University leaders or superstar CEO's?

by Rob Schofield, NC Policy Watch, November 10, 2015.

Five reasons why giant salaries for UNC bosses are not the answer

North Carolina State University Chancellor Randy Woodson is very clearly a good guy. He is also, by many accounts, a fine chancellor and, if the recent gift that he and his wife gave to N.C. State to establish a scholarship fund is any indication, a person who cares about those less fortunate than himself.

All of that said, Professor Michael Behrent of Appalachian State was absolutely correct in a Progressive Voices column he wrote for N.C. Policy Watch last week in which he called on 12 UNC chancellors including Dr. Woodson to return the money they were recently awarded in massive pay raises.

Simply put, however excellent a chancellor Woodson is, it is simply wrong for the people of North Carolina to be paying him $590,000 per year. (A “stipend” from the private N.C. State Foundation actually raises Woodson’s overall compensation to $790,000 annually.) The same is true for the $570,000 UNC Chapel Hill chancellor Carol Folt now pulls in – not to mention the near $1 million per year package bestowed upon new UNC system president Margaret Spellings.

There are several reasons why such munificent pay packages ought to be out of order in our public universities – some obvious and some less so. Here are five that stand out:

#1 – If this is what “running government like a business” means, please spare us.

The argument repeatedly advanced by those who favor such massive salaries for university bosses and any other favored bigwigs (Pat McCrory used it as an explanation when he arranged big raises for several cabinet secretaries at the outset of his administration) is that such salaries are “what the market demands.”

You know how this argument goes because it’s the same circular excuse used by one-percenters and their apologists and enablers everywhere: “If we don’t pay big bucks to attract ‘superstars’ to run our companies (or government departments or universities), we won’t be able to ‘compete’ for the best talent.”

But, of course, this argument has been repeatedly debunked in the world of private commerce for decades. As economist Robert Reich has observed:

“CEOs don’t rake in 300 times the pay of average workers because they’re ‘worth’ it. They get these humongous pay packages because they appoint the compensation committees on their boards that decide executive pay. Or their boards don’t want to be seen by investors as having hired a ‘second-string’ CEO who’s paid less than the CEOs of their major competitors. Either way, the result has been a race to the top.”

As Reich also notes, how else to explain the massive compensation packages showered on the Carly Fiorinas of the world who ran their companies into the ground?

The simple truth is that, as with large American companies, universities aren’t that much harder to run than they were 30 or 40 years ago when leaders earned salaries that were nowhere near the princely sums paid today – either proportionately or in real dollar terms. What’s changed, of course, gradually but dramatically, are the ethics and values of the people in charge.

#2 – If we funded higher education adequately, we wouldn’t feel a need to employ “superstar CEOs” to run our universities. 

One area in which things have changed significantly for a lot of public university bosses in recent decades is in the area of fundraising. While hitting up wealthy alumni has almost always been an important part of running a college, the systematic underfunding of public higher education in recent years has clearly made fundraising a vastly more urgent matter.

Simply put, when tax dollars were adequate to assure that in-state students could attend UNC system colleges for next to nothing and literally work their way through school, raking in massive amounts of private cash from the rich was not as absolutely essential as it has become today for university leaders. In the mid-20th Century, a university boss might be judged as much for his or her relationship with faculty or students as any other part of their job performance.

Today, it’s clearly “all about the Benjamins.” In 2015, nothing signifies the “success” of a university leader more than his or her ability to attract big bucks from well-heeled donors. Little surprise then that boards of governors and trustees feel obliged to lure and retain “superstar” chancellors and presidents who can, in turn, hobnob with (and win the affections of) the nation’s new class of fat cat millionaires and billionaires. Why take a chance on simply promoting a veteran professor when hiring and fundraising consultants are advising you to bring in a high profile “brand manager”?

#3 – The big salaries are emblematic of an unhealthy explosion in college administration.

In his Progressive Voices essay, Professor Michael Behrent rightfully linked the explosion in the salaries paid to university bosses to the explosive growth in the number of college administrators:

“Chancellors’ and presidents’ salaries are, of course, only part of the much larger problem of the massive expansion of administrative positions on university campuses across the country. People like Margaret Spellings and her ideological compadres have for years been encouraging universities to take inspiration from corporate management techniques. But a funny thing happened on the way to the corporate university: it was discovered that to impose business-style efficiency on universities, a vast cadre of administrators was needed. According to a study of federal figures by the New England Center for Investigative Reporting, the number of non-academic administrative and professional employees in American higher education has more than doubled in the last 25 years: that’s a total of 517,636 administrators and professional employees, or an average of 87 added every working day. [The pay raise] decision is just another step in what Benjamin Ginsburg has called the ‘all administrative university.’”

Behrent’s critique echoes the arguments of Fredrik deBoer in a powerful recent article in the New York Times Magazine entitled “Why We Should Fear University, Inc.” in which he pointed out that:

“It’s not unheard-of for colleges now to employ more senior administrators than professors. There are, of course, essential functions that many university administrators perform, but such an imbalance is absurd — try imagining a high school with more vice principals than teachers.”

#4 – The salaries send a destructive message. 

Behrent was also correct when he blasted the massive salaries and raises for the message they send to everyone else. As he notes, since 2008, tuition has skyrocketed by more than a third in the UNC system while faculty salaries have remained stagnant. Similarly, the pay of most average state employees has barely kept up, if at all, with inflation while overall state median incomes are down significantly. The editorial page of the Charlotte Observer put it this way last week:

“It’s a troubling cycle in North Carolina and across the country. Administrator pay keeps rising, as does college tuition, and families are less equipped to afford it.

There’s also no escaping that while the people who make the most in the UNC system are about to make a lot more, faculty and employees got a comparatively puny, one-time bonus of $750 this year from the N.C. legislature….

We just don’t get it. If it’s important to take the long view on the men and women who lead our strong universities, why wouldn’t we do the same for all the people who make them great?”

#5 – The salaries were bestowed with a disturbing lack of transparency.

Finally, if there is an argument to be made for massive salaries and raises for the UNC chiefs, the least the people behind it could have done was to explain it to the citizens in a public forum. Unfortunately, the Board of Governors couldn’t even be bothered to do that. Instead, and in keeping with the typical workings of the modern corporate world, they adjourned to a closed session and approved the increases out of public sight en masse.

Going forward

Since the appearance of Behrent’s article criticizing the salaries, some N.C. Policy Watch readers have written to us to defend some of the chancellors as good people. Chancellor Woodson, in particular, was lauded by some for his generous philanthropy.

But, of course, that’s beside the point. The solution to exorbitant CEO pay is not more charity on the back end; it’s a renewed commitment to greater justice and societal equality on the front end. Let’s hope Professor Behrent and his colleagues continue to take advantage of this important teaching moment by emphasizing this powerful truth.

http://www.ncpolicywatch.com/2015/11/10/university-leaders-or-superstar-ceos/