Higher Education’s Aristocrats
While tuition increases continue to burden students, a small group of administrators are getting rich.
Last week, the Barack Obama Foundation announced that the University of Chicago is one of four finalists to house the Obama Presidential Library, according to its mission of finding a site that reflects “President Obama’s values and priorities throughout his career in public service.”
If Obama chooses UChicago, however, he risks tying his legacy to the American university that perhaps most exemplifies higher education’s current crisis of mission. Rather than being institutions that prioritize free inquiry, research, and high-quality education, universities are increasingly acting like the worst of Wall Street, where anything goes in order make a buck for the people at the top.
The latest sign of identity crisis at UChicago? Hefty pay raises to a large number of top staff, who have enriched themselves at great cost to their institution.
New analysis of tax data from publicly available IRS 990 forms shows that eight high-level UChicago administrators have received more than $7.6 million in compensation increases since 2007–8, even as the school moved toward and suffered a credit downgrade.
Over five years, administrators enjoyed pay increases of between 40 percent and 135 percent, and as a result each received $450,000 to $3.3 million from cumulative increases by the end of 2012–3, the most recent year for which tax data is available.
UChicago thus ended up paying $2.5 million more annually for the combined services of these eight people — an increase from $3.4 to almost $6 million per year.
These administrators include President Robert Zimmer, former Provost Thomas Rosenbaum (now president of the California Institute of Technology), and executive vice president David Fithian, a former Harvard dean. Previously, all three received scrutiny because they did not help identify administrators responsible for an apparently deceptive UChicago statement about increases to Zimmer, the country’s highest paid private university president.
Five more vice presidents round out the list, their other prominent affiliations hinting at a wider national problem of values in academia. Of these, David Greene has since become president of Colby College, while Nimalan Chinniah will soon begin work as executive vice president of Northwestern University. Greene previously worked at Brown University and Smith College and Chinniah at Vanderbilt University, while vice president for communications Julie Peterson worked at the University of Michigan and the University of Indiana.
The eight administrators represent all administrators who have served full academic years since 2007–8 and for whom comprehensive annual tax data is publicly available, but other, recently hired administrators have also received outsize pay hikes.
For example, James Nondorf, a former administrator at Yale and Rensselaer Polytechnic who has a master’s degree in ethics, began working as vice president of enrollment and student advancement in 2009–0. He has since enjoyed a 112 percent pay jump — from roughly $220,000 to $470,000 a year — for a total of $636,000 skimmed over just three years.
The reasoning behind the compensation increases and the identity of the people overseeing them are still unclear. Although Chinniah could not be contacted through UChicago or Northwestern, all other administrators did not respond to multiple requests for the names and offices of people overseeing their compensation increases, a rationale for the increases, corroborating documentation for the increases’ rationale (or their permission to obtain such documentation), or a personal statement clarifying how UChicago benefits from this allocation of money.
Fithian, vice president Donald Levy, and an assistant responding to Zimmer’s email directed the request to spokesman Steve Kloehn, who after a second query said he would be “back in touch,” but did not respond to multiple emails asking for a specific timeline.
An unpublished October 2013 UChicago statement, circulated via email, said in reference to Zimmer that the compensation committee of board of trustees considers consultant data and “the recommendation of the president” in order to make annual recommendations on compensation “for all officers and deans of the University,” and the board’s executive committee then “makes final decisions.” Uncertain, however, are the identity of any of these committee members, the role of the larger board of trustees in creating these committees, or which specific administrators fall under this process.
Three of the eight administrators saw minor job title changes during the five-year period, but examination of yearly increases suggests the raises were granted independently of such changes. Additionally, the pay increases are likely not attributable to increased job responsibilities.
According to several administrators from other universities speaking on background, claims of additional duties are difficult to verify since the appearance of such duties can be created in order to justify title upgrades and increased compensation. Furthermore, a general rise in compensation without a corresponding decrease in administrators or in remuneration for other positions likely indicates increases were allocated for other reasons.
The sharp uptick in administrative pay has come at an especially inopportune time, overlapping with a major economic downturn and an accumulation of debt totaling more than half of UChicago’s endowment and constituting the largest relative debt among peer institutions. Subsequently, after previous shifts of its credit rating outlook to negative by both Moody’s and Standard & Poor’s, UChicago suffered a July 2014 downgrade of its credit rating by Moody’s due to an “increasingly high level of outstanding debt” and “expectations of thin cash flow.”
