Business Columns & Blogs

Higher-ed execs earn their keep

At least some of the grumbling attendant to the departure of Mark Emmert as president of the University of Washington is the result of a salary – just over $900,000 a year – that critics see as approaching the bloated level of corporate chief executive officers.

Not to rationalize the quite comfortable salaries paid to either corporate CEOs or university presidents, but at least when talking about higher-ed institutions of the size of the UW, there’s a reason for the perceived correlation – college prexies are running entities that are as financially large, complex and contentious as big corporations.

Whatever ivy-covered romantic notions you might still harbor of college campuses as refuges from the commotion of the outside world where faculty and students, under the gentle guidance of their president, have the luxury of contemplating the wisdom of the ages – dispense with those immediately.

The quest for knowledge has been supplanted, for most college presidents, by the quest for money, an even more important responsibility in an era of (for public institutions) budget cuts from sponsoring governments and (for just about everyone) income-producing endowments that have been perilously shrunk by the financial meltdown.

And these are large dollars we’re talking about. Even relatively small institutions such as the University of Puget Sound ($108 million annual operating budget, $233 million endowment) or Pacific Lutheran University ($106 million budget, $67 million endowment) are dealing with numbers that would be on par with a medium-size publicly traded company.

With $2.9 billion in operating revenue for fiscal year 2009, the University of Washington is in a financial class with large corporations; Weyerhaeuser, for example, reported sales and revenue from continuing operations of about $5.5 billion last year.

Financial matters, as challenging as they’ve been in recent years, might be the least of the worries for college presidents and corporate CEOs. For both, the trickier part of the job is placating various constituencies.

Corporate CEOs have employees, labor unions, investors, customers and government regulators to worry about.

College presidents have all those too (substitute students for customers, faculty for employees, donors for investors) and then some – alumni, the surrounding community (“Do something about all your people taking up the parking in my neighborhood!”), sports fans and, if you’re a public institution, taxpayers, as well as legislators angling for free football tickets or admission preferences for the progeny of relatives and campaign contributors (not that that would ever happen in this state).

These varied constituencies may have different issues and aims, but they share one common trait: a tendency to be loaded with malcontents, likely to be perpetually mad at the administration, although the specific irritation might change with the calendar.

Thus the challenge for corporate CEOs and college presidents: Figure out how to get out while the getting is good, and before all those constituencies decide that the one thing they agree upon is how much they hate you.

Not surprisingly then, the average tenure of both corporate CEOs and university presidents has been declining (although for the latter, according to one study, it has actually increased in recent years). That has the effect of driving up the salaries for both, since they figure they’re not going to be around that long to collect those attractive paychecks, and they ought to be well compensated for all the headaches they contend with.

In the public sector, beyond the short-term issues of keeping the budget balanced, the faculty from revolting, the students from drunkenly rioting and the football team winning, there are some looming long-term issues to add to the pressures of running a big educational institution.

Universities such as the UW are increasingly depended upon not only to generate the workers of tomorrow but the ideas and technologies that will generate jobs for those workers. They’re the engines of economic development, and presidents whose schools aren’t raking in research dollars and spitting out those new technologies will find their tenures shortened.

There’s also the matter of just who universities are for. Land-grant institutions were designed to be accessible to the everyman and everywoman. But increased emphasis on research, increased tuition and dreams of being elite institutions are pushing much of the work of undergraduate education and occupational training off on the community-college system.

Then there’s the tension between the university and the state governments that supposedly sponsor them. The UW gets only about 10 percent of its budget from the state. Legislators like the budget relief that comes with higher ed shouldering more of the financial burden; they hate the idea of losing more influence over the higher-ed system.

Combine all those short and long-term issues, and the result is still more upward pressure on compensation for presidents of large, high-profile institutions like the UW. Not that such pressure won’t be met with considerable resistance from the above-mentioned constituency groups, whose members are certain they could do the job better for less money.

The same argument is being made by those who object to the salaries paid to corporate CEOs. While the amounts paid in both cases look excessive to a public dealing with layoffs and wage cuts, there is one important difference.

When it comes to corporations, the malcontents argue that they couldn’t do any more superb a job of running companies, and the country, into the ditch, than the incumbent CEOs, and they could do it much less expensively. On that one, the evidence is on their side.

For all its ills and issues, American higher ed still represents a huge competitive advantage for this country. It has not been run into the ditch, nor has it contributed to running the American economy into the ditch. There’s much less of a case to be made for whacking compensation as punish-ment for prior poor performance.

Still, if someone wants to try arresting pay inflation by taking on the job of UW president for a somewhat leaner paycheck than was awarded Mr. Emmert, we malcontents could live with that too.

Bill Virgin’s column on business and economics appears Sunday in The News Tribune. He is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at