A small but growing number of colleges and schools are offering a new incentive to presidents to meet goals. The colleges are now linking salary raises and bonuses for college leaders to results, writes Rebecca Trounson of The Hechinger Report. Massachusetts Bay Community College President John O’Donnell, like most American college and university leaders, is under pressure to boost graduation rates and make students ready for jobs.
“College presidents need to be accountable,” said O’Donnell, a self-professed advocate of the idea that presidential pay be used to reward good performance, and whose board of trustees has recommended that he get the relatively modest maximum allowable incentive bonus of $7,390 for this, on top of his $211,150 base pay.
Previously, presidential evaluations were almost a formality at many colleges and raises often rubber-stamped, according to Patrick Callan, president of the National Center for Public Policy and Higher Education.
The process appears to be undertaken “just to justify extravagant salaries, or is way too focused on fundraising,” Callan said. In other cases, “it’s like they put the presidents on trial,” and every constituency—faculty, donors, students—is invited to weigh in, said Callan. “That’s just a killer. It creates presidents who won’t take risks.”
Linking executive compensation to specific performance goals has been drifting slowly into higher education from the corporate world, where executives and leaders get rewarded for meeting business goals. Parents and politicians are putting the same pressure on universities and colleges leaders that shareholders put on CEOs.
Yaffe & Company, an executive compensation consulting firm, said that about a third of presidents of private colleges and universities are now entitled for variable pay or pay for performance. The agency said that 64% of those received their maximum possible incentive bonuses last year, which came to an average of $34,000 each.
Public universities are also moving towards performance-based presidential compensation. In December of this year, for the first time, the heads of the nine universities and six health centers of the University of Texas System received bonuses equal to as much as 10% of their salaries based on their cost savings, growth in research grants, fundraising, graduation rates, and other measures.
Former Indiana Governor Mitch Daniels, who took over in January as president of Purdue, is paid $420,000 a year with the potential to earn an additional $126,000 tied to goals, such as lowering students’ debt.
Some critics complain that presidents should not be paid extra for doing things that seem to fall under their job descriptions—especially with money tight.
In September, the Arizona Board of Regents voted to give $40,000 each in incentive pay to the presidents of Arizona State University and the University of Arizona, who make base salaries of $475,000 each, plus more than $250,000 a year in other benefits.
Each president is due for another $40,000 in incentive bonuses in 2014 and up to $180,000 the year after that if they can lower the cost of health care, attract more students and research funding, and lower the number of dropouts, among other things.
In Massachusetts, O’Donnell and the presidents of the state’s other 14 community colleges and nine state universities will be evaluated under new guidelines linked to policy priorities set by Commissioner of Higher Education Richard Freeland, including raising graduation rates and closing achievement gaps, among others. The presidents will be eligible for bonuses of up to 3.5% based on how closely they meet these targets.