Cuts renew focus on university salaries
Universities say they must offer competitive salaries to attract top educators and administrators needed to offer a quality education. Critics contend the salaries of top university administrators are inflated and taxpayers are paying the price. With new
It didn’t help that McGill University’s planned senate meeting occurred last week, just as unexpected cuts of $124 million to Quebec’s universities over the next four months were revealed.
In light of that, recriminations flew over a $500,000 low-interest loan given to Arthur Porter by the university when Porter was CEO of the McGill University Health Centre — a loan McGill is now suing to recover. Senate members complained McGill had acted as a bank.
“That raised some eyebrows, indeed,” said Josh Redel, president of the Student Society of McGill University, and a member of senate. “I don’t know if a university should be operating as a bank and I hope the university will look at the necessity of continuing that practice.”
As universities scramble to look for ways to slash their budgets, criticism is sure to resurface over the salaries and perks some top administrators earn. In lean economic times, with universities facing cuts, pay and benefits surpassing $350,000 for many of the gatekeepers of public institutions become an easy target:
If you have to make cuts, critics say, why not start with rectors’ salaries?
Universities argue that salaries and perks are needed to recruit top candidates, that low-interest loans are given so university presidents can entertain in a home grand enough to reflect their position. But unions and students are asking just how much a public institution must spend to attract top leaders.
And while the use of public funds to offer compensation that competes with the private sector might be debated, even halving the salaries of Quebec’s top university administrators wouldn’t make a dent in the budget reductions universities have been asked to make.
What’s more, many people say the real problem is not the presidents’ compensation, but that rising salaries point to a bigger issue in the university sector: the commercialization of higher education.
“The whole tuition thing was a superficial debate. The real debate we should be having is about the purpose of universities,” said Eric Martin, a researcher for Quebec’s Institut de recherche et d’informations socioéconomiques (IRIS). “If the purpose is to stimulate the economy, that’s what we’re doing now. If the purpose is to teach and transmit culture, then we have a problem because it’s not at all where we’re headed.”
The Canadian Associa- tion of University Teachers (CAUT) says in its 2012-13 Almanac of Post-Secondary Education in Canada that “corporate interests are reshaping many aspects of postsecondary education in Canada and around the world.”
McGill law professor Daniel Weinstock doesn’t object to the high salaries, or even such perks as low-interest loans, that university presidents earn — but he says he does worry that the collegial way universities used to operate is eroding.
The CEO-type salaries “create a culture in universities which leads to rifts and conflicts; it casts the administration apart,” he said. “So I’m less worried about salaries and more worried about the direction of universities.”
It is because we are trying to create market-driven universities, says Martin, that we have rectors — not just in Quebec, but everywhere — who are paid like managers, and university construction budgets that rival private enterprise.
“Rectors are overpaid but that’s the tip of the iceberg,” he said. “The whole culture of universities is being destroyed because they’re trying to copy the business world.” Porter made headlines last month when it was discovered McGill is suing him for $287,000, claiming he failed to repay a $500,000 loan in full last December when he abruptly resigned as head of the MUHC. The question of why universities would lend money to administrators emerged, with McGill saying it can’t discuss a case that is before the courts.
At senate last week, student member Jimmy Gutman said they were told loans are given occasionally, but not often.
“A lot of people were really upset,” he said. “I asked if McGill is a bank. I mean, who wouldn’t want a one-per-cent-interest loan?”
Universities lending money are exceeding their jurisdiction, argued Martine Desjardins, president of the Fédération étudiante -universitaire du Québec. “They’re not banks.”
“Regarding loans, the university exceptionally offers loans to permit the attraction of senior administrators in the international recruitment market,” McGill dean of medicine David Eidelman replied in an email. “These are always interest-bearing loans, the rate of which is based on Canadian tax law.”
It does seem such loans are not a common occurrence. Concordia University lent about $1.4 million to former president Fred Lowy when he stepped in suddenly to fill a gap and had to maintain two residences to do it, but media relations director Chris Mota said the university doesn’t routinely lend money as part of compensation packages.
Université de Montréal’s rector, Guy Breton, said in an interview the university doesn’t offer loans and he believes in above-board compensation such as his, which is dictated by a policy the university has had in place since 2009 and which determines salaries based on the median of rectors and presidents of Canadian universities.
But loans are sometimes given. A copy of the employment agreement of Patrick Deane, president of McMaster University, shows he is entitled to interest-free loans, secured against property, for $125,000 and $145,000, which are a taxable benefit.
That surprises Alex Usher, president of the Torontobased consultancy Higher Education Strategy Associates, who remembers some U.S. universities getting into trouble with loans and pensions. “I’d be shocked if it were still common because it’s so open to abuse,” he said. “Give them a bonus, but with a loan you’re on the hook for the whole amount.”
Still, the practice is completely legitimate, according to Nick Moraitis, a tax partner at Fuller Landau. He says loans in compensation packages are “accepted fiscal policy,” and even interest-free loans are “perfectly above board” if they are a taxable benefit. It’s a tactic to recruit bright minds, he said.
Professors argue these high salaries don’t do much to improve universities. Max Roy, president of the Fédération québécoise des professeures et professeurs d’université, said the increase in administrators’ salaries has not extended to professors. Also, despite an increase in students over the past 20 years, there has not been a proportionate increase in professors, but administration is growing, which he finds worrisome.
However, as universities have been mired in controversies over compensation time and time again — with the case of Porter at McGill and a $2-million fine imposed on Concordia by the former Liberal government after several high-profile administrators left abruptly with rich severance packages — one positive trend that has resulted is disclosure.
New Concordia president Alan Shepard sent out copies of his contract when the question of his pay was raised, and Breton’s compensation is also public. Ontario has created a Sunshine list, which has public sector salary disclosure for anyone earning $100,000 or more.
“Transparency is import- ant, especially when dealing with these high salaries,” Desjardins said.
But the shock that is registered every time a president’s salary is made public doesn’t seem to be subsiding, and the question of how much is too much will likely persist. And with universities complaining about being underfunded, university presidents’ salaries or severance packages will always get a reaction, as was the case with Université Laval rector Denis Brière, whose sal- ary jumped $100,000 between 2009 and 2010, to $330,000.
“Do we really need to ramp up salaries to improve quality?” Desjardins asked.