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Presidential Compensation for Peer Institutions

Once again, David is on the warpath about Morty’s level of pay and compensation. Yes, $325,849 in salary and $423,005 in total compensation is a lot of money and I would gladly accept that salary. But perhaps excellent leadership costs that much on the open market.

To get a sense of this question, I compiled a data set with presidential salary, benefits, total compensation, college expenditures, college revnues, average compensation for full professors, enrollment, the year the President was hired and endowment for William’s Peer Institutions (defined as the top 25 liberal arts colleges in the US News & World Report plus NESCAC members).

Morty’s pay ranks 8th out of the 27 schools.

Morty’s total compensation ranks 4th out of 26 schools (Hamilton’s outgoing President received defered compensation that ballooned his compensation over $1 million).

So, Morty is paid well, but there are at least other schools willing to pay their President’s more.

However, one might argue that schools with larger endowments and enrollments are more complicated to run than smaller schools, so Presidents should be paid more. So I ran a set of regressions controlling for most of the variables in the data set. The idea is to get an estimate of how much a president at a hypothetical school like Williams would be paid on average.

The bottom-line is that Morty makes more than the average college president. A hypothetical top 25 liberal arts college like Williams might pay its President $317,343 — meaning that Morty is overpaid $8,500 or so. With regards to compensation, the Morty premium is higher. An average hypothetical institution would pay its President $391,497. Morty receives $423,005, so the difference is $31,508. The salary figure is well within the 95% confidence interval for the predicted pay, but Morty’s total compensation is right on the edge of the 95% confidence interval. I take this to mean that Morty’s benefits are probably above average (and David should probably direct his ire towards the benefits package rather than the salary).

This quick analysis does not mean that Morty is necessarily overpaid. If you think Morty is a better leader than the average college president, then his extra skill might be worth the slight premium.

Of course, it is also possible that Williams’ peer institutions are schools like Dartmouth and Brown and not liberal arts colleges. The data set is small and does not include every possible comparison school (I spent longer compiling it than I should have). Selection bias might plague the analysis. Indeed, David could argue that all of the top liberal arts colleges are overpaying their presidents.

The goal of the post is simply to place Morty’s compensation in perspective.

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#1 Comment By David Kane ’88 On December 8, 2004 @ 1:23 pm

I do believe that “all of the top liberal arts colleges are overpaying their presidents,” but I only really care about this fact in the context of Williams. Relative to other colleges, I agree with this analysis (although it would be fun to see the actual regression results and even some plots — easy to do in R!) and concur that there is no reason to believe that, relative to his peer group, Morty is overpaid.

I also agree that you spent too much time compiling this data. EphBlog is a time sink. Get out while you still can. But, perhaps some the of the current students in STAT classes at Williams will have occasion to use it.

#2 Comment By David Glick On December 8, 2004 @ 2:35 pm

Two points:

1) Interesting analysis, I would add a variable for the experience of the President before taking their current job. Presumably schools are willing to pay a premium for a known commodity (someone who has held top administrative jobs elsewhere) as it is worth paying a little more if it significantly increases the probability of getting good leadership.

2) More generally, it seems the possible set of people for these jobs is very, very small. To even be considered one needs a PhD, a good post, and an excellent academic reputation. Nearly all of the people who pass that first bar have, because of their interests and skills, consciously chosen the relatively solitary life of research (and maybe teaching) over management and administration etc. It seems the universe of top scholars who would rather do something other than their own research is quite small, and those who would like to spend time fundraising and dealing with requests from alumni with one complaint or another is even smaller. Additionally, many people who end up in acadmia do not have the skills to be administrators even if they wanted the jobs. Finally, as Dave Zimmerman points out in this week’s Record, the few who are qualified and interested in such work are very attractive to the private sector as well.

Considering that most who meet the base qualifications do not have the skills for the work, that some of those who do have the skills wouldn’t want the jobs for any amount of money, and those who have the skills and interests are coveted by the private sector and private sector salaries, I’m not sure why these salaries should be so shocking or upsetting. If there were many qualified and interested people for all of these jobs that would be a different story. I have no idea whether there are empirics on this?

