Tuesday, June 9, 2015

For the Record: Kaler's compensation: He is not the CEO of a commercial business

From the Star-Tribune
(emphasis mine)


He’s overpaid, and attention to this has been underpaid. 
The University of Minnesota president receives an annual salary of $610,000 plus an annual contribution of more than $75,000 to his retirement plan, plus other benefits, including free housing (“6-figure pay to run a public college,” June 8). In 2013, the IRS released its final report on its compliance project on tax-exempt colleges and universities. The average total compensation of presidents of large universities was $399,723, and the median amount was $337,881. 
The U president is not the CEO of a commercial business. He is the head of a nonprofit institution of higher education. The law restricts the pursuit of personal wealth by the leaders of private, tax-exempt organizations. Section 4958 of the Internal Revenue Code imposes an excise tax on excessive compensation paid to senior administrators at private colleges. The section does not apply to public universities, as those institutions are classified as units of government. But we must be concerned with the reasonableness of the compensation of senior administrators at the U — and not simply by comparison to compensation levels at other large public universities. Until recently, no one has been watching the store anywhere in higher education. 
Michael W. McNabb, Lakeville 
• • • 
It’s not U President Eric Kaler’s fault that he measures success by the salary he deserves as the CEO of a $3.5 billion business. He’s been taught, like the rest of us, that money is the barometer of achievement. And it’s not his fault that a tuition hike is needed at the U to cover things such as his $610,000 salary. He runs a large corporation, not a kitchen table where a student and his parents are working out their budget for the fall. And, after all, Kaler is competing with the U’s sports coaches, whose salaries are double and triple his. 
But true success isn’t about money. It’s about assuring that the CEO doesn’t earn more than 20 times the salary of the lowest-paid employee (see Ben & Jerry’s CEOs). It’s about paying your employees for a year when your mill burns down, as Aaron Feuerstein did in 1996 in Massachusetts. Success is about knowing that raising tuition may mean that some students will have to leave college, about knowing that $610,000 is more than you will even need to live well on. Success is about caring more for the world around you than for your ranking in the Big Ten pay scale. 
But then we don’t teach executives to distinguish between success and true success, even in the business ethics courses now springing up in most M.B.A. programs. Shame on us. 
Elaine Frankowski, Minneapolis

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