Paying University Executives for Performance

Michael Rao, Virginia's highest-paid state employee

Michael Rao, Virginia’s highest-paid state employee

The Richmond Times-Dispatch published its annual ranking of highest-paid state employees Sunday and, no surprise, university presidents and Virginia Retirement System (VRS) executives dominate the list.

I’m of two minds. On the one hand, if you want the best people running your universities and your pension funds, you have to pay them competitive salaries. Basically, you get what you pay for. Don’t expect exceptional results if you hire mediocre leaders.

The compensation of top VRS executives is largely tied to investment results. Investment mangers get rewarded if they deliver superior returns, a metric that is directly aligned with the interest of Virginia citizens. I have no problem with that. On the other hand, what do Virginia’s public university presidents get rewarded for? I know one thing: not for restraining tuition hikes.

Let’s take a look at Virginia Commonwealth University’s president, Michael P. Rao, the highest-paid state employee last fiscal year. According to T-D calculations, he earned $901,000 in fiscal 2016.

As befitting a public employee, Rao earned a base salary of $183,000. That’s a modest sum for a man running an organization with operating expenses of roughly $1 billion a year, so it’s no surprise that the Board of Visitors supplemented his base salary with:

  • $191,500 in deferred compensation
  • $72,000 housing allowance
  • $50,000 to cover personal expenses relating to his role as president
  • $7,000 for tax preparation
  • $5,000 for disability insurance from his previous contract
  • $2,160 for wireless communications
  • $42,500 for an automobile provided by VCU (and not included in the salary calculation)

Plus, he got paid a $50,000 bonus paid for meeting performance goals in 2014-2016. The T-D noted that the board will meet next week to evaluate Rao’s last-year performance and a new set of measurements to reflect the university’s objectives this year, but did not say what the performance goals were.

The VCU president’s page refers vaguely to three “themes” relating to the universty’s vision and goals: (1)  “provide all students with high-quality learning/living experiences;” (2) “attain distinction as a fully integrated urban, public research university;” and (3) “become a national model for community engagement and regional impact.”

What metrics would demonstrate progress toward achieving those goals? I’m hard-pressed to imagine.

Suggestion to the T-D: Next year, it might be worthwhile to find out exactly what performance metrics were used to calculate Rao’s bonus. As a matter of fact, it would be useful to obtain that information for every public university president. There could be no clearer indicator of university boards’ top priorities. I would be very much surprised to find that “holding the line on tuition charges” is among them.

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6 responses to “Paying University Executives for Performance

  1. Maybe we should also rate the K-12 Schools to see who has the lowest costs per student thus saving taxpayers “tuition” costs for them also?

    Of course VCU and other higher ed could do what Liberty has done which is offer an online degree for a lot less … eh?

    where did you get 901K in compensation? I can’t get the numbers to add…

  2. Looking at University of Mary Washington:

    http://data.richmond.com/salaries/2015/state/university-of-mary-washington

    Richard Hurley Pres Univ of Mary Washington $442,424

    but what struck me even more (beyond the fact that dozens made way more than 100K per year):

    Employees 714
    Total payroll $42,324,693

    I’d be curious to know how much of the 42 million came from tuition and student fees and how much from state aid.

  3. You’re right, Jim those goals are nebulous. As for the need to lure hires with competitive salaries, that’s an arms race from which all public universities ought to disengage. Is a president @ $900K really twice as good as one at $450K. Phooey. And I note that the total budgets are often mentioned as justification for paying pres well “she/he is responsible for a $1B organization” yet we don’t really hold them accountable for the budget, or concommitant inefficiencies. Ain’t public service grand?

  4. To be fair – what other State salaried leaders are held responsible for keeping costs low?

    I suspect for Colleges and University -one of the biggie requirements is for the leaders to insure that they are
    fully enrolled….and all that really requires is that they not be out of line with their competitors on price…

    but take the head of VDOT or Dept of Ed or Prisons – are they held to a “spend less” standard as part of their performance?

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