How Trustees View Presidential Compensation Issues

November 14, 2003

In any presidential-search process, different players bring to the table different perspectives on compensation. Candidates typically want as generous a package as possible -- knowing that these jobs are exceptionally difficult, that comparable executive positions outside of academe usually pay more than college presidencies, and that starting salary is the critical element in establishing long-term salary. Meanwhile, the college's chief financial officer, who is concerned about balancing the budget, might want to rein in the new president's compensation.

Where do members of the search committee and the governing board typically stand on compensation, and what issues do they consider?

The typical search committee hopes to set compensation high enough to attract the most outstanding candidates, although that impulse may be tempered by equity concerns. A committee that sets a president's salary too high can stir up bitter feelings among other administrators and faculty members on the campus.

Bidding wars take place mainly among those institutions known for offering lavish presidential salaries. Intensive recruiting efforts focus on "star" candidates who are asked questions like "what would it take to attract you here?" Then a package is designed accordingly. The candidate of choice, in effect, has the opportunity to write his or her own ticket. That is even the case at certain top public institutions, where the state-financed portion of the president's salary is enhanced by private contributions through the institution's foundation, by arrangements for seats on corporate boards, by creation of various kinds of deferred compensation, and so on.

But how attractive a campus is to a candidate will depend on many features besides compensation, including the institution's academic stature, financial health, fund-raising capacity, and location. Then there's the matter of fit: Does the candidate mesh well with members of the hiring panel and, in particular, with the board's chairman?

For many fine candidates, even the prospect of writing their own ticket cannot compensate for deficits in those other areas. The search committee may struggle to attract the people it wants in spite of its generosity. In other cases, an astonishing offer may well turn the candidate's head, and a deal is struck.

The stratospheric salaries get a lot of attention -- far beyond their representation in academe. At most institutions, however, search committees do not have the capacity to offer a blank check to presidential candidates. Instead, the institution's board establishes a compensation range, and the details of the candidate's salary package are negotiated within this range. Search consultants may be instructed not to pursue candidates whose salary requirements significantly exceed the range.

Establishing an appropriate salary range at the start of a search is essential. If the range is not competitive, it will be difficult to recruit. The range also must be carefully synchronized with the type of candidate that the search committee is seeking. If the salary range and the committee's expectations are inconsistent, an unhappy conclusion to the search is likely. The committee may have to be content with weaker candidates (e.g., those who are less experienced, come from lower-ranked institutions, or have certain limitations that must be overlooked). Or the board may have to reconsider its salary range in order to attract a stronger candidate pool.

How do the salary range and the search panel's expectations come together? Consider the situation of a search committee that is seeking presidential candidates who are already presidents at comparable institutions. Unless the college offers a salary that exceeds the candidate's current one, he or she would have little incentive to move.

In our hypothetical case, let's say the institution is unwilling to offer a higher salary than its favored candidate is now earning. The solution may be for the institution to seek a more plausible candidate -- like the provost of a comparable institution, whose salary is likely to be lower. The search committee's offer will look better to that provost than it would to the more highly paid president.

Search panels often have a certain amount of flexibility at the top of a prescribed salary range. The trustees may tell the search consultant that they will "pay what it takes to get the right person," but often they don't mean that literally. How much is too much? That's impossible to quantify here. However, I have seen boards lose interest in candidates whose requests are deemed unreasonable.

The candidate's request may be perceived as unreasonable for a variety of reasons. Sometimes the trouble starts when the trustees compare the candidate's previous salary with what he or she is demanding. Someone who is making a huge career leap -- from a provost to a president -- or someone who has been underpaid, may want an increase of 50 percent or more. Even if the salary request is reasonable for the position, board members may balk at giving a candidate a raise that big. It may feel too risky to the board to give that kind of a raise to a candidate who has yet to be tested as a president.

Sometimes a candidate's request is seen as unreasonable because the trustees had mixed feelings about offering that candidate the job. Such reservations often emerge at the point of salary conversations. Things can become especially tense if a second- or third-choice candidate is attractive, or if an internal candidate is waiting in the wings in the event that the search fails.

Finally, the candidate's style in making a request can be as troublesome as the substance of the request. Sometimes a salary deadlock derives not just from disagreement about the amount, but from from a negotiating style that is offensive in some way to the trustees.

All these observations should serve as a warning to candidates that striving for the highest possible salary has its pitfalls. Candidates should try to get a sense of what their bargaining power is in a particular situation.

As boards consider what salary and compensation packages to negotiate with candidates, both sides should also keep in mind the likely reaction of the college community. Since presidential compensation is a matter of public record, presidents and trustees will have to deal with this at some point.

At institutions where administrative and faculty salaries are low compared with peer institutions, a presidential salary perceived to be higher than the campus norm may, on the one hand, cause considerable controversy. On the other hand, a candidate may believe that it is especially challenging to lead an institution that cannot afford to pay competitive salaries, and that his or her leadership will significantly enhance the institution's health and stature. I have seen candidates make this case successfully, but it has to be done with care.

The main nonsalary item that can lead to controversy is the president's house and its renovation and redecoration. A great deal has been said about this, and I will only observe here that this item is a classic lightening rod, focusing any and all unhappiness on the associated expense. If major costs are involved, the board should be actively involved in overseeing the project and supporting the president.

Negotiations over compensation are the first formal exchange between a new president and a governing board. Both sides should approach the negotiations knowing that they are laying the foundations of a partnership for the years ahead.

Jean Dowdall is a vice president with Educational Management Network/Witt Kieffer, a search firm serving higher education, health care, and other nonprofit organizations. She specializes in searches for presidents, vice presidents, and deans in colleges, universities, and foundations. Her recent clients have included Georgetown University and the University of Wisconsin System. She is currently head of the American Council on Education's Executive Search Roundtable, a group of search consultants working in academe.