Are University Presidents Paid Like CEOs?

(Photo: Will Folsom)

The Chronicle of Higher Education just published its survey of public university presidents’ compensation, which rose 4.7 percent, with four presidents receiving more than $1 million. During that year, public university faculty salaries rose less than 2 percent, a discrepancy that replicated the previous four years. Why the difference?

Market explanations would be that these wages reflect jobs increasingly well done relative to faculty performance (increasing relative productivity) and/or increasing difficulty in attracting talent.  The first explanation is not credible: having taught at public universities for 40 years, I’ve seen the quality of public universities decline compared to private universities.  (In 1969, one could argue that 3 of the top 10 economics departments were at public universities.  Today, only 1 is.)  Nor is there a dearth of high-quality potential university presidents.

The best explanation is the same as that for increasing relative CEO salaries: cronyism between board members (Trustees and Regents) and the university presidents whom they appoint and meet with.  Are university presidents increasingly superstars or schnorrers? You decide — it’s your tax $!

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  1. Mark says:

    University presidents are paid, in part, on how well they can raise funds for their university’s programs and endowments. I know that was a factor in setting the salary of the University of Washington president’s position. Sadly, that has little to do with faculty performance and is somewhat of a factor in recruiting talent.

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  2. Joe in Georgia says:

    I agree with Mr. Hamermesh. People at the heads of public or private organizations should have clear methods for determining their salaries based on objective measures of their organizations overall performance. Boards are made up of people who are highly capable and generally more successful and intelligent than the common person. These folks have affinity for and over-estimate the value of people in their positions. One could argue that they would not be in this position if they did not have an inflated estimate of self worth. So they see no issue with paying someone this kind of salary. If any of them believe that it is a little on the high side, they surely feel that this is the least of an organizations excesses. Sort of like university professors with tenure. While the top .01% probably deserve such guarantees (and would get them in contract terms), the vast majority of university professors are quickly replaceable with low relative costs. That is why tenure is bad economics.

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    • Joe D says:

      I accidentally clicked “like” instead of “reply” the first time. Oh, well.

      Nice turn from presidential salary to an attack on tenure. Tenure may be “bad economics,” but it’s good academics. Tenure is what allows university administrations to resist (usually) outside political pressure to fire an academic who may be studying difficult, uncomfortable, or politically incorrect topics. Don’t believe anyone who tells you that a tenured professor can’t be fired. They just can’t be fired without a finding of actual misconduct.

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      • Joe in Georgia says:

        Please see my reply to Kaye further down, I answer why I change the subject to tenure. But to summarize:
        I can’t say whether tenure is a good or bad idea, but I certainly take issue with Professor Hamermesh’s saying that the minimum wage is a bad economic policy/idea (in a previous post) but then proceeding to defend another bad economic policy in university tenure. If you are going to make a non-economic defense of tenure, then you must be able to see or at least admit to a non-economic defense for minimum wages. The fact that it wasn’t that long ago that we had prepubescent children working 12 hours a day in the most horrible conditions for pennies in the USA and it still happens in other parts of the world.

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  3. Joe says:

    To be fair, Dr. Spanier’s large compensation was due to severance pay and not a pay raise. Including him (slightly) skews the results.

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  4. Pete says:

    If only there was some group of economists who use interesting techniques to answer empirical questions like this one.

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  5. James says:

    I would first ask what you are using for your quality metric(s). Judging the quality of an entire university by its economics department is more than a little biased.

    Unfortunately, I suspect those appointing university presidents judge quality by the success of the football team – certainly the case for the local state university.

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  6. Nil says:

    It is all about the Lake Wobegon effect. Nobody wants to admit they have a below average University President or a below average CEO least of all those in charge of hiring them. Thus their compensation needs to be set above average compared to heads of similarly sized Universities and companies.

    Every year data is collected showing the average salaries of these organizational leaders and then most organization react by either increasing their leaders compensation to make sure their above average leader receives at least a slightly average salary package or in the rare cases where the board agrees that their organizations leader really isn’t worthy of an above average salary then they are actively looking to replace them with a new leader who will be worth it. Thus year after year average compensation spirals upward.

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  7. Brian N says:

    I agree the issue is worth exploring, what is also worth noting is that generally tax dollar support for institutions is decreasing– meaning even public institutions are more private– and as noted in other posts, ability to raise money is a leading factor in who is eligible for the job.

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  8. Me says:

    “Your money?” That sure is stoking a fire. It’s very little of your money – and even less taxes that go to public univiersities. Just because I put in 3 cents a year on a section of highway doesn’t mean I get to setup a tent on it or paint it fluorescent yellow.

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