Boards say the high pay is justified
Sticking around even when times were tough paid off in a huge way for the president of Lynn University.
Donald E. Ross, who for 34 years has led the college in Boca Raton, Fla., that he brought back from bankruptcy, was the highest-paid college president in the 2003-4 fiscal year, with a whopping $5.04-million compensation package. He earned a salary of $477,017, and his benefits include $4.5-million in deferred compensation accrued during the fiscal year. In addition, his expense compensation was $391,698, which included a housing subsidy, car allowance and supplemental life insurance.
Besides Mr. Ross, four other presidents cracked the $1-million mark this year — a milestone long in the making for presidential-compensation packages that have risen steadily in recent years. The symbolic move into the seven-figure range may spark more discussion of presidential compensation, as the federal government starts seeking the logic behind high pay for leaders of nonprofit organizations, faculty members call for salary caps, and board members move to defend the amount that they pay college executives.
Christine E. Lynn is chairwoman of the university’s Board of Trustees, which voted last year to give Mr. Ross such a hefty retirement package. She says he deserves every penny of it.
“In the early years, he didn’t receive a salary and we had no money to put toward his retirement,” says Ms. Lynn — the university is named after her and her late husband. “We used any money we had for growth and expansion. There are very few presidents who would have stayed this long and he’s done an outstanding job.”
With Mr. Ross’s retirement looming, the board knew it had to play catch-up. It hired an executive-compensation consultant from KPMG who Ms. Lynn says helped the board arrive at the pay package that it approved for Mr. Ross. The eight-month process included intense discussions between the board and KPMG, which confirmed that it completed a compensation data report that the board would not make available to The Chronicle. The chairwoman of the board also declined to discuss in detail the specific criteria the board used to arrive at the amount. Mr. Ross will be paid the deferred compensation over three years once he retires in June 2006.
Increased Scrutiny
The point of hiring an independent expert, Ms. Lynn says, was to make sure the figure was “fair and in line” with what other similar institutions would have accrued in retirement savings for their presidents over such a long tenure. The university also wanted to make sure its retirement package would not trigger an investigation by the Internal Revenue Service under the section of its code informally known as “intermediate sanctions.” That allows the federal agency to financially penalize or tax a nonprofit executive and the individual board members who sanction excessive compensation.
Still, such a large compensation package will almost certainly draw the attention of the IRS to the Florida institution that recently resumed its classes after being shut down by Hurricane Wilma. The scrutiny of nonprofit executive pay is now at its highest level in recent years, and the IRS is in the midst of auditing about 2,000 nonprofits, including an undisclosed number of colleges and universities.
The Lynn retirement package “is going to be viewed by a lot of people as excessive compensation by a nonprofit,” says Raymond D. Cotton, a Washington lawyer who specializes in presidential contracts and compensation issues. “There are guidelines out there. You don’t have to make them up.”
Key among those is using up-to-date data from institutions of the same size and complexity, say compensation experts and others familiar with presidential pay. Lynn University has about 3,000 undergraduate and graduate students and had revenue of $62.7-million in the fiscal 2004 year. Yet Mr. Ross’s salary alone is more than the 2004 fiscal-year salaries of presidents of larger, nationally known institutions, such as Tufts University, the Massachusetts Institute of Technology, and Wake Forest University. For example, Tufts had about 8,500 students and revenue of $577.6-million in the 2004 fiscal year, and the institution’s president received a salary of $436,167.
If Lynn is questioned by the IRS, the board may have to document how such a lofty compensation package could be set, using data from comparable institutions.
Boards of directors have become increasingly sensitive to intermediate sanctions as they grapple with the details of compensation packages for their presidents, says Richard T. Ingram, president of the Association of Governing Boards of Universities and Colleges. However, compensation data are often hard to come by, and many institutions are unable to afford the few consultants who can provide it, he says.
Boards need to use creative ways to get the information they need, Mr. Ingram says, but even after studying it, they still have to make judgment calls — such as where their president’s compensation should fall in the range of peer institutions, or how to reward a long-serving chief.
