We keep hearing about the growing pay inequity in the private sector. CEO pay, as a multiple of the average pay of their workers, has reached ridiculous levels. According to Bloomberg, in 2012, the average CEO pay multiple reached 204, up 20 percent since 2009. Here is a chart showing the top ten CEOs by pay multiples:
Here is a chart showing the top ten CEO's by compensation levels:
I guess it's not terribly surprising to any of us that the corporate world pays its chief executives extremely well, particularly in the granting of stock in the form of options and performance shares. After all, the corporate world really knows how to look after itself.
What I did find surprising was the level of executive compensation at America's private universities. A recently released study by the Chronicle of Higher Education shows us how well compensated private university presidents were in 2011. Here is a chart showing the top ten highest compensated presidents in academia:
You will notice that in many cases, base pay forms a relatively small part of total compensation, with Esther Barazzone at Chatham University receiving only 15.7 percent of her total compensation as base pay ($283,839 base pay versus $1.812 million total compensation).
Let's look at a few details about America's highest paid private university president, Robert Zimmer at the University of Chicago. Dr. Zimmer earned his PhD in mathematics at Harvard in 1975 and joined the University of Chicago in 1977 at an instructor in the mathematics faculty. His speciality lies in geometry, the bane of math students around the world. He served as Provost at Brown University between 2002 and 2006, returning to Chicago in 2006 to become the university's president.
In 2011, Dr. Zimmer's total compensation was $3,358,723 which was broken down as follows:
Base Pay: $917,993
Bonus Pay: $200,000
Deferred Compensation: $454,800
Non-taxable Benefits: $146,472
Other Pay: $1,638,478
Here is a graphic showing his pay history since 2008:
Yes, that's right. Dr. Zimmer received a 110.2 percent raise on a year-over-year basis from 2010 to 2011. Since 2008, he has seen his compensation rise by 189 percent. It was 2011's bonus and other pay that brought his salary to never before seen levels.
Putting Dr. Zimmer's pay into context, it would take the tuition and fees paid by 78.5 students to over his total compensation, putting him in the 99th percentile among all 550 chief executives at the 500 private nonprofit colleges in the United States. Fortunately, University of Chicago students pay among the highest tuitions and fees in the United States, coming in at the 94th percentile. If we compare Dr. Zimmer's base pay of $917,993 to the median salary of a full professor ($190,400), the multiple of 4.8 puts his base pay ratio at the 90th percentile, also high by comparison to its academic peer group.
Lastly, if we compare Dr. Zimmer's compensation to the compensation received by the presidents of similar universities, he made $1,031,379 more than the second-highest paid president of a similar institution and $2,003,661 more than the median president in the same peer group.
While the study shows that private university professors in the United States don't make anything close to what CEOs in the private for profit sector can earn, they are very handsomely rewarded for their efforts particularly considering that profitability is not a factor and quite clearly, are part of the income elite in the United States. It appears that the academic world has learned a few lessons from the corporate world about looking after their own.