It also now plans to issue $750 million in bonds, more than half of which will go to refinancing outstanding debt, although a post-downgrade statement by chairman of the board of trustees and twenty-one-year Goldman Sachs veteran Andrew Alper only mentions debt acquisition for “bold investments in the academic priorities articulated by our faculty, deans, provost, and president.”
According to a financial plan obtained by Crain’s Chicago Business, UChicago faces operating deficits of $5 to $30 million a year through 2018, and “ratings agencies could downgrade the university’s credit by as many as two notches.”
In comparison, the pay increases detailed above would constitute 8 to 50 percent of the projected deficits, and the eight administrators’ overall pay would constitute 20 percent to 120 percent of the deficits. (It is unclear if administrative pay has been or will be subject to the “targeted expense reductions” that Alper mentioned in his post-downgrade statement.)
In the case of Zimmer, the UChicago news office had previously affirmed that his compensation increases were “consistent with leaders of institutions of similar scale and caliber,” a conclusion reached according to “data and guidance from an outside consultant who compares similar roles at 20 peer institutions.” They refused to identify the peer institutions.
Subsequently, an independent analysis of tax data suggested the peculiarity of Zimmer’s compensation increases compared to the other top twenty American private universities by endowment: Zimmer enjoyed $115,000 to $320,000 annual increases three to seven-and-a-half times higher than the median, and his recent 110 percent, $1.76 million pay spike, primarily attributable to deferred compensation, constituted “an extreme outlier. . . around double all other outliers.”
Alper further claimed that “Bob Zimmer’s compensation reflects the high degree of confidence the board has in his leadership,” but the public record indicates uneven job performance by administrators like Zimmer and reluctance by the board of trustees to evaluate job performance.
Also notable: unpublished emails, a union grievance, and subsequent administrative response suggest that Zimmer or someone close to him instituted an administration building elevator policy whereby uniformed employees were told to use the stairs when Zimmer was in the building, including a man who had received two hip replacement surgeries. The ultimate source of these alleged violations of the Americans with Disabilities and Civil Rights Acts was not identified despite multiple inquiries, including to Alper, who responded via email that “this is clearly not a board matter.”
In addition, during the period of the pay increases, at least two trustee-associated companies profited from administrative actions, even though such arrangements go against standard advice in the sector: UChicago staff awarded campus dining services to trustee-associated company Aramark, and they supported the use of city money to build a hotel in the trustee-associated Hyatt chain. UChicago administrators also attempted to give an aborted predecessor hotel project to White Lodgings, a company associated with a third trustee from the legally and financially interlinked medical center.
UChicago’s current situation seems to constitute a worst-case example of the “failure of governing boards to ensure that institutions adhere to their stated purpose,” as an August 2014 American Council of Trustees and Alumni report put it. The ACTA correctly lays partial blame for a decline in educational quality and an increase in costs on trustees, but ultimately identifies the problem as a “strategy of passive governance” and recommends greater voluntary engagement and scrupulosity within a system where trustees “are beholden to none.”
Yet UChicago’s outsize pay increases, trustee-associated contracts, and overall lack of transparency and accountability do not seem to be the result of passive governance.
Instead, all currently available information indicates that an unknown number of UChicago’s trustees and top echelon administrators are purposefully exploiting an absence of formal checks-and-balances in order to enrich themselves at the expense of the university and taxpayers’ investment in education and research.
Furthermore, because a majority of UChicago’s trustees appoint future trustees, change is only likely to come through public outrage, then informal, inefficient mechanisms like faculty votes, online petitions, and withdrawal of alumni donations.
At a time of widespread administrative bloat and crushing student debt, the case of UChicago underscores the extent to which personal profit is outweighing public good at American universities — but the Barack Obama Foundation did not respond to a request for comment on how discovery of the compensation increases might affect UChicago’s candidacy.
To say the university has merely become too top-heavy risks making the trend seem relatively benign. At UChicago and elsewhere, the administrative class is gobbling up money with abandon, imperiling the public interest, and foreclosing on students’ futures.