Mr. Ross’s deferred compensation, reported on the federal tax returns that nonprofits must file each year, will amount to roughly 65 percent of his current salary for the rest of his life, says Lynn University’s vice president for business and finance, Laurie Levine. Mr. Ross is 66 years old. Until now, he had accrued $500,000 in deferred compensation, which the university began to contribute in the early 1990s as its finances became more stable, Ms. Lynn says. Mr. Ross would not speak to The Chronicle for this article.
$1-Million Milestone
Mr. Ross is followed in the survey ranking by Audrey K. Doberstein, president of Wilmington College, in Delaware, whose salary and benefits totaled $1.37-million. Ms. Doberstein became president at Wilmington College — which Mr. Ross founded — in 1979. She retired in June.
E. Gordon Gee, chancellor at Vanderbilt University, was the third-highest-paid president in this year’s survey, the same as last year. In the 2004 fiscal year he received $1.33-million in total compensation from Vanderbilt. He made as much as $275,000 by serving on five corporate boards.
Other presidents whose annual packages were more than $1-million are John R. Silber, longtime president of Boston University, with $1.25-million in salary and benefits, and John M. McCardell Jr., former president of Middlebury College, with $1.21-million in annual compensation. Mr. Silber stepped down in October 2003, and Mr. McCardell stepped down in June 2004, after 13 years as president.
The millionaires’ club is likely to grow next year because the remaining presidents in the top 10 have compensation packages hovering around the $900,000 mark.
The annual growth of presidential salaries, often with the help of incentive bonuses and deferred compensation, “emulates some of the worst aspects of corporate America,” says Robert H. Atwell, former president of the American Council on Education. “Rather than emulate it, we ought to be deploring it. I think it’s bad to see this kind of run-up.”
A Shrinking Pool
But the pay increases are triggered by factors that can’t easily be controlled. The job of president requires incessant fund raising, long workdays, and the ability to manage enterprises that often mirror for-profit companies. Landing and keeping someone who can handle the job typically requires increasing his or her current pay.
“Most search committees are typically risk averse, so they want to go with people who have more experience rather than less,” says Shelly Weiss Storbeck, vice president of the education practice at A.T. Kearney, Inc.
And although “compensation isn’t the only thing” that works in wooing a president to a college, “it’s absolutely something that gets people’s attention,” says Jean A. Dowdall, a vice president at Witt/Kieffer, who specializes in searches for presidents, vice presidents, and deans.
Roger W. Bowen, general secretary of the American Association of University Professors, agrees a college president’s job is a tough one. But, says the former college president, “Having said that, what’s a fair salary? Is it time to look at salary caps?”
The median compensation for college leaders, the point at which half make more and half make less, has increased as well. The median for research university presidents rose 2 percent to $468,704 — not adjusted for inflation. The median went up 6.2 percent to $208,271 for master’s institutions. At liberal-arts colleges, the median went up by 4.7 percent to $243,541.
Although longevity in the president’s office translated into big pay for some of this year’s top earners, academe’s highest-paid leader worked for an organization that was only affiliated with a university. The top earner is Jack R. Meyer, the former president of the company that manages Harvard University’s endowment. His salary and benefits from Harvard Management Company came to $7.2-million.
