how about some leadership on executive compensation?

I have to say that I’m pretty outraged. We’re all hearing about the tough economic times ahead. How we shouldn’t expect any raises next year. How we can’t hire new faculty to replace old ones. And then, I see this. That the median compensation for University presidents is going up 7.6%. My president made $1,411,894 last year. Yours made $1,742,560, Jeremy. Amy Gutmann of UPenn got a 40% raise. She’s giving $100,000 back (far less than her raise). This is a paltry symbolic gesture. While median home earnings are going down, universities are rapidly increasing the pay to their executives. You can read more of the chronicle’s report here. But I warn you, it will enrage you. While most workers at colleges are asked to trim their wages, executives like Bollinger, Gutmann and Bienen are rapidly increasing their pay.  Faculty pay has not kept pace. And it’s not just the private folks. Public Universities are also paying enormous amounts (OSU’s E. Gordon Gee made more than $1.3 million last year). On average, public university presidents have increased their wages by 35.6% in the last five years. Median household income has fallen during that time (while tuition steadily increases). How, exactly are their wages in keeping of the educational mission of their institutions? Fewer people can afford university. So the response? Pay our executives more.

So what, exactly have these people been doing for the money? Increasing part-time work (now 46% of faculty are part time, up from 22% 30 years ago – and at community colleges it’s far worse, nearing 67%). These part time folks are paid about 1/4 as much per course as full time people like me. They’re also busy cutting the wages of non-academic workers. In other words, they’re make the lives of the people who work at universities less stable, more difficult, and more painful. Nice work; I can see why they’re rewarded.

I have a proposal for this folks. Take some leadership on executive pay. Tie your wages to the median % wage increase in your university. And give at least half the money back, demanding that it be used for student scholarships. In short: stop being so damn greedy. Yes, greedy. That’s exactly what you are. As of right now, the mantra of the unversity president should be, “You get less, while I get more.”

11 thoughts on “how about some leadership on executive compensation?”

  1. Can I play devil’s advocate, or at least offer an alternative viewpoint? One of the reasons exec pay is so high in universities is because they are often attempting to lure folks out of the corporate sector to become university bigwigs. Also, university presidents at a place like Penn, for example, also have to deal with hospital systems in addition to the schools. And less than $1.5 million does not even compare to the median being paid to comparable CEOs in the private sector.

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  2. See, my view is:

    1.) just because we pay our CEOs too much doesn’t mean we don’t pay our presidents enough. Or that we should pay them more. One outrageous salary is not justification for another.

    2.) The “poaching” justification is often mobilized. I don’t buy this. Bollinger is a free speech scholar. Gutmann is a democratic theorist. Are there REALLY that many corporations out there looking to hire academics with management experience as their CEOs? I would be open to hearing about cases. But I’d be very surprised if companies wanted to hire these people (or, say, Havard’s president, a civil war historian).

    3.) Luring folks from the corporate sector: maybe it’s the universities I know, but again, this is rare. Most candidates come from inside Universities. Provosts elsewhere, etc.

    4.) Hospitals and professional schools are most often run by other executives, who themselves make extraordinary salaries. So the UPenn hospital system (like Harvard’s) is actually run by a CEO (Ralph Muller).

    Elite Colleges and universities are increasingly populated by richer and richer kids. They are increasingly staffed by adjuncts. What have these presidents done? Made colleges places for the very rich while cutting away at the jobs of those who provide the education.

    We should not provide a “mirror” model of the world, but an alternate one.

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  3. Shakha — your point #3 is right, but it simply relocates the poaching. Other universities poach provosts to be presidents, presidents to be presidents, etc., keeping the market value very high for top administrators. These administrators could voluntarily reduce their own salary, as some have done, but if it were forced on them, they would likely look for a new job, thereby driving up their salary. (At one university that I know, there was an attempt several years back to freeze faculty salaries because of a (much smaller than now) economic “crisis.” A segment of the faculty immediately produced outside offers and the university had to match those offers to retain them. Turns out that a reasonable across the board raise for all faculty would have been cheaper).

    Two other observations about recent moves by the elite universities — most have very publicly committed to not raising tuition and many have also increased financial aide. These were responses to the political attacks about the size of endowments in the face of very high tuition, and I doubt that these actions would have been taken without that pressure. But one result over the next few years may be to increase the number of non-rich kids who can afford to attend. Indeed, at some of the elite universities the scholarships for low income kids now make it cheaper to attend these universities than their state university. Of course, the current financial situation could make attending any college seem impossible.