#3 Comment By David Kane On December 8, 2004 @ 3:11 pm

David Glick writes “More generally, it seems the possible set of people for these jobs is very, very small.” I am doubtful of this. I believe that there were many excellent candidates during the last two searches for a Williams president. (That is certainly what the search committees reported at the time.) The pool of plausible candidates includes anyone who has held an administrative job (dean of the faculty or of the college or or provost even chair of a large department) as a place like Williams or even, like Morty, at a larger school.

Moreover, the competition at lower levels is also, I believe, intense. That is, each time a job one rung below Morty’s opens up (Dean of Faculty, Dean of the College or Provost) at Williams, there are always several strong candidates among current Williams faculty.

It is certainly true, that many professors want to do administration. But more than enough do to prevent big salaries from being necessary to attract them.

My empirical claim: There were several candidates competing with Hank Payne (especially!) and Morty that were, in expectation, just as good as them. These other candidates (as well as perhaps Hank and Morty) would have taken the job even if it “only” paid $250,000. The reason that Williams (and other Colleges) pays Morty so much it “wants” to, not because it has to.

#4 Comment By Ronit On December 8, 2004 @ 4:54 pm

Too many Davids!

#5 Comment By Drew On December 8, 2004 @ 9:15 pm

Dave Glick is, not surprisingly, absolutely right: The demand for qualified, skilled senior administrators in higher education far exceeds the supply. This fact comes directly from Morty’s tutorial 9 months ago and is obviously supported by the significant wage increases for college presidents.

The challenge is more than that there aren’t many academics who prefer administration over the classroom or research. Nothing in their long road to a tenured professorship has taught them much about management or how to run a large institution. Therefore, the number of academics who want to be administrators and who are actually skilled in administration is very low.

Finally, like in most other industries, the nature of running a college has changed in the last 20 years, as John Chandler mentioned last spring. It’s become far more complex, more technology-drive, more competitive and more time-consuming — making the job of a college president far harder than it used to be.

Kane wrote, “I believe that there were many excellent candidates during the last two searches for a Williams president. (That is certainly what the search committees reported at the time.)” The search committee could have the worst applicant pool in the world and they’ll still say that; it doesn’t prove anything.

Personally, I am surprised that Morty isn’t paid more. He has a very tough job that requires him to work long hours, seven days a week, raise $1 million a week (per the “Climb Far” schedule), travel constantly, help run a town, manage the finances of a large corporation, be responsible for the safety and wellfare of 2,000 students, and work to constantly improve Williams in an increasingly competitive market.

#6 Comment By Noah Smith-Drelich ’07 On December 9, 2004 @ 2:22 am

…And he finds time to teach a tutorial and frequent student events and functions with his family (such as tonight’s Jewish Association Chanukah Party).

#7 Comment By David Rodriguez On December 9, 2004 @ 6:45 am

One more David to chime in on this one…

David Kane writes in his post

My question is: At what point should I — as a concerned alum from whom the College is always asking for more money — become concerned that the President of Williams is being paid too much? Is it $600,000, $800,000, $1 million, $4 million or what? How much is too much? Tell me now so that I can know when to start worrying

There’s no doubt in my mind that there is merit to David Glick’s argument (and subsequently, Drew’s), but the fact remains that this is still, in theory, a not for profit organization. A private sector job requiring similar skills in management would pay significantly more, yes, but a private sector firm isn’t asking for voluntary charitable donations to support its enterprise.

If the problem is in the shortage of supply of viable candidates, then the problem is obviously not Williams-specific, but it seems to me that these “not for profit” organizations seem to have quite a few people at the top profiting quite a bit.

How one can ask for more charity for an institution with 1.3+ billion dollars in assets and keep a straight face is probably the better question, but hey, we need tens of millions of dollars more in construction that no one really needs, so why not?

#8 Comment By David Kane ’88 On December 9, 2004 @ 8:43 am

Drew writes:

The demand for qualified, skilled senior administrators in higher education far exceeds the supply. This fact comes directly from Morty’s tutorial 9 months ago and is obviously supported by the significant wage increases for college presidents.

I don’t believe that this is true. Could you provide a citation of some type from the tutorial?