LEADERS IN TOTAL COMPENSATION AT PRIVATE COLLEGES, 2003-4 Total compensation listed covers pay and benefits and does not include income from corporations. Doctoral/Research Universities | Audrey K. Doberstein, Wilmington College (Del.)1 | $1,370,973 | E. Gordon Gee, Vanderbilt U.2 | $1,326,786 | Annual compensation from corporate sources: As much as $275,000 in annual pay for membership on the boards of Dollar General Corporation, Gaylord Entertainment Company, Hasbro Inc., Limited Brands Inc., and Massey Energy Company, plus stock options and shares. | | John R. Silber, Boston U.3 | $1,253,352 | Shirley Ann Jackson, Rensselaer Polytechnic Institute | $939,346 | Annual compensation from corporate sources: As much as $525,500 in annual pay for memberships on the boards of AT&T Corporation, Federal Express Corporation, Marathon Oil Corporation, Medtronic Inc., Public Service Enterprise Group, and United States Steel Corporation, plus stock options and shares. She also received $60,000 in annual pay for membership on the board of the New York Stock Exchange. | | Judith Rodin, U. of Pennsylvania4 | $934,922 | Annual compensation from corporate sources: As much as $318,000 in annual pay for memberships on the boards of Aetna Inc., AMR Corporation, Comcast Corporation, and Electronic Data Systems, plus stock options and shares. | | John E. Sexton, New York U. | $897,139 | William R. Brody, Johns Hopkins U.5 | $895,774 | Annual compensation from corporate sources: As much as $96,000 in annual pay for memberships on the boards of Medtronic Inc. and Mercantile Bankshares Corporation, plus stock options and shares. He also served on the board of Aegon USA, the privately held American subsidiary of Aegon NV, a Dutch insurance company. | | Harold J. Raveche, Stevens Institute of Technology | $858,499 | Annual compensation from corporate sources: As much as $28,000 in annual pay for his membership on the board of Merrimac Industries, plus stock options and shares. | | Benjamin Ladner, American U.6 | $814,177 | Kenneth A. Shaw, Syracuse U.7 | $802,731 | Annual compensation from corporate sources: Unspecified amount from service on the board of a private company, Unity Mutual Life Insurance Company. | | 1 Ms. Doberstein stepped down in June 2005. Benefits include $699,877 in deferred compensation. 2 Benefits include deferred compensation that had not yet vested. 3 Mr. Silber served as chancellor from July 2003 through October 2003. Compensation includes $513,333 of leave benefit that was earned at the rate of one full year of salary for every five years of service and $334,241 in imputed taxable income from an insurance policy. The balance of $183,333 is his salary as chancellor. 4 Ms. Rodin stepped down in June 2004. Benefits include $180,000 in deferred compensation that has not vested and is subjectto forfeiture. 5 Mr. Brody was paid $505,323 by the Johns Hopkins U. and $175,000 by Johns Hopkins Health System, a nonprofit affiliate of the university. 6 Mr. Ladner stepped down in October 2005. 7 Mr. Shaw stepped down in August 2004. | Master’s Institutions | Donald E. Ross, Lynn U.1 | $5,042,315 | James P. Gallagher, Philadelphia U.2 | $938,816 | John R. Brazil, Trinity U. (Tex.)3 | $638,542 | Annual compensation from corporate sources: As much as $84,000 in annual pay for membership on the board of Caterpillar Inc., plus stock options and shares. | | I. King Jordan, Gallaudet U. | $577,723 | Jerry C. Lee, National U. (Calif.) | $562,500 | Joseph G. Morone, Bentley College4 | $505,241 | Annual compensation from corporate sources: As much as $111,000 in annual pay for memberships on the boards of Albany International Corporation and Trans World Entertainment Corporation, plus stock options and shares. | | John L. Lahey, Quinnipiac U. | $498,000 | Annual compensation from corporate sources: As much as $55,000 in annual pay for memberships on the boards of Aristotle Corporation, UIL Holdings Corporation, and the United Illuminating Company, plus stock options and shares. | | David J. Steinberg, Long Island U. | $479,611 | William E. Cooper, U. of Richmond | $478,697 | Thomas E. Corts, Samford U. | $462,233 | 1 Benefits include $4,500,000 in deferred compensation accrued over one year. 2 Pay includes $108,066 in deferred compensation accrued over 10 years. Benefits include contributions to a deferred-compensation plan. 3 Compensation includes performance and longevity bonuses and a 10-year retention loan. 4 Mr. Morone stepped down in May 2005. Pay includes $72,702 for a