Vice-chancellors could be ousted by the funding council under new proposals for the sector.
The plans are outlined in a consultation on the "financial memorandum" between universities and the Higher Education Funding Council for England, and follow the recent stand-off between funding chiefs and London Metropolitan University.
London Met's governors initially supported Brian Roper, who was then vice-chancellor, leaving Hefce powerless to remove him despite the scandal over inaccurate student-completion data. The errors led to the clawback of tens of millions of pounds from the institution.
Mr Roper eventually left in March 2009, and the governors resigned last month following a series of critical reports into their role in the affair.
The ongoing consultation proposes giving Hefce new powers to reject a university's "accountable officer", who is usually but not always the vice-chancellor, and force the appointment of a replacement.
The officer is accountable to governors for ensuring that the conditions in the financial memorandum - the funding agreement between Hefce and universities - are met.
The consultation document says that "in exceptional circumstances, if in Hefce's view the accountable officer cannot be relied upon, Hefce will explain its reasons and require the governing body to take steps to rectify the position.
"The governing body will need either to appoint a new head of institution or seek Hefce's exceptional agreement to its accountable officer being an officer other than its head of institution," it adds.
Mike Shattock, visiting professor of higher education management at the Institute of Education, University of London, said the proposals raised "serious issues", not least for institutional autonomy.
"If Hefce is not going to trust governing bodies to control their own chief executives, then that says something pretty clear about how Hefce views governing bodies," he said.
"Second, it appears from the wording that there is no disputing Hefce's judgment on this matter: Hefce explains its reasons and the governing body either changes its chief executive or another person must be nominated.
"Surely the chief executive must be allowed to answer the charges?"
Jon Baldwin, registrar of the University of Warwick, was also critical of the plans, describing them as a "direct assault on the autonomy of our universities".
The consultation also suggests giving governors more responsibility for academic standards, raising the prospect of a shift in power away from academics in older universities, where responsibility for standards resides with institutions' senates.
Mr Baldwin said this was a "huge" change, adding: "Governing bodies deal with financial and corporate matters; they do not seek to get involved in academic management of the university."
However, Roger Brown, professor of higher education at Liverpool Hope University, said that he saw no reason why overall responsibility for standards should not rest with governors, "so long as key decisions remain with the academic board or senate".
Universities, not academics, are granted degree-awarding powers and given confidence ratings by the Quality Assurance Agency, he added.
David Palfreyman, director of the Oxford Centre for Higher Education Policy Studies, was sceptical that the proposal would make much difference if adopted.
"It will mean the governors simply saying they've ticked some boxes for the QAA as well as the academic management doing it," he said.
However, if governors did start to take a greater interest in academic standards, this could redress the current situation, where some universities have "let standards slide into the gutter in order to fill places, while others have short-changed undergraduate teaching in favour of research", he said.
He added: "Something needs to be done - senates have been completely emasculated."