The challenge is more than that there aren’t many academics who prefer administration over the classroom or research. Nothing in their long road to a tenured professorship has taught them much about management or how to run a large institution. Therefore, the number of academics who want to be administrators and who are actually skilled in administration is very low.

Again, I don’t believe this. Everytime that a NESCAC school does a presidential job search there are dozens of plausible applicants. Consider just, say, the deans and provosts at these schools. Here we have a dozens individuals, many of whom would *love* to be the president at a place like Williams. Which of them do you think would be unqualified? The right answer, of course, is that you don’t know them all so you can’t tell. But, then, how do you know that they aren’t qualified? How do you know that there aren’t dozens of senior faculty who are skilled in administration?

In fact, there are. From everything that I have heard and read, Professors Roseman, Lenhart and Hill — senior faculty who are skilled in administration — would all make fine College presidents at Williams or elsewhere. Would they be as good as Morty? Perhaps not. But I certainly believe that they would be as good as the average NESCAC president.

Moreover, why should the situation be any different now then it was 25 years ago. The number of job openings in, say, NESCAC, is more or less the same now as it was then. The number of potential applicants — senior faculty with administrative experience — is the same. What process over the last 25 years would have caused the demand/supply balance to change?

Answer: None has. The salaries of college presidents and senior administrators have changed for exactly the set of (bad!) reasons that those of CEO’s and senior executives have changed.

Finally, like in most other industries, the nature of running a college has changed in the last 20 years, as John Chandler mentioned last spring. It’s become far more complex, more technology-drive, more competitive and more time-consuming — making the job of a college president far harder than it used to be.

It is a common conceit of those in the present that the past was somehow simpler or easier or less challenging. It is a stupid conceit.

Moreover, even if you believe that a particular job at Williams — president, economics professor, basketball coach — is more complex or challenging or whatever now than 25 years ago, this is not enough to explain away the salary growth issue. There would have to be a significant differential in that complexity growth for this phenomenon to be driven by fundamentals.

After all, 25 years ago, the President of Williams was paid something like 6 times what a junior professor in economics was paid. Now he is paid 8 times. Why is it that the President’s job has become more complex/challenging at a faster rate than the job of economics professor? Answer: It hasn’t.

Personally, I am surprised that Morty isn’t paid more. He has a very tough job that requires him to work long hours, seven days a week, raise $1 million a week (per the “Climb Far” schedule), travel constantly, help run a town, manage the finances of a large corporation, be responsible for the safety and wellfare of 2,000 students, and work to constantly improve Williams in an increasingly competitive market.

Funny, but this is exactly the job description that John Chandler had 25 years ago. It is exactly the job description that Williams presidents have always had and will always have.

Finally, if you are surprised that Morty isn’t paid more, then please tell us how much you think he should be paid and how much would be, in your opinion, too much.

#9 Comment By Drew On December 9, 2004 @ 11:52 am

David Rodriguez wrote, “How one can ask for more charity for an institution with 1.3+ billion dollars in assets and keep a straight face is probably the better question, but hey, we need tens of millions of dollars more in construction that no one really needs, so why not?”

With a Williams education costing somewhere between $50,000 and nearly $80,000 (depending on how the cost of the facilities are factored in) per student per year, the extensive financial aid that Williams provides, the College’s numerous construction projects, and the standard of higher education that is constantly being raised, it seems obvious to me why the College — like every other non-profit — needs to continually fundraise.

As far as whether the construction projects are needed, that’s a matter of opinion, but if Williams does not meet the campus standard of our peer institutions, Williams will start to lose more and more kids — and eventually faculty — to other schools, thus lowering the quality of our institution.

In my opinion, Baxter was a disaster and badly needed to be replaced (though I am sure it is hard to see this now on campus), Sawyer needs to be gutted and Stetson is in need of renovation, the Science Quad project was an enormous improvement, and various key athletic facilities need major upgrades as well.

#10 Comment By Drew On December 9, 2004 @ 12:26 pm

Ok, Kane, here we go. First, the easy answer:

How much should Morty be paid? Well, the Chronicle reported a few weeks ago that 42 college presidents are paid over $500,000 and 7 are paid more than $800,000. Looking at Williams place in American higher education, I wouldn’t be concerned until his salary hit the $800,000 level.