bonus and tuition remission, and his benefits include $52,500 in deferred compensation. | Baccalaureate Institutions | John M. McCardell Jr., Middlebury College1 | $1,213,141 | Richard H. Hersh, Trinity College (Conn.)2 | $905,931 | Arthur J. Rothkopf, Lafayette College | $603,602 | Annual compensation from corporate sources: As much as $30,094 in annual pay for membership on the board of Bristol West Holdings Inc., plus stock options and shares. He also served on the board of Insurance Services Office Inc., a private company. | | James F. Jones Jr., Kalamazoo College3 | $542,606 | Russell K. Osgood, Grinnell College | $508,795 | Kathleen G. Bowman, Randolph-Macon Woman’s College | $495,963 | Douglas J. Bennet, Wesleyan U. (Conn.) | $488,230 | Larry P. Arnn, Hillsdale College | $476,930 | Msgr. Milam J. Joseph, U. of Dallas4 | $471,419 | Nancy S. Dye, Oberlin College | $458,382 | 1 Mr. McCardell stepped down in June 2004. Benefits include a payment of $850,000 accrued in a supplemental executive-retirement program. 2 Mr. Hersh stepped down in August 2003. Benefits include the deferred portion of a severance contract. 3 Mr. Jones stepped down in June 2005. 4 Monsignor Joseph stepped down in December 2003. | SOURCES: Institutions’ federal tax filings; corporate reports to the U.S. Securities and Exchange Commission for the 2004 fiscal year; Chronicle reporting | |
PRIVATE-UNIVERSITY PRESIDENTS WITH TOP ANNUAL COMPENSATION, 2003-4 -
Donald E. Ross Lynn University Total annual university compensation - $5,042,315
- $477,017 in salary
- $4,565,298 in benefits, including $4,500,000 in deferred compensation accrued over a year
Additional annual compensation from corporate sources -
Audrey K. Doberstein* Wilmington College (Del.) Total annual college compensation - $1,370,973
- $662,500 in salary
- $708,473 in benefits, including $699,877 in deferred compensation
Additional annual compensation from corporate sources * Ms. Doberstein stepped down as president in June 2005. -
E. Gordon Gee Vanderbilt University Total annual university compensation - $1,326,786
- $898,715 in salary
- $428,071 in benefits, including deferred compensation that had not yet been vested
Additional annual compensation from corporate sources - As much as $275,000 in annual pay for membership on the boards of Dollar General Corporation, Gaylord Entertainment Company, Hasbro Inc., Limited Brands Inc., and Massey Energy Company
- Stock options and shares in companies on whose boards he served
SOURCES: Institutions’ federal tax filings; corporate reports to the U.S. Securities and Exchange Commission for the 2004 fiscal year; Chronicle reporting |
WHAT PRIVATE-COLLEGE PRESIDENTS EARN Over $300,000 | | $200,001 to $300,000 | | $100,001 to $200,000 | | $1 to $100,000 | | Nothing | | Note: Figures do not add to 100 percent because of rounding. The statistics do not include specialized institutions. | SOURCE: Chronicle reporting | |
TRENDS IN THE MEDIAN COMPENSATION OF PRIVATE-COLLEGE PRESIDENTS | Inflation adjusted (2004 dollars) | Doctoral/Research Universities | 1999-2000 | | | 2000-1 | | | 2001-2 | | | 2002-3 | | | 2003-4 | | Master’s Institutions | 1999-2000 | | | 2000-1 | | | 2001-2 | | | 2002-3 | | | 2003-4 | | Liberal-Arts Colleges | 1999-2000 | | | 2000-1 | | | 2001-2 | | | 2002-3 | | | 2003-4 | | Note: The Carnegie Foundation for the Advancement of Teaching changed its classification system in 2000. Most of the institutions that shifted categories did so within the Doctoral/Research category, so the institutions are largely the same for this historical comparison. The number of liberal-arts colleges increased by about 25 percent. | SOURCE: Chronicle reporting | |
PRIVATE-UNIVERSITY PRESIDENTS IN TOP PAY BRACKETS, 2004 Fifty presidents of private colleges earned $500,000 or more in the 2004 fiscal year, a 19-percent increase from the previous year. Compensation for presidents has risen sharply in recent years, with five chief executives surpassing the $1-million mark. Number of presidents with salary and benefits worth $500,000 or more | 1995 | | 1996 | | 1997 | | 1998 | | 1999 | | 2000 | | 2001 | | 2002 | | 2003 | | 2004 | | Number of presidents in the highest-paid tiers in the 2004 fiscal year | $1-million or more | | $800,000 to $999,999 | | $700,000 to $799,999 | | $600,000 to $699,999 | | $500,000 to $599 | | Note: The statistics do not include specialized institutions. | SOURCE: Chronicle reporting | |
http://chronicle.com Section: Executive Compensation Volume 52, Issue 13, Page B12