College Campuses Debate Administrators' Lofty Pay

The president of the University of Florida got a nearly $300,000 performance bonus in 2008. So did the head of Florida State University. Meanwhile, Governor Charlie Crist authorized double-digit tuition increases at all public universities in Florida, which has been hit hard by foreclosures and bankruptcies. But largesse for university presidents wasn't confined to the Sunshine State last year.

With the national $787 billion economic stimulus plan set to give higher education new federal assistance, the lofty compensation for some school presidents is drawing critical scrutiny. The Obama Administration's recent crackdown on executive pay at companies that accept bailout funds has resurrected a heated debate about whether college presidents earn too much. While the impact of the Wall Street salary cap is likely to be limited—pay consultants have already identified ways around many of the limits—the action signals a shift in the national attitude toward lavish compensation. Given an economic climate in which tuition is outpacing inflation, endowments are plummeting, and colleges are pleading for more government aid, the public may sour on seven-figure compensation for university presidents.

Hefty Benefits and Perks

University presidents may not be as generously compensated as their counterparts in the for-profit world, but their pay has been rising steeply over the past 15 years, especially compared to professors' incomes. One-third of presidents at public universities now earn more than $500,000 a year. The median pay for public-school presidents in the 2007-08 school year was $427,400, according to an annual compensation survey by the Chronicle of Higher Education. It was $100,000 higher at private colleges.

With base salaries well into the six figures, the administrators' total compensation is rounded out by perks like retirement payouts, retention bonuses, performance awards, expense accounts, and the use of well-appointed homes and cars. For instance, E. Gordon Gee, president of Ohio State University, took home a total of $1,346,225 last year, including a $310,000 performance bonus. Henry S. Bienen, president of Northwestern University, raked in $1,742,560, thanks in part to $590,929 in deferred compensation from the previous ten years. (Bienen, 68, has announced his retirement this year.) These totals do not include money both men earned from serving on corporate boards. Gee is on the boards of Massey Energy (MEE), Gaylord Entertainment (GET), Hasbro (HAS), and Dollar General, while Bienen, a former director of Bear Stearns, serves on the boards of the Council on Foreign Relations and the Steppenwolf Theater.

Faculty Pay Gap Has Been Growing

No one is claiming that college presidents are making anywhere near as much as Wall Street CEOs and other corporate titans. After all, in 2007, the world's 500 top-paid chief executive officers earned an average of $12.8 million apiece. "It's not fair to compare these presidents to people who took multi-million-dollar bonuses as their companies' stock was tanking," says Pat Callan, president of the National Center for Public Policy and Higher Education. "But it's a similar phenomenon in that it's an oblivious sense of entitlement by people at the top, and the country is starting to feel distaste about this."

University faculty members are disgruntled, too. The average pay for full-time faculty at universities was $75,677 in 2007-08, according to an annual report from the American Association of University Professors. That's less than one-fifth what most presidents earned. The AAUP report blasts the oversized paychecks of university leaders, pointing out that pay increases for presidents substantially exceeded raises for full professors.

Some argue that the pay gap is justified. In a piece called "Why Presidents Are Paid So Much More than Professors," Stephen Trachtenberg, former president of George Washington University and chairman of the education group at executive search firm Korn/Ferry International (KFY), points out that because presidents don't get tenure, there's more job risk involved. Plus they typically work 60-hour weeks without sabbaticals or designated time off for consulting.

Voluntary Pay Cuts

When the Chronicle released its compensation survey data last November in the midst of the Wall Street meltdown, it set off a wave of voluntary pay cuts. For instance, Elson Floyd, the president of Washington State University, returned $100,000 of his $725,000 salary. "We will be asking [students and faculty] to think more creatively and work harder with less as we deal with budgetary restraints," Floyd said in a news release. "It is incumbent upon me to lead by example." Additionally, a number of presidents have declined bonuses in light of the economic crisis, including Michael Hogan at the University of Connecticut, James Ramsey at the University of Louisville, and Richard McCormick at Rutgers.

Schools Take Harsh Measures

As state legislatures are forced to slash appropriations for higher education, many schools are looking for ways to trim their budgets and generate more revenue—including enrollment caps, tuition increases, and faculty salary freezes. Data from the College Board shows that public university tuition increased by an average of 6.4% for the 2008-2009 school year. The University of Massachusetts has proposed a whopping 15% tuition hike to compensate for an anticipated $82 million drop in state subsidies. With its endowment down 20%, Johns Hopkins University announced it would freeze faculty salaries and—in a move that could be emulated by other schools—cut top administrators' pay by 5%.

Some relief may be imminent. Higher education will be a big beneficiary of the economic stimulus package, which allocates money for student loans, university infrastructure improvements, and research grants. As universities accept tens of billions of dollars in federal assistance, presidents may find that six-figure performance bonuses do not go over well this year. "How does a guy who's making three-quarters of a million dollars sit in front of a legislative committee and plead about the distress of higher education?" asks Callan.

Professors, parents, politicians, and students may all ask the same question.

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