As far as the supply shortage of qualified, successful college presidents, it’s impossible to cite to a comment and explanation given in the midst of a tutorial.

And I think it’s pretty arrogant of you to say that John Chandler’s statement (in a senior seminar last spring), that running a college now is more challenging, is “stupid” — especially since he is a noted college president headhunter.

But since you want some sort of authority, here is an excerpt from an article in the Chronicle from last month that I found:

“But presidential-search consultants and board members say that the demand for proven leaders exceeds the supply. ‘The competition is fierce for individuals who have the breadth and depth of experience that is required for these tough jobs,’ says Richard T. Ingram, president of the Association of Governing Boards of Universities and Colleges.

“Presidential jobs have become more complex in recent decades, say supporters of high pay for presidents, and academic leaders work long hours and lead institutions that in some cases are billion-dollar enterprises. Research and medical divisions bring added administrative responsibilities. Board members say they must match or beat the pay of presidents at peer institutions to attract and retain successful leaders.”

These statements are further supported by the comments of Professor Zimmerman, in this Record this week: http://www.williamsrecord.com/wr/?view=article&section=news&id=6203

Furthermore, being 15 years removed from Williams, where did you gain the knowledge to make statements such as “Why is it that the President’s job has become more complex/challenging at a faster rate than the job of economics professor? Answer: It hasn’t.”

For me, the keys are twofold: supply far exceeds demand and the job has become far more challenging. As a result, the market has driven the salaries for college presidents up. You certainly have the right to disagree, but as referenced above, there is a lot of support for this position.

#11 Comment By Loweeel On December 9, 2004 @ 1:13 pm

Is it just me or is the Kane/Newman disagreement hinging in the difference between Supply/Demand and Quantity Supplied/Quantity Demanded?

Ah… Econ 101. Now, if only Williams would hire an Austrian School economist… but I fear that purple cows will fly out of my ass before that day.

#12 Comment By David Kane ’88 On December 9, 2004 @ 2:11 pm

Drew writes:

And I think it’s pretty arrogant of you to say that John Chandler’s statement (in a senior seminar last spring), that running a college now is more challenging, is “stupid” — especially since he is a noted college president headhunter.

If you tell me what John Chandler’s statement was, I’ll tell you whether or not it was stupid. The only thing that I actually said was stupid was the all-too-common conceit that the present is much more complex/challenging/whatever than the past.

The job of College president, like most other jobs, has changed a lot in the last 20 years. But I see no reason why it has gotten more challenging. Both John Chandler and Morty Schapiro are/were charged with raising lots of money from alumni. Changes in technology make this a different process — Morty can use e-mail, Chandler couldn’t — but why is it more challenging for Morty to raise money today then it was for Chandler 25 years ago?

And — this is the key point — to justify the increasing differential between the president’s salary and those of other professionals at Williams using your the-world-is-more-complex argument, you have to make the case that the challenges to the President have increased at a faster rate then the challenges to, say, David Zimmerman as chair of the economics department. After all, if the complexity/challenges of both jobs have gone up equally then, while you might expect salaries for both to go up, you would not expect the salary for the president to go up faster.

#13 Comment By David Glick On December 9, 2004 @ 3:04 pm

I have no idea why I’m getting involved again, but I don’t believe one has to demonstrate that one job has gotten more complicated over another.

If what I sense to be something of the conventional wisdom that PhDs are in increasingly over-supply is true, and the job market is slow, then it is easy to explain the differential rates in pay growth between administrators and junior faculty. If there are relatively more and more people seeking faculty jobs, especially in fields where they have few options other than academia, employers don’t have to entice them. Someone who just spent five years getting a PhD in philosophy because they want to be a philisopher / professor is not going to turn down faculty jobs over money if they’re lucky enough to get an offer over the other hundreds of recent PhDs. On the other hand, administrative candidates already have nice jobs as senior faculty members or other administrative work and are in stronger positions relative to those seeking to hire them. Even if Presidential candidates are in the same supply as they have always been it’s possible that it is slow growth of overall faculty salaries (especially entry level) rather than inflated growth at the administrative levels that is driving the changes in the ratios.

empirics anyone?

#14 Comment By Mike On December 9, 2004 @ 3:18 pm

Drew writes:

Furthermore, being 15 years removed from Williams, where did you gain the knowledge to make statements such as “Why is it that the President’s job has become more complex/challenging at a faster rate than the job of economics professor? Answer: It hasn’t.”

Drew, considering that David knows that in the 80s the typical senior knew only 50-150 of his classmates while nowadays the typical senior knows 125-225 of his classmates, I’m surprised that you haven’t learned yet that David knows things about modern day Ephdom that not even people who actually do know things about modern day Ephdom know.

#15 Comment By Drew On December 9, 2004 @ 6:45 pm

Kane, I think you are misunderstanding my argument:

1. The salaries of college presidents continue to rise because the demand for qualified, experienced presidents far exceeds supply.

2. One of the reasons for this supply shortage is because there are fewer professors who are qualified: the position has become more complex and challenging, and because boards are now demanding higher standards.

As far as what John Chandler said last spring, see my first post. If you are looking for a word-for-word quote, I don’t have a transcript.

With regard to my unanswered question and Mike’s comment, it often amazes me, and others I have spoken with, the number of statments and assertions you make about Williams, that may have been true about Williams 15 years ago but reflect a true ignorance of the way Williams exists today.

This is not a slam since I am sure you mean well and I wouldn’t expect an old alum to have a real understanding of what goes on at Williams today unless you have spent a lot of time on campus recently, which is what prompted my question initially.

I am sure that I, too, will loose touch with the pulse of campus life within a short period of time, too; it’s natural and to be expected.

#16 Comment By Mike On December 9, 2004 @ 7:03 pm

I just got an e-mail from Kane who points out that I misstated his position. He is correct, and I apologize.

I wrote:

“Drew, considering that David knows that in the 80s the typical senior knew only 50-150 of his classmates while nowadays the typical senior knows 125-225 of his classmates”

What David actually wrote at the time was:

“My sense is that the typical senior this year knows more like 125 to 225 (perhaps more) members of her class.”

He did not claim to know anything in this case.

I still agree with the point Drew is making and it would be a good topic for a post entirely to itself. I would start it except I’m running out to dinner.

#17 Comment By (d)avid On December 9, 2004 @ 10:49 pm

Just to clarify the typical process of becoming a college president to the uninitiated:

1) Go to graduate school (showing that you scored well on the GRE and had good letters of recommendation);

2) Finish your PhD (showing that you are tenacious and don’t mind foregoing a real salary for years);

3) Land a tenure track job (showing that you are lucky, good at selling yourself, and have a well connected advisor);

4) Get tenure (showing that you are liked by your colleagues and you crossed some threshold for publications);

5) Move up to a mid-level of administrative post like department chair or associate dean (showing that you are either a sucker or have some mild desire for administrative power);

6) Move up to a higher level of administration like vice-provost or maybe even provost (showing that you showed some competency at your earlier administrative gig);

7) Convince a college to hire you as President (showing that someone thinks you might be good at raising money and have a macro-vision for a college);

8) Get hired away by a better college/university (demonstrating that someone was impressed by your vision and ability to raise money).

So a potential college president needs to be a decent scholar with diplomatic and administrative skills, who can raise money and prefers committee meetings to teaching and researching. Occassionally a school will hire someone from outside of this mold (e.g., Bob Kerrey at the New School in NYC), but such instances are quite rare.

If there is a bottle-neck, my guess is that it comes from steps 5, 6, and 7. Many of the people who want to move to the administration are not diplomatic or organized. Raising money is entirely different skill. A vision for a college is probably also rare. But the extent to which many academics lack social skills and aggressively pursue research after tenure, is probably overstated.

#18 Pingback By Kids Today » EphBlog On March 9, 2008 @ 2:48 pm

[…] the factual statements that I make about Williams true? I believe that they are. (I thank Mike for correcting an counter-example to this statement.) When I write that Morty is paid X or that the College has […]