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  4. Re #1: Yes, of course this is true, but not the way the system works. If you want to secure great talent, then you need to pay for it. Otherwise the talent will go elsewhere.

    Re #2: Judy Rodin (former president of Penn) has served on corporate boards and is currently the president of the Rockefeller Foundation. Lawrence Summers? Managing director of an investment bank. While Guttman and Bollinger are “pure” academics, I doubt they would have a hard time getting a corporate position.

    Re #4: Yes, the hospitals have CEOs, but they have bosses too, and report to the President. The more you have to be responsible for, the more you get paid.

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  5. I guess I’m just pig-headed. But I don’t buy this “great administrators require great pay” argument. Bollinger’s salary went up 20% in a single year; his overall compensation (deferred benefits included) increased nearly 100% in that year. Gutmann’s compensation went up 40% in one year. Their base salaries were already quite high ($700K) and their peer group was not making much more than they.

    As executive pay has shot up far above the rate of professor pay or even tuition hikes what have we gotten? Yes, many universities have made very public campaigns about giving out more scholarships. But these tend to obscure the fact that universities have become more, not less rich, in the last generation. Between 1975 and today the percentage of kids from the bottom quartile of earnings at elite universities has gone unchanged (10%). If we expand that up to the top 150 colleges and universities it’s 3%. During the same time the percentage of kids from the top quartile has doubled. The top decile makes up about 2/3 of kids at elite schools. Harvard may well be increasing the funding for “middle income” students – but they consider earnings of $110-$250K middle income. That’s 2-5 times median earnings.

    Do I begrudge these earnings? Honestly, yes. I think that what they are symptomatic of is the broader economy – winner take all markets where there’s a tenuous relationship between performance and pay. I’m really quite curious what we have gotten for these massive increase in wages for our executives. As far as I can tell elite colleges are more exclusively for the rich (not less so). And colleges more generally are far more likely to be staffed by part time labor.

    That may save the college money and make more for them in the long run (rich people give more money). So I guess we could reward that. But in terms of educational value, it’s questionable at best.

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  6. I agree with shakha. I think, e.g., “The more you have to be responsible for, the more you get paid,” is an article of faith that deserves testing, not a simple truism! Our new chancellor, Holden Thorp, makes a relative pittance (about $400K, I think, but can’t find a specific reference right now), and during his hiring there was a publicly voiced concern that we not try to play the CEO inflation game. So far Thorp has been a strong, smart, and careful leader.

    Honestly I think some of this is akin to “nobody got fired for buying IBM”: picking a highly-paid CEO to become an even-more-highly-paid CEO is the safe decision.

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  7. For all of the points that shakha and andrew have already mentioned. But I also wanted to mention that the truisms that gradmommy mentioned – that more responsibility requires more pay and that you need to pay a lot to secure talent – only work for those at the top. Professors are expected to do more work, teaching, research, grant-writing, while having fewer colleagues to help them out and their pay is frozen.

    As shakha notes, one of the particularly devastating things for the future of academia is that not only are universities cutting full-time positions in favor of part-time non-tenure track positions where the university talks about having “no responsibility” to those who work for it. Beyond that, as full-time faculty lines are cut, graduate students are expected to do more teaching which provides universities. This provides an incentive to accept more graduate students than can be maintained in shrinking ranks of the professoriate which creates a surplus pool of labor that can continue to drive the cost of academic labor down.

    And, for doing this, Lee Bollinger, Amy Guttman, et al. get a 35% pay raise!

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  8. If you’re an academic, why would you want to be a university president unless it was accompanied by a huge pay increase? Most serious academics wouldn’t give up their day jobs for a small increase in compensation. And among those who are eager to take on lofty administrative positions for nothing, my guess is that a significant proportion of them would be in it for the glory and power. I doubt we want those people running our universities.

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  9. And, as a future professor who did not grow up around professors, they are paid handsomely for the work they are expected to do. As a grad student, I don’t mind having to work for the credential I’m going to receive. Furthermore, there are people out there who do harder work every day and get paid a lot less. I’m certainly not thinking that we should take president pay and redistribute among the faculty or the grad students. Doesn’t anyone else think it’s nuts that faculty have life-time job security after a certain point anyway?

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  10. @8.brayden: unless your salary is wildly out of sync with mine, there is a lot of room between “a small increase” and the salaries as quoted.

    @10.gradmommy: I don’t think it’s nuts at all. Tenure provides the institutional space for intellectuals to pursue ideas of the highest quality and importance regardless of whether they’re convenient to the administration.

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