Rising Pay for University Presidents

The NY Times reports that University Presidents continue to be paid quite well.  The Marginal Revolution blog reports that coaches are earning larger raises than these Presidents.   An ongoing economics literature has studied CEO pay and how it tracks corporate performance.   A famous early paper is available here.    Another well known paper documents that CEOs often receive big pay for good luck.    For an accessible overview of executive compensation that argues that CEOs are paid for performance, read this.

I realize that University Presidents are not corporate CEOs (but do they know that?).   In the case of evaluating University Presidents, what is the right performance criteria?  In the case of public firms, their firm’s daily stock price contains information that is continuously updated.  What new information arrives about the performance of the University Presidents?  Given that a University is a bundle of a zillion things, how do you tease out the President’s value added?   On the supply side, why isn’t there more competition for University President slots?  Why can’t a tenured associate professor be named President if she has the “right stuff”?  Why must entry barriers of previous service as a Dean or Provost be introduced?

Author: Matthew E. Kahn

Professor of Economics at UCLA.

7 thoughts on “Rising Pay for University Presidents”

  1. I thought that university presidents were graded on three criteria alone: fundraising, football, and basketball. (Only #1 and a bit of #2 are relevant in the Ivy Leagues; only #1 is relevant outside of Division I.) One of the reasons why Larry Summers crashed and burned was that he thought there were other aspects to the job. Silly Larry!

  2. Paying CEOs according to the stock price has its problems. Any single numerical indicator is open to manipulation, especially if it’s short-term. Using multiple indicators (on a standard quadruple mission of research, teaching, public communication and institutional survival) isn’t a problem per se. The problem is that university presidents are paid CEO salaries without accountability for meeting measurable objectives on any dimension.

  3. Of course it makes sense to hire presidents from the pool of deans and provosts. The army doesn’t choose division commanders from the pool of platoon leaders, even very bright platoon leaders; they choose them from the ranks of brigade commanders and assistant division commanders, i.e., the people who’ve proven they can handle large organizations. Since most associate professors have little demonstrated experience managing anything larger than a lab with a couple of postdocs, we first let them try running a department, then a college, then a university. This doesn’t always work — the Peter Principle still applies — but the alternative is too risky.

    Why is the pool small? At least in my field, professors with the energy and brains and fundraising savvy to become successful senior administrators prefer research and teaching to administration. In industrial R&D it’s hard to recruit managers from the senior engineers and scientists, because engineering is just a whole hell of a lot more interesting than management. We have to do enough administrative crap dealing with funding agencies as it is, why would we want that to be our full-time job?

    Maybe management types think the pool is small because there are so few people bright enough to do the job, but I figure it’s because so few bright people are willing to do such an unpleasant, thankless job.

    1. I agree with Kevin Long. The scientific literature on predicting vocational success indicates that the only solid predictor is prior attainment in similar work (references/interviews are lousy). The jobs of provost and dean overlap with that of president significantly in activities, but the job of associate professor does not, so it would be a huge risk to promote someone up from there to the head job. On the other hand, there are fields outside of universities that have roles with some similarity to university president and from which some applicants can be drawn…it isn’t unreasonable to include former mayors/governors/members of Congress on one’s short list.

  4. “Another well known paper documents that CEOs often receive big pay for good luck.”

    Hmmm … I don’t have a well known paper to cite, but it seems to me that fits football coaches, too.

  5. I had the privilege of working for some years on an advisory programme in Eastern Europe on higher education reform with Peter Fischer-Appelt, the highly successful Rector of Hamburg University (40,000 students). He’d never been a professor, which is extraordinary in the status-conscious German university world. As a young theologian, he had been one of the leaders of the exploited junior academics in the upheavals of 1968. I gather that the university was in deep crisis and practically ungovernable. Peter got the job that nobody else wanted, and made a go of it. Extreme situations throw up talent in unlikely places. Wars lead to purges of peacetime generals.

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