Save colleges from the pitfalls of corporate greed

The Chronicle of Higher Education recently reported on the salaries of presidents of private colleges. The survey - quickly picked up by the mainstream press - showed that about a dozen presidents of private colleges made $500,000 annually in 2000, and that number jumped to 27 last year.

The Chronicle offered several involved explanations for why such a sharp increase had occurred. There may be a simple reason, however. Perhaps for college presidents, as for those at the top of other organizations, greed has become a virtue.

The experts quoted in the Chronicle article naturally did not put it that way. The representatives of executive search firms that specialize in education asserted that it was rare to find someone with impressive academic credentials, good management skills, and great leadership qualities. Not only is this talent pool small, but they maintained the ability to fundraise in the billions makes paying someone a half a million a no-brainer.

The article also explained that the Internal Revenue Service was planning to enforce a 1996 law that levied heavy fines on presidents and boards of trustees of nonprofit organizations, including colleges, who receive undue compensation. The threat of the IRS insisting on a justification for the salary a college president earns has supposedly struck such fear into the hearts of trustees that they now emphasize performance and are willing to pay generously for it.

Another possible explanation is the fact that, according to a study released Dec. 9 by the American Council on Education, 15 percent of college presidents in 2001 came from outside academia, which was nearly double the percentage in 1998. Perhaps those from outside the academic world are increasingly bringing their values with them and changing the thinking on compensation within the ivory tower.

Whatever the reason, the argument therefore seems to be that college presidents should perform like the chief executive officers of big corporations and should be well rewarded, though at a level still far less than your average CEO. Even at $500,000 a year, the top 27 college presidents are paupers compared with heads of major corporations. The average annual salary for the top 100 CEOs was $1.3 million 30 years ago, but now tops $37 million, according to Fortune magazine. In those three decades, the top executives' pay went from 39 times that of the average worker to more than 1,000 times what the ordinary Joe (or Jane) makes.

Today the top level of our government reinforces this greed-is-good attitude. President Bush, a former CEO, has a domestic policy that consists mainly of permanently eliminating a tax that only multimillionaires pay. (The emptiness of that domestic policy will be compensated for by an aggressive foreign policy, which is why we will be at war with Iraq a year from now.) And Vice President Dick Cheney, also an ex-CEO, returned to government work with a platinum parachute worth many millions.

The way the CEO's salary is set is an important factor because the CEO determines who is on the board of directors. Since the board determines the CEO's salary, the directors are chosen based on their willingness to pay the person selecting them an astronomical sum. As a result, it is not just the former head of Tyco that sees it as a constitutional right to spend $2,000 on a wastebasket. Such excess has become the prevailing ethic in corporate America.

One might argue that in academia the president does not select the trustees. Since it is the other way around, the system should protect against such a shift in values. However, college presidents have to raise billions by rubbing elbows with corporate elites making several dozen million. Would compensation envy be a surprising result? And many of the trustees are from the corporate world, where the measure of an individual's worth is the size of his or her paycheck.

In addition, they are advised on whom to hire by headhunters whose fees vary in direct relation to the salary of the person being hired. And as the pay at private universities rises, the public institutions are quickly increasing what their leaders get in order to keep up. Thus the upward spiral continues.

With presidential pay at private colleges perhaps, in my rough estimate, 20 times that of junior professors and 40 times that of the janitorial staff, the inequality in academia is only now approaching where the corporate world was 30 years ago. With tuition at the most expensive schools topping $30,000 a year, maybe the students will restrain the growth of excess more effectively than the stockholders were. In any event, it will be a struggle because at the top of our government, corporations, and colleges there seems to be an increasingly common version of Marie Antoinette's famous let-them-eat-cake attitude.

Dennis Jett is dean of the International Center at the University of Florida, and former US ambassador to Peru and Mozambique.

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