Organizations and Markets

Newsflash: University Presidents Make Good Money

21 November 2006 at 12:06 pm Peter G. Klein Leave a comment

| Peter Klein |

The Chronicle of Higher Education has released its annual executive compensation report. Most of the contents are behind a subscription firewall. Fortunately, Richard Vedder has summarized the key results. Among them:

The findings continue trends in the last few years: compensation is up, and increased use of non-traditional forms of pay are evident — performance pay, deferred compensation, and other perks. The prosperity of higher ed is continuing to show up in the pay of the leaders of our institutions.

Moreover, two other trends appear to be continuing:

1. Salaries in research universities are rising much faster than in liberal arts colleges or schools with modest graduate work.

2. Presidential salaries are growing faster than those of mainline employees, including faculty, at least at the more prestigious institutions, not to mention the employment income of ordinary Americans.

Vedder follows with some pointed questions.

Higher Education Establishment types would note corporate leader salaries are rising even faster, that the job of college president is getting harder, and that the risks of getting discharged are rising, increasing the “combat” pay dimensions of the job. There is some truth in all of this.

At the same time, however, these trends are very worrisome and troublesome in other regards. Higher education professes to be a higher calling. We subsidize it rather than tax it. The public sacrifices to allow it to exist and flourish beyond what strictly market forces would dictate. University presidents are perceived by the public that subsidizes schools to be more akin to governors of states or ministers or priests –performing public services, for which they can expect to be comfortably paid, but not opulently so. I suspect most people believe a good university president of a fairly large institution should have the income of a highly successful doctor or lawyer, perhaps a $250,000 to $300,000 salary, a nice car, and maybe a stately presidential home for use while in office. If the president wants to earn perhaps another $50,000 to $100,000 a year serving on a corporate board, that is okay too. We want to reward our university presidents reasonably well, but not at the level of corporate executives. When salaries get over, say, $500,000 a year, and, in some cases, over $1 million annually, we have every right to wonder: are the public subsidies we give universities increasingly ending up as “economic rent”, payments beyond what is necessary to have the service performed? Are university presidents selfless servants of the public trust, or money-hungry entrepreneurs? Why are we dropping money out of airplanes over college campuses, if the keepers of the purse are increasingly giving the money to themselves?

Entry filed under: - Klein -, Institutions, Teaching.