Should U.S. News Make Presidents Rich?

March 19, 2007

In a move that concerns some experts on college admissions and executive compensation, the Arizona Board of Regents has approved contract changes for Michael Crow, president of Arizona State University, that link $60,000 in bonus pay to an improved rating from U.S. News & World Report.

Crow -- whose total compensation already tops half a million dollars -- was awarded an additional bonus plan tied to achieving specific performance goals. Incentive-based bonuses are increasingly common as part of the compensation packages of college presidents -- the idea, common in the corporate sector, is that such a system promotes accountability and rewards performance.

In Crow's case, he would be paid an extra $10,000 for each of 10 goals he achieves and would get an extra $50,000 if he achieves all of them. Nine of the goals relate to actions on which the university is the key actor (goals such as increasing the diversity of freshmen, improving freshman retention, adding to research expenditures, improving faculty salaries, etc.). There is one goal over which the university has no direct control -- an improved U.S. News ranking. If Crow achieves the other nine only, he would miss a shot at $50,000 in addition to the reward for the higher ranking.

While Arizona State has won acclaim for many academic improvements and innovations in recent years, it has never done well in U.S. News, and is currently listed as "third tier" among national universities.

The East Valley Tribune on Sunday drew attention to the rankings incentive, noting that Arizona State's provost had been quoted in Inside Higher Ed just last week questioning whether there was any intellectual basis to the U.S. News approach to rankings.

Crow could not be reached for comment Sunday, but he told the Tribune that while he agreed that parts of U.S. News rankings were "subjective," other parts -- such as graduation rates -- were valid and pointed to areas on which Arizona State needs to improve.

In interviews with Inside Higher Ed, experts on admissions and executive compensation said that they had never heard of a president's compensation being linked explicitly to the rankings -- and offered various views on the wisdom of the approach.

Lloyd Thacker, founder of the Education Conservancy and a leading critic of the role of magazine rankings, had strong words for the idea of such a linkage: "rotten, educationally irresponsible, wimpy,
short-sighted and wrong."

Raymond Cotton, a Washington lawyer whose practice focuses on presidential contracts, said that 90 percent of the contracts on which he works these days have bonus clauses, and he said that he has heard many trustees talk about concern about the U.S. News rankings, but he said he has never seen the rankings as part of a contract and that he would discourage any client from going ahead with such an approach.

Cotton said that he understood and supported the idea of performance-based bonuses, but that it is inappropriate "for a board of trustees to turn their own priority setting authority over to any third party, but especially a for-profit popular magazine." And he expressed concern that this approach "might take the leadership of a particular university in a direction that is inconsistent with its own mission."

For example, he said that U.S. News rewards colleges for selectivity, but a public university might appropriately focus on the idea of "giving everyone the opportunity to achieve a college education." U.S. News also rewards colleges for getting students in and out of higher education in a timely way, but Cotton asked whether that emphasis might be inappropriate for a public institution committed to educating many non-traditional students who must work or support families while earning a degree -- at their own pace.

Cotton added that "business people on boards need to keep in mind that in higher ed we are not producing manufactured products, but instead we are educating people, conducting research and providing service to the state, the nation and even the world. Additionally, trustees also should think through very carefully the implications of where the university will go if a specific presidential goal is the one they choose to reward."

Others think that there's nothing wrong with the U.S. News measure being used.

Charles W. Quatt, president of Quatt Associates and co-author of Dollars and Sense: The Nonprofit Board’s Guide to Determining Chief Executive Compensation, said that he too had never seen the rankings used as an explicit performance measure. But he said that the rankings are "a very common part of the conversation" among board members about presidential performance and goals. (Quatt's company advises boards on compensation; he had no role in the Arizona State contract.)

Quatt said that much of the magazine's rankings come from "observable metrics" and that if boards like those measures, and presidents agree on relevant goals, there is nothing wrong about using the rankings.

"It may be giving more power to U.S. News," he said. "But the rankings are a fact. The magazine is published. It's a way the public is going to think about your institution, so I don't think it's unreasonable."

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