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U-M chief financial officer Tim Slottow

The Faculty Strikes Back

Are U-M administrators overpaid?

by Eve Silberman & John Hilton

From the May, 2014 issue

"The secret bonuses blew me away!"

That's U-M history prof Juan Cole, describing his response to the news that a growing number of university employees--chiefly top administrators--are receiving hefty supplements to their publicly reported salaries. Between 2004 and 2013, payments in four categories of "additional pay" more than tripled, to $46 million.

Cole was one of several professors who got an advance look at a forty-page "open letter" to the U-M regents, posted online at michiganexposed.info. Unsigned, and provided to the Observer by a source who requested anonymity, it contends that "The University is in desperate and urgent need of fiscal reform." Twenty-four pages of appendices detail the unpublished payments by individual and unit--including $16 million over ten years in intercollegiate athletics, $9.8 million in the office of the chief financial officer, and $5.5 million in the investment office.

The Observer did not have access to the original data, which appears to be drawn from internal university records. To test its accuracy, the magazine submitted Freedom of Information Act requests for the information detailed in ten line items; the responses matched within $1,000 or less.

The scale of the payments, and their secrecy, shocked faculty who spoke to the Observer. "I think it's really a scandal," says professor Ivette Perfecto of the School of Natural Resources and Environment. "Especially when tuition is increasing so much--students are leaving with loans [of] twenty, thirty, fifty thousand. At the same time, we're seeing this increase in bonuses in top administration."

The payments--categorized as "salary supplement," "administrative differential," "services unrelated to appointment," and "additional duties differential"--have never been included in employees' published salaries. And the letter argues that those published salaries also are out of line. A table compares base salaries for the highest-paid administrators at the U-M with those of their counterparts at four other leading public universities--UC-Berkeley, Texas, UCLA, and Virginia.

Depending on position, Michigan's average faculty salaries range from 9 percent lower to 8 percent higher than their peers' at those

...continued below...


four schools. But the anonymous writers calculate that administrators here make 27 to 41 percent more--and that's not counting Michigan's bonuses.

Cole isn't bothered by the salaries. "Some people might say the U-M finances didn't take the kind of hit in 2008-09 that the Ivy League did," he says. "We were a better-run institution, and maybe somebody should be rewarded for that." But he finds the bonuses "just mind-boggling ...

"Had there not been this bloating of higher administration that seems to be in the tens of million of dollars, would anyone even feel the necessity for AST?"

---

AST stands for "administrative services transformation." Developed at a cost of $18 million by the consulting firm Accenture, the program would eliminate more than 300 support jobs in academic units, replacing them with a smaller number of positions in a new "shared services center" off-campus.

Fawwaz Ulaby, an engineering prof and former VP for research, told the Observer last fall that by removing in-house support staff, AST would reduce his productivity. The support person he shares with seven other faculty members "makes one-fifth of my salary," he said at the time, "and I can do her job about one-fifth as well."

Ulaby said that he raised those concerns privately within the administration, but was politely ignored. So just before Thanksgiving he posted an open letter online protesting the plan. Within three days, more than 1,000 faculty members had signed it.

"I've never seen any reaction like that from the faculty," says Perfecto, who's been here since 1990. "I think this is quite unprecedented."

Some signers objected for humanitarian reasons--most of the employees scheduled for reassignment are older women, "the most vulnerable part of the labor market," in the words of history professor Dario Gaggio. Some were troubled that both Rowan Miranda, who led AST as associate vice president for finance, and his boss, chief financial officer Tim Slottow, had previously worked for Accenture. And many shared Ulaby's concern that losing in-house support staff would impair their ability to do the work they were hired for--teaching, research, and winning grants.

Asked about AST, chemistry prof Mike Morris replies, "My blood pressure just went up 50 points." Morris is wary of the administration's latest effort to cut costs through centralization because of problems with an earlier effort, an expense management system called Concur. "It has its good points--it gets reimbursement back to you real fast," he says. But "it assumes we're traveling like corporate sales executives ... We now have to have a person who spends most of her day filling out the travel reports, [because the] program is based on assumptions that don't apply: Faculty don't travel first class; we don't stay in high-end hotels.

"AST was proposed as a way of economizing, and [that is] absolutely necessary," Morris says. But, he adds, "the amount saved keeps going down." By last fall, the projected ten-year savings already had shrunk from $270 million to $50-$60 million--and that was before it was sent back for further review after the protest. "And while they're [administrators] worried about saving a couple of million dollars" a year through AST, he adds, "they're rewarding themselves much more handsