“Executive Compensation at Private and Public Colleges” is out with the 2013 numbers. It seems that working at a nonprofit can be pretty rewarding, if not profitable. The president of Columbia collected $4.6 million, the president of Penn clocked in at $3 million, etc.
The U.S. is supposed to be a place with a deep pool of talent. Being a college president is, absent some sort of hashtag protest, a coveted job and a relatively easy one. Why is the wage then so high? Is the U.S. in fact not blessed with a large pool of qualified people? Is there cronyism going on such that people are not being paid a market-clearing wage? What?
Based on http://www.columbia.edu/cu/opir/abstract/opir_endowment_1.htm for example, Columbia has quite a large endowment, so (1) they can probably afford it, and (2) they might want somebody good enough to be able to handle it. What would you consider the market-clearing wage for a person handling a business that size?
Ziv: The president of a university does not manage the endowment. At Harvard, for example, there is http://www.hmc.harvard.edu/ ; Columbia has http://finance.columbia.edu/departments/investments ; smaller schools may rely on contract money managers to allocate their funds.
If we consider Columbia as a pure profit-seeking business I suppose that they would have to pay a lot to get someone decent. But at least currently Columbia has the image of being a non-profit. So there is a huge amount of prestige that a person could get from being president. Not to mention the social connections and schmoozing opportunities. Thus I think they could probably get someone great for $1/year, e.g., a successful executive from the business world who had made enough money to satisfy his or her personal wants and needs.
Check out the Form 990 from http://www.pih.org/pages/annual-reports . Partners in Health is a much more challenging organization to run than Columbia. There are a lot fewer important people to meet and schmooze with. Yet they don’t pay anyone more than $200,000/year (and their “executive director”, who corresponds to the president job at Columbia, got paid about $87,000/year in 2013).
My impression is that a large part of a university President’s job, especially at the top schools, is to facilitate fundraising. Thus, there could be a simple quid pro quo going on; you raise (or announce a capital campaign to raise) $N, and the U figures you’re worth $X.
Not sure what the term for it is, but it is the inverse of “regression to the mean”. All u-pres paid the same, but thenext one hired wants to be ninety percentile, so s/he gets more. Next one somebody hires, same thing. Approaches a limit of infinity, bounded by how much the education kleptocracy thinks they can get away with.