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Tips and Trends in Academic Employment – Types of Compensation: Part 1, The Problem

I approach this topic with a bias, which I will now disclose:

In 2023, the job of a college or university president, senior dean or head of an independent school is sufficiently difficult that there is almost no amount of money or other traditional compensation which is “too much” to pay the select number of academic leaders who can fulfill the demands of the job!

Of course, this is the real world – the world where the football coach of the “name” university in any given State is often the highest paid employee of that State, earning a hefty multiple of the salary paid to the university’s president.

So, fair or not, the president or head of school must be offered, and agree on, a specified amount of monetary compensation. Most often, he or she looks to us, as executive employment lawyers concentrating on educational leaders, to help them arrive at the right amount and type of compensation in their agreement with the school.

Added to that necessity is the practical fact that when a new academic leader is selected from the ranks of teachers or senior administrators, the jump to even a less than fair presidential or head salary can look like “big money” by comparison to what he or she has previously been earning.

Moreover, the firm conducting the hiring search is customarily too conflicted to be of much help to the prospective new president or head. The search firm has been hired and paid by the school to help find and deliver the Board’s choice of candidate. It has only marginal interest in what the school’s leader will actually be earning, which is another reason why those candidates need truly independent counsel in order to evaluate and negotiate the school’s salary offer.

It may also be helpful to understand how the school’s initial compensation offer has been arrived at.

Sometimes it is a calculation based upon the current or immediate past president’s compensation.

Sometimes the Board of Trustees (spending the school’s money, not their own) will pay a meaningful amount of money to a nationally known consulting firm for that firm to come up with a compensation study of the salaries of supposedly comparable positions at other academic institutions.

Unfortunately, we have routinely found that these studies are often deeply flawed, in a number of ways. Sometimes the cohort of the schools is random or strangely chosen, mixing types of schools with very different profiles, let alone significantly unequal financial resources.

An even more serious flaw sometimes lurks in the compilation and handling of the data itself. Often the consulting firm merely takes the publicly published salary data from the so-called 990’s (the form which colleges, universities and schools along with other non-profit institutions are required to file with the government at regular intervals) and, recognizing that this data is at least two years old, increases the amount of the published compensation of the chosen academic leaders by a set percentage figure, like 6%, based on inflation or some other metric.

Our experience comparing the results tabulated by the consulting firm against the actual known compensation paid to certain of our clients – confidential information to which we are privy as attorneys – is that the numbers in these compensation studies are often dramatically incorrect, almost always on the lower (sometimes much lower) side. The old expression “died of a theory” is thus relevant to the theory behind the compilation of these compensation studies. They often simply cannot be trusted.

Of course, Boards of Trustees of not-for-profit academic institutions have their own problems. They take seriously their fiduciary duties to their schools and are not about to “give away the candy store.” They are even fearful of being accused of doing so, however unfairly. Our assurance that there is almost no reasonable amount that they could pay an incoming president or head of school, which, given the job description, would be “too much”, is sometimes greeted with skepticism. It takes an enlightened and entrepreneurial Board to recognize that appropriate compensation for its chief academic officer is an investment which almost always will be dwarfed by the return, in both money and intangible benefits, which that leader will produce.

How to get the president of a college or university or the head of an independent school to the compensation level they deserve?

In the next installment of this topic, I will suggest some answers to this not inconsiderable problem.

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.