Take the money and run
Take the money and run
UC chancellors’ stuffed wallets
By Michael Klein and Andrew R Quinio
From the April 2006 Print Edition
“Following the money” at the UC system’s disposal has lead to the discovery of exorbitant bonuses, mismanaged funds, and outrageous cash settlements. In November of 2005, the San Francisco Chronicle published an investigation that it had conducted into the compensation practices of the University of California. Among the numbers reported, $871 million was given by the University of California a year and a half ago in moving bonuses, severance payments, administrative stipends, and other forms of cash compensation. The University of California, however, reported much smaller figures to the public, according to the Chronicle.
These pay revelations have prompted action in the State Legislature, with lawmakers asking for more transparency in the 10-campus UC system. Since its report last fall, the Chronicle has reported further abuses within the University of California.
In late November, UC Provost M.R.C. Greenwood resigned from her position after questionable hiring practices launched an investigation into her previous offices. Even though Greenwood is on sabbatical, the Chronicle reported that the University of California kept her on the payroll, with a salary of $25,000 per month for a year. It was further revealed that Greenwood was given $125,000 to move from Santa Cruz to Oakland to work at the UC headquarters. This was in addition to the compensation she was given for temporary housing and other moving expenses. One of Greenwood’s subordinates, Winston Doby, is also on paid leave while his involvement with the former provost’s hiring practices is under investigation.
The Chronicle revealed that in December of 2005, UC Davis paid off former Vice Chancellor Celeste Rose, who had threatened to file a discrimination suit against the university. UC Davis offered Rose a spot in the administration with no formal job description, little responsibility, a salary of $205,000 annually, and benefits that accompany senior management positions. She was also guaranteed that she would not be fired. If she were to quit this informal position, Rose would still receive a salary for two years of “work” and an additional $50,000 “transition payment.”
Members of the UC Board of Regents were not informed of the decision, raising concerns that UC Davis may have violated University policy. The policy states that litigation settlements or legal claims involving more than $250,000 must be approved by the Regent chair and the chairman of the finance committee, even in cases where a lawsuit was not filed.
At UC Santa Cruz, about $30,000 was spent on a private enclosure for Chancellor Denice Denton’s two pet dogs. The Santa Cruz Sentinel reported that the $600,000 in renovations on the chancellor’s campus residence was paid for by private endowments, but the appropriation has still raised questions over the transparency of the University’s finances. In his testimony to the State Senate Committee on Education, UC President Robert C. Dynes said of the UC Santa Cruz scandal, “We approved expenditures totaling $7,000. It ended up costing $30,000. Clearly there was not appropriate review and controls.
Dynes also said in an earlier testimony, “… I take responsibility for the fact that the University of California has not always met its obligations to public accountability in matters of compensation and compensation disclosure.” While he took responsibility for the lack of oversight of the mismanaged funds, Dynes faced considerable fire for accepting the power to raise the salaries of senior managers by several thousand dollars.
In January, the UC regents approved a plan that allows the UC President to gradually raise executive pay within a given salary range which is pre-approved by the regents. The University of California told the Chronicle that giving Dynes this discretion is part of the broader goal of increasing salaries to compete with other prestigious universities.
Noel Van Nhyuis, spokesman for the UC Office of the President, commented on the need to keep salaries at competitive rates: “The quality of UC’s personnel is critical to the quality of the institution and UC must pay competitive compensation in order to stay competitive and maintain institutional quality. When you compare the salaries of UC chancellor to other institutions across the country, we are actually behind market.” This plan is one of several reforms that the regents have put in place to address the compensation controversy.
There are consequences for attracting talent with large sums of money. K. Lloyd Billingsley, senior editorial director for the free-market think tank Pacific Research Institute, contends that the large payouts will only lead to more mismanagement. He said, “UC bosses believe they must pay administrators lots of money in order to attract the best people. That also drives the disregard for transparency.”
UC Regent Chairman Gerald L. Parsky presented several plans to increase the University of California’s financial transparency to the State Senate Education Committee. One was a complete audit of the UC system’s finances conducted by the firm PricewaterhouseCoopers. According to Van Nyhuis, this audit will be finished and released in late April.
Other actions that have been taken are listed on the UC Salaries and Compensation Web site. They include: the creation of the Regents’ Committee on Compensation, the creation of a task force to investigate pay practices, and interim rules giving regents final say over the separation agreements which offer terminated employees financial compensation.
Parsky also stressed that most of the regents are “appointed, unpaid volunteers with extensive professional responsibilities beyond the University.” Although assuring the State Senate Education Committee that the regents do provide an oversight mechanism to the UC system, the fact that they delegate much of the authority to the 10 chancellors and president could render many of the duties of the Board of Regents superficial and duplicative.
Still, the checks and restraints that the UC regents have placed on their own institution have not fully satisfied the California Legislature. As a member of the Joint Legislative Audit Committee and Vice Chair of the Higher Education Committee, California Assemblyman Tim Leslie and his colleagues have a proposal underway to complete a joint-legislature audit of the UC compensation procedures to further the accountability of the UC system in California’s public eye.
Craig DeLuz, a prominent political activist and staff member at Assemblyman Tim Leslie’s office, explained that the goal of the hearings was fact-finding. Two specific questions DeLuz posed of the controversy are: “How does [the UC system] compensate versus other comparable institutions?” and, “Has anything been done outside of compensation policy?” He mentioned that University of California has about $271 million of the $871 million in compensation going to causes not consistent with responsibilities of the UC administration.
For the Legislature and general public of the state of California, DeLuz suggested that “transparency brings accountability” and that accountability is what Californians look for in public higher education. A barrier to this accountability has been the UC regents’ lack of vigilance in tracking the compensation of UC administrators. DeLuz found that the optimal solution might lie in observing the compensation policies of other comparable higher institutions and implementing some of them in the UC system.
This past February, the California Senate Subcommittee on Higher Education held informal hearings with several senior administrators of the University of California to express concern over the lack of transparency in the UC compensation procedures. Jason Murphy, a staff member at California State Senator Jack Scott’s office, commented on the proceedings and the role of the legislature in this controversy. Murphy made it clear that the University of California is an autonomous institution by law, and that the legislature “gives the UC broad range to deal with issues.” Even if the University of California breaks with its own policy, it is not necessarily a breach of law, said Murphy, “the legislature simply disagrees with its compensation policy.”
Murphy explained that the legislature found that the critical problems with UC compensation policy stemmed from the numerous side deals among UC staff at all levels. “You break down morale when those with lesser experience get perks. The senior staff and administrators want that too.” “The difficult thing,” said Murphy, “is a legislator saying, ‘you’re paying too much’ because we’re not academics.”
Since the legislature does not guide the UC system in making its autonomously decided compensation policy, accountability must come in the relationship the legislature has with the UC administration. In particular, “there isn’t complete impunity” of the UC compensation procedures because the legislature makes out a budget for the UC system each year, Murphy said. Again, Murphy stressed that the goal of the senate proceedings was to target problems with past, ambiguous UC compensation policies and create a more transparent compensation system that the public can witness in action.
UC Berkeley is not free from controversy, contributing its own questionable pay practices to the UC-wide problem. After stepping down as chancellor in 2004, Robert Berdahl received paid leave with the understanding that he would return to Cal to teach. Earlier this year, Berdahl decided to teach only one semester and leave in May to head an academic trade group.
The chancellor was allowed to keep the $315,000 he earned on leave, even though policy requires him to give a pro-rated portion of it back since he returned to teaching for only a part of the time that was agreed upon. Regent Judith Hopkinson told the Chronicle that payments of this amount should be approved by the regents, which was not done when the University of California allowed Berdahl to keep his cash.
The failure to involve the regents in major financial transactions was further detailed by the Chronicle in late February. It reported that UC administration failed to provide its governing body with important documents relating to executive compensation, legal settlements, and senior managers’ corporate board service.
Current UC Berkeley Chancellor Robert Birgeneau defended the decision to allow Berdahl to keep the salary he made on leave. In a letter to Berdahl released on the UC Berkeley News Web site, Birgeneau waives the former chancellor’s obligation to return the cash, citing the “benefits to the campus and to UC of this appointment, and the positive impacts nationally of [Berdahl’s] service …” The Chronicle reported that Birgeneau additionally extended Berdahl’s leave to about 13 months, despite the UC sabbatical policy’s limitation of sabbatical leave to one year.
Marie Felde, spokeswoman for Chancellor Birgeneau, emphasized Berdahl’s continuing connection with UC Berkeley. “Chancellor Berdahl has returned and is teaching this semester at the Goldman School of Public Policy and in our Freshman Seminar Program. He has also volunteered to teach in our Washington, D.C., program in the fall when he will be the new president of the Association of American Universities.”
Van Nhyuis explained that Birgeneau “had the authority to do what he did, but it’s the kind of exception that the regents have said they want more control over and are taking action to achieve just that.” According to Felde, the chancellor would have no trouble with such oversight.
According to Van Nyhuis, the UC regents have the power to remove UC President Dynes. For now, the state and its taxpayers await the findings of the UC audit, and the chancellors named in the various controversies remain free from censure.
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