes the rationale for this change at system level by tracing its historical imperatives; after which it discusses the concept of the supervisory governance model. The second part focuses in particular on one of the key objectives of higher education policy, namely diversity, and addresses the question of the extent to which a supervisory governance strategy can contribute to the attainment of this objective and what doing so implies for the role and function of higher education institutions. By focussing on the specific issue of diversity, the authors intend to demonstrate the dynamic relationship between governments and higher education institutions that is implied in the supervisory model.