The American Interest
Analysis by Walter Russell Mead & Staff
Winter for Higher-Ed College Presidents Make a Killing While Schools Struggle

Tuition revenue and enrollment for colleges are falling, but the people at the top aren’t feeling the pain. 2011 was a banner year for executive pay on campus, with college presidents raking in more money than ever before. Including bonuses and benefits, 42 presidents took home $1 million. Many of these presidents saw their pay double or triple over that year, according to data collected by the Chronicle of Higher Education. As the NYT reports, colleges defend these salaries by pointing to the need to retain top talent.

The boards at some of the highest-paying universities took pains to point out that such awards are an incentive to retain a successful president, and that the money is meant to recognize the achievements of the president’s total tenure.

Henry J. Nasella, the chairman of Northeastern’s board, released a statement explaining that the $2 million retirement benefit to Dr. Aoun was intended to ensure his continued service, and that since many of his major initiatives were still underway, “members of the board agree unanimously that continuing President Aoun’s leadership was among our higher priorities as trustees.”

It may be true that higher salaries help attract better presidents, but with revenue sources getting weaker, most colleges should be looking for a ways to cut back, not spend more. Administrative spending, in particular, has always been a key driver of the exploding cost of college, and is where most of the cutting ought to begin as colleges tighten their belts. If lower-level administrators and faculty begin to feel serious cuts, these massive salaries for presidents will become much more difficult to defend.

Published on December 16, 2013 3:35 pm
  • free_agent

    Hmmm… The question is whether the $2M president is worth $1M more than the $1M president. Looking in from outside, it’s hard to tell.

    I look at it in this way: In one particularly lucrative year, the CEO of GM made $600M. And it was not a particularly good year for GM (it wasn’t having any of those by the time I stumbled into this event). But it was also only $6,000 per GM employee, so it was a rather small part of the overall budget. And while I’d be perfectly glad to take the job for only $1M, saving GM $599M, I would certainly make errors that he would not, and those errors would cost GM billions.

    In the college situation, I suspect that panic is starting to set in. Consider that the colleges with the best presidents will win the competition and survive the increasingly harsh competition, while the ones with less effective presidents will fold. Given the near-mathematical certainty that a substantial fraction of colleges will fold, having a second-quality president may not be worth any savings in salary.

    • Andrew Allison

      I look at it this way: while GM’s performance most certainly doesn’t justify the salaries paid its senior executives, they are employees of a public company with revenues of $150B. How much revenue does a college produce and what’s the administrative overhead? Given the nature of the Academy, the President is nothing but a figurehead. BTW, I’m hoping for some commentary from WRM on Bard’s tolerance of masked Islamist activism on campus.

      • free_agent

        I would say that it’s not at all clear that the senior executives of GM are not worth what they’re paid. Ironically, due to the number of large companies that perform poorly, the value of a CEO that is even mediocre may be quite high, as the next-best possibility might cause the company to do much worse.

        In regard to college presidents, their first job is bringing in money. And as the situation gradually gets more difficult, the president is going to become increasingly important in forcing the policy changes needed to keep the college alive.

        • Andrew Allison

          Some metrics for the performance of GM’s management: market share, profit and the multibillion dollar fiasco that is the Volt.
          Your second paragraph suggest that you must be a college president [grin]. I suspect that college revenue comes from four primary sources: endowments, philanthropists, alumni, and tuition. What the president has to do with any of that is far from clear.

          • free_agent

            Well, the president of my alma mater is working very hard to increase alumni giving (which is quite low for a college of its type). A week ago, he was in Boston hosting a lunch for alumni, making the pitch. We are told that he makes about 20 such trips each year. I don’t know anything particular about how or whether he’s directly involved in soliciting major philanthropic gifts, but if he’s willing to hustle alumni for a few hundred dollars each, it seems likely that he’s involved in the million-dollar deals.

          • Andrew Allison

            And how much is he paid?

  • Tom Myers

    Executive pay trickle down and overall administrative costs… Paying a university president $1mil may not be a big problem for a budget measured in hundreds of millions. However, if the president’s pay package helps raise the compensation of direct reports, VP’s, etc etc then overall, generous compensation at the top is a large problem.

  • tweell

    The question is: what does a college president do that adds value, and how much? Folks don’t go to a specific college because of a specific president, they go because of a reputation generally built up over decades. Comparing corporations and universities is definitely apples to oranges.

    • rheddles2

      They build the endowment and put up with professors. Mark Hopkins on a log they aint.