December 3, 2004

How Much Should Your President Get?

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Are university presidents CEOs? And does that entitle them to the similar benefits and compensation that CEOs of Fortune 500 companies receive?

Congress and the Internal Revenue Service have begun to ask that question about the chief executives of nonprofit organizations in general as presidential pay scales have recently taken off.

This past June, the Senate Committee on Finance suggested it would introduce legislation limiting nonprofit pay scales. In July, the IRS began to scrutinize the pay of officers of nonprofit institutions, including some universities, by sending out over 2,000 letters to institutions seeking more information.

According to Mary Opperman, Cornell’s vice president of human resources, the University was not included in that batch of 2,000 institutions, although she did say that she and Cornell welcome such governmental scrutiny.

In the 2003 fiscal year, 42 university presidents earned over $500,000, and seven presidential salaries rose as high as $800,000. In 1994, two presidents received compensations worth $500,000 or more. Two thousand and three saw a 56-percent increase in salaries and benefits.

This rise in pay has been justified by the fact that schools compete to land the best executive in the same manner that corporations compete, and that they are responsible for the organization of a complex structure, according to University officials.

“Cornell is a very large enterprise and in some ways more complex than a private corporation,” said Peter C. Meinig ’62, chair of the Board of Trustees.

He continued: “Cornell pays its president a salary that is commensurate with the size and status of [this] institution.”

Meinig said that the Board of Trustees has a compensation committee that carefully examines the trends in salary at peer institutions.

But some critics fear that these pay scales establish dangerous precedents.

“If you treat [university presidents] more as CEOs of private corporations, then they will begin to act as such,” said John Curtis, director of research at the American Association of University Professors (AAUP).

“This puts presidents and administrators into a separate context or track and seems it can begin to separate them from the faculty,” he said.

Tommy Bruce, vice president for media relations, Simeon Moss, deputy director of Cornell News Service, and Opperman emphasized the complex nature of running Cornell in a meeting yesterday with The Sun.

The University has over 10,000 employees on the payroll in Ithaca and an operating budget between $2-2.5 billion.

According to the Chronicle of Higher Education, the pay scale for universities is anything but consistent. Rev. Robert A. Wild of Marquette University receives zero in compensation while serving as its highest official. On the other side of the scale, however, William R. Brody of Johns Hopkins University receives $897,786.

According to the University’s 990 tax form, for fiscal year 2003 Cornell’s president, Hunter R. Rawlings III, received a total compensation of $558,693. He was paid a base salary of $206,393 and received $352,300 in unspecified benefits and an additional $34,200 in expense accounts.

The 2004 fiscal year figures have not been released, and numbers for President Jeffrey S. Lehman’s ’77 2004 compensation were unavailable.

Over Rawlings’ tenure, his annual base increased from $199,580 when he began in 1996-97. But his benefits rose from $137,175 in 1996-7 to $352,300 in his final year.

An anonymous Cornell staffer familiar with Rawlings’ compensation figures said he took offense to the fact that Rawlings “earned this pay while presiding over a hiring freeze and a lower than cost of living raises for staff.”

Opperman disagreed with this statement and said in response, “During Cornell’s last eight fiscal years, the Consumer Price Index for all urban consumers increased by 18.4 percent. In comparison, Cornell staff salary improvement pools totaled 35 percent during those eight years.” Rawlings’ pay was the fourth-highest among the Ivies.

All of the Ivy presidents, except the former head of the University of Pennsylvania, Judith Rodin, had total compensations within the range of $400,000 to $600,000.

Rodin received $893,213 in total compensation.

The AAUP has no official position on a solution to the spiraling pay scales. But, according to Curtis, one concept that has been discussed is to “relate faculty to [executive] pay scales in some way.”

Opperman disagreed with this solution, saying that professors in different specialties are not paid comparable salaries, and that this would only be an arithmetic disaster.

According to the University’s 990 tax form, some of the University’s highest-paid employees are professors at Cornell Weill Medical College in New York City. A handful of reproductive and cardiothoracic professors make seven figures.

University Provost Biddy Martin, in contrast, made a base salary of $312,062 and $47,747 in benefits in 2003.

Opperman stressed the importance of the marketplace for both professor and executive pay. The market does not allow for the same pay for a humanities professor as a life sciences professor.

Meinig agreed with Opperman’s emphasis.

“Cornell, and universities in general, remunerate [presidents] at a lower level than what is dictated by the private marketplace. The marketplace determines the pay and I am a firm believer in the marketplace,” he said.

Curtis noted that this escalation of presidential compensation is merely a symptom of a greater problem.

“The underlying problem is the lack of public finance for universities,” he continued. “Financial aid has not kept up with the cost of education or even the cost of running of a university.”

Both Opperman and Meinig agreed in part with Curtis.

“In any organization as enormous as ours, if one source of revenue declines you either reduce expenses or you need to find another source of revenue,” Meinig said.

Curtis said that as universities have become more corporate and more interested in the bottom line, “presidents have become fundraisers.”

“We need to make a more significant effort to fund higher education in this country especially since we consider it a benefit to the greater good,” he said.

Archived article by Michael Margolis
Sun Senior Writer