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Some Differences Between First-Time and Renewal Contracts for College and University Presidents (Part 1)

As executive compensation attorneys, we represent college and university presidents in their contract negotiations.  As I have written at length elsewhere, for a prospective president to “do it yourself” or to be represented by an attorney without experience in the academic arena, almost always results in a presidential contract which is seriously flawed.

In our experience, there are important differences between the contractual arrangements offered by a college or university Board of Trustees to a presidential candidate who will be serving a first term at a particular institution and those which can be negotiated for a sitting president whose value and worth has already been tested.

This is as you would expect: once a president is a “proven product,” Boards of Trustees are usually eager to retain their services, and often are willing to consider a variety of creative ways to enhance such contractual terms as the president’s compensation and other entitlements, far more so than they were when the relationship was new.

Similarly, the prospective president on the threshold of his or her first contract — particularly a first-time president, having previously been a dean, provost or even administrator of a for-profit institution — should be looking for different contractual terms and protections than those which will come to the fore in negotiations for a renewal term.

Space does not permit an exhaustive comparison of the different situations, but here are some meaningful negotiating differences.

Security the Key to the Initial Presidential Contract

Unfortunately, a first-time college or university president often contacts an executive employment lawyer for legal representation only after the school has made the offer to become president, and sometimes even after the terms of compensation already have been tendered and accepted by the candidate.

Thus, although there still may be some compensation terms to be negotiated (e.g., sign-on bonus; performance bonus; deferred compensation), the most important compensation term — the president’s base salary — may be “set in stone” or at least not open to any real negotiation.  For example, if after a full search, the Board of Trustees has decided to offer the first-time president a base annual salary of $400,000, no lawyer is going to be able to persuade the Board that the new president actually deserves twice that amount.

Other “back-end” compensation items may be more negotiable, even for a first presidency, but let’s shift the focus, because more money may not address the most essential issues in a first presidential contract.  It may be far more important to make certain that the first presidential contract contains some of the protections which executive compensation lawyers are adept at building into deals.

A college or university, even after a comprehensive national search, hires a new president on a hope and a prayer.  All the qualifications in the world — prior academic credentials, previous success as a dean or a provost elsewhere — does not guarantee that a new president will fit into the culture of a particular institution or succeed at fundraising while managing all of the institution’s particular constituencies.  A candidate who has already held a presidency at another university may have a greater likelihood of success in the same role at a new school, but there are never any guarantees.

So, what happens if things just don’t work out through no particular fault of the new president or the school?  If the first-term president’s executive employment attorneys have done their job, his or her contract will contain adequate security to cushion an unexpected fall: severance (which I have written about elsewhere) sufficient in both amount and length — given the rhythm of the academic year and the timing of presidential searches — to enable the president to look for another position; a meaningful bridge to the next job of health and other benefits; adequate time to vacate the presidential residence; moving expenses (not inexpensive if the president has come from a distant state or country); and so-called “retreat rights” to a tenured faculty position at a predetermined salary, which assure the president of a back-up job, particularly necessary when the president’s ouster is more political than performance-based.

These sorts of protections actually may turn out to be more important than the compensation terms in the contract of a first-term president. Be warned, however, that every president’s situation is different and requires unique legal attention.

(In the next installment of this blog, we will look at renewal contracts.)

Negotiating Great Deals for Leaders PDF

https://www.universitybusiness.com/article/negotiating-great-deals-higher-ed-leaders

About the Author

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George Birnbaum

Since 1980, sophisticated business people have relied on George to apply the meticulous preparation, attention to detail, and devotion to his clients he learned from fabled trial lawyer Louis Nizer. A graduate of Harvard College and Harvard Law School, George has over 35 years of distinguished deal-making, litigation, mediation and arbitration experience which he has used to negotiate high-stakes agreements for senior executives and select business clients throughout the United States.