A survey in August by The Chronicle revealed that several presidents of
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The Growing $500,000 Club
state universities -- a group long thought to be modestly paid -- are actually receiving supplements from alumni that bring their annual compensation to well over a half-million dollars, not including the free housing and other lavish perks they normally receive. These highly paid executives join a growing number of presidents of private universities who also receive more than $500,000 per year -- 27 last year, up from 12 the year before, according to the latest research by The Chronicle, reported this week.
Salaries of that magnitude are relatively new; two decades ago, almost no college president would have earned more than $150,000. For years, the story line of most newspaper reports on presidential pay was that the football coach, the head of the affiliated hospital, and the more successful surgeons in the medical school were all making substantially more than their CEO. Now, universities seem to be in danger of accepting the same rapidly escalating presidential salaries that many other organizations have already embraced.
Are such large presidential paychecks justified? It is hard to tell. Setting the appropriate compensation for CEO’s of nonprofit organizations is notoriously difficult. Precise performance indicators on which one can base a conclusion, like stock prices or annual profits, don’t exist. Nor are comparisons among different universities much help. Presidential pay, even at leading institutions, varies too widely to throw much light on the matter -- and one must still ask whether any of those salaries are based on anything more than sheer guesswork. Broader comparisons are even less fruitful. On the one hand, if corporate CEO’s earn as much as $50-million a year, who can complain about paying the head of the vast University of Texas System a paltry $800,000? On the other, why should any college president make twice as much as the president of the United States, or four times the secretary of state?
High salaries are usually justified either because they are necessary to attract the talent needed for the job in question, or because the incentives they provide will improve the performance of the recipient. In the case of university presidents, neither rationale works very well. There is little evidence that trustees need to offer $500,000, $600,000, or $800,000 per year to attract talented people to the presidency. Many of the very best institutions pay their presidents between $300,000 and $400,000, and most of the recipients would probably serve for less. After all, few presidents enter college administration and accept leadership positions to make money. For them, the real appeal of the job is the chance to make a difference, to exercise influence in a worthy cause, to deal with interesting issues and tackle challenging problems. Many faculty members would regard a president who had to receive $750,000 to accept the job as lacking the values and aspirations that academic leaders ought to have.
It is even harder to justify high salaries as a necessary incentive to ensure high performance. Corporate CEO’s receive most of their gargantuan compensation in the form of stock options, which (allegedly) tie their pay to the company’s stock price. But it is impossible for university trustees to link salaries to performance, because there is no accepted way to measure the progress of the institution, let alone the contributions of its president. The most widely used indexes of a college’s standing, the annual ratings of U.S. News & World Report, are notoriously unreliable and depend on factors like SAT scores and faculty reputations, which are beyond a president’s immediate control.
Presumably, trustees think they are taking performance into account when they vote a hefty salary increase for their president. They base their judgment on various bits of evidence: successful fund raising, growing numbers of applicants for admission, indications of alumni satisfaction, impressions derived from trustee meetings of intelligent leadership and sound judgment. Few thoughtful presidents, however, believe that anyone, including themselves, can have an accurate view of their overall performance. A university’s goals are so ambiguous and progress so difficult to measure that it is hard to assess the significance of most presidential policies and decisions. Moreover, almost everything that matters in an institution -- the quality of education, the creativity of the faculty, even the amount of money raised -- is the work of so many hands that no one can be certain of the president’s role in obtaining the final results.
Trustees, like most people, probably overestimate their CEO’s accomplishments. According to Michael D. Cohen and James G. March, authors of the best-known study of the college presidency, Leadership and Ambiguity: The American College President (McGraw-Hill, 1974): “Decision making in the university seems to result extensively from a process that decouples problems and choices and makes the president’s role more commonly sporadic and symbolic than significant. Compared to the heroic expectations that he and others may have, the president has modest control over the events of college life. The contributions he makes can easily be swamped by outside events or the diffuse qualities of university decision making.”
Although trustees are unlikely to have a clear sense of how well their president has performed, they presumably know enough to distinguish an able leader from an inept and unsuccessful one. Such judgments doubtless help a board to decide whether to offer a 10-percent salary increase, a raise that merely covers the rise in the cost of living, or a notice of an intent to start looking for a new CEO. But they are no help at all in deciding whether a president is worth $300,000 per year or $800,000.
To reach a sound decision about the president’s base salary, one would need, at the very least, to compare the performance of presidents at similar universities. But if most trustees have difficulty measuring the performance of their own president, they are completely in the dark about the work of presidents at other institutions. That is why compensation levels at major universities vary so erratically, and why presidents rarely see any correlation between the list of the highest paid CEO’s and their own rough impressions of the relative quality of presidential or institutional performance.
The fact that trustees have no convincing way to justify large presidential salaries does not necessarily mean that such salaries are harmful. By itself, paying $200,000 or $300,000 extra hardly matters in a multibillion-dollar budget, especially if enthusiastic alumni contributed the money for that purpose.
But lavish compensation can hurt a university by undermining the effectiveness of campus leadership. Unlike corporations, colleges are collegial rather than hierarchical. As their presidents frequently (perhaps too frequently) proclaim, they are “communities of scholars,” populated by independent teachers and researchers who are protected by tenure and instinctively resistant to commands from above.
Presidential leadership is still essential to provide direction, defend essential values, and distribute resources, but it must be a special kind. No one ever improved teaching or brought about better research by issuing orders or promulgating elaborate strategic plans. Instead, successful leadership depends on eliciting enough respect from faculty members to command their attention and cause them to respond to persuasive arguments about institutional needs.
A huge presidential salary tends to exacerbate tensions that too often exist between faculty and administration. Rather than helping presidents assume the role of primus inter pares, it makes them a breed apart.
The harm that results may not be visible to trustees much of the time. At critical moments, however, when academic leaders need to rally the faculty to make special efforts for the good of the institution, the distance between highly paid presidents and their professors can be costly indeed. When hard times come and faculties are asked to assist in making cutbacks, presidents with huge salaries are not likely to inspire much sympathy or cooperation. When a strong voice is needed to urge faculty members to maintain appropriate teaching loads, reform the curriculum, or resist intemperate student demands, richly compensated leaders may find their words falling on deaf ears.
Presidential leadership -- and the loyalty and respect that it requires -- is especially important today. Now that scholarly expertise has become so valuable to powerful institutions in our society, professors have unprecedented opportunities for making money -- consulting with corporations, teaching for for-profit Internet companies, starting their own businesses. In this environment, a critical challenge for campus leaders is to prevent a gradual dispersion of faculty time and effort to outside pursuits.
Presidents cannot protect their institutions from such temptations by enacting regulations. They can prescribe minimum teaching loads and office hours, but they cannot ensure that courses will be taught well or that students will be advised with genuine care and concern. Professors will not agree to punch time clocks or tolerate intrusive efforts to police their behavior. Instead, rules that limit their outside activities will work only as well as they allow them to work.
If presidents are perceived by their faculties as distant figures with chauffeured limousines and out-of-scale salaries, they will hardly be credible when they exhort professors to spend less time outside their offices giving lectures or consulting for high fees. The influence of money is already too strong on many campuses, distorting priorities, distracting faculty members, and eroding academic values. Lavish salaries for campus CEO’s will only tend to make the problem worse.
Derek Bok is a university professor and president emeritus of Harvard University. His next book, Universities in the Marketplace, will be published next year by Princeton University Press.
http://chronicle.com Section: The Chronicle Review Volume 49, Issue 13, Page B20