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High pay for college chiefs is justified

BY Werner Z. Hirsch

According to a recent article in the Chronicle of Higher Education, a growing number of college presidents are on easy street, despite the tough economic roads both public and private institutions are traveling. The article is causing quite a stir in academia, including at UCLA. It should be useful to put the pay issue of university chiefs into an appropriate context.

Seven chiefs of private institutions earned more than $800,000 each in 2003, up from four the year before. And 17 chiefs of public institutions in 2003 earned more than $500,000, up from 12 the year before. For some observers, such high compensation packages as well as annual salary increases are outrageous. Faculty are apprehensive. While the median increase for research university chiefs was 19.2%, faculty received an average pay increase of a mere 3% from 2002 to 2003.

Lately, students, parents and legislators have been deeply concerned about the enormous increases in tuition fees. Over the past four years at UCLA, fees have increased for resident undergraduates from $3,429 to $5,684, and for graduate students from $3,609 to $6,269. The increases are especially shocking because between 1981 and 2001, fees had declined by 1.5% (if adjusted for inflation, by almost 5%).

Despite these concerns, large pay packages of university presidents are justified, given their enormous fiduciary responsibilities and the challenge of distinguishing themselves as thoughtful, innovative and inspiring academic leaders expected to advance the mission of their institutions by assuring adequate funds and effective use of resources, thereby performing virtually all the functions of a city mayor. They must act under immense pressure from competition for outstanding faculty, promising students and funding — without a sabbatical to recharge. Their large pay increases must be seen in light of these challenges.

One example: As more and more students seek admission, an increasing number of high schools are failing to adequately prepare them for university work. At the same time, university costs are skyrocketing, even as state funds greatly shrink and increasingly burdensome government requirements and orders are implemented.

Few people are equipped to effectively carry out such heavy responsibilities. Moreover, the demand for premier presidents and chancellors greatly outstrips their availability. The imbalance leads to generous pay packages, which governing boards must justify by making sure high expectations are fulfilled.

To meet this awesome responsibility, boards must develop precise mission statements, eloquently articulating the university's values, aspirations and goals. Members must engage in vigilant yet sensitive and respectful oversight. Applying agreed upon performance criteria should help in reaching appropriate conclusions.

In response to today's defining challenges facing universities, appropriate monetary rewards for effective leadership are clearly in the interest of the university and society. Because present demand for such leadership far exceeds availability, high pay is the natural and justifiable result. But governing boards must see to it that university leaders meet the expectations warranting such compensation.

Hirsch is professor emeritus of economics.