November 18, 2003

Concerns raised over university presidents' pay

This year, the nation's college student body has faced an unwelcoming economic climate—a 5.1 percent rise in tuition, a waning economy showing faint signs of recovery, and a general state of economic anxiety. Given this, it is unsurprising that the Chronicle of Higher Education's (CHE) annual survey on university presidents' salaries has generated a healthy amount of interest.

The CHE's review of private universities' non-profit tax records of 2002 fiscal year show that 27 university presidents reap a salary and benefit package of $500,000 or more, a sharp increase from 1999-2000, when less than a dozen presidents earned that amount. The CHE's comparative survey signals that it is only a matter of time before university presidents' earnings pass the $1 million mark; four private university presidents already earn more than $800,000 annually.

The publication of these figures has precipitated a nationwide debate about whether a president's salary should increase while tuition increases. Faculty pay has been growing at at least half the rate of that of the presidents', and alumni and private donor contributions have been waning recently.

When taken in relation to the current economic state of affairs, the high salaries seem difficult to justify. According to people working within academic institutions, however, the issue is not simply a question of ethics, but of market realities and institutional necessity.

Consulting firms and members of Boards of Trustees maintain that university presidents' salary is not capriciously determined, but guided by market forces and the short supply of suitable presidential candidates. To remain competitive and discourage incumbent presidents from resigning in favor of more lucratively paid posts, universities have had to bolster their compensatory packages.

"[This] has driven up the pay of public university leaders," according to the CHE. "The number of public university president's earning $500,000 or more annually doubled in 2003-04 from the previous year."

Another explanation for the relatively recent surge in presidential income is that many administrations are reprioritizing the functions of institutional leaders. Not long ago, a president's primary concern was to oversee the day-to-day campus and administrative business proceedings. According to the general counsel of the American Council on Education, Sheldon Steinbach, the "21st century top role of a college president" is fundraising.

At the University, President Don Randel is currently heading the Chicago Initiative, an ambitious fundraising campaign that seeks to raise $2 billion within a five-year period. At the moment the campaign has raised slightly under $1 billion, and the funds are being channeled toward the university's endowment, financial aid budget, faculty recruitment, research programs, and construction of new facilities.

In relation to other presidents' salaries at closely ranked universities, Randel's salary falls in the middle of the spectrum. CHE calculated that Randel earned a base salary of $454,988 between 2000-01, and $474,938 between 2001-02. In addition to his salary, Randel receives a benefits package worth $40,121.

"President Randel's salary is modest, both by comparison with other university presidents and executives running organizations with revenues of $2 billion," says Richard P. Saller, provost of the University.

At a time when the University is facing a rough financial patch—CHE reported expenditures at $1.2 billion and revenues at $1 billion for the 2002 fiscal year—officials believe that Randel becomes a greater asset, since the University's welfare hinges on his fundraising skills.

"Do any parents of students with comparable job responsibility for a $2 billion a year organization earn less than our president? I doubt it," said a highly-ranked University official who wishes to remain anonymous.

However, some believe that the income gap between university president and CEO should narrow because each manages a complex organization with a multitude of people under him. The difference is that the former operates a non-profit organization and the latter operates a for-profit organization.

Ideologically each set of organizations strive to achieve a different aim—the former interested in collective enrichment and the latter occupied with individual gain. Some argue that the criteria on which their leaders' merit and compensation is determined should not be identical.

Many members of this camp say the corporate ethos that is infiltrating higher education undermines the uncompromising values associated with leadership in academia, such as candor and absolute commitment to education.

On the other hand, students like Sheena Payne, a second-year at the College, do not see any practicality in university presidents reducing their salary or refusing raises in a period of budget crisis as a symbolic gesture toward students and faculty. Ultimately, any fluctuation in the president's pay will have a negligible impact on student tuition.

"The president's raise [$19,950] can't even pay for one person's [annual] tuition," Payne said.

The question is whether high-caliber salary and benefit packages, regardless of their destabilizing effects and symbolic message of indifference to student and faculty concerns, actually encourage the development of higher education institutions.

"If you don't let these market forces work, institutions and people can stagnate," said Michael Gazzaniga, dean of faculty at Dartmouth. "Rating leads to institutions' being forced to improve themselves because it makes them say ‘What's wrong with us? How can we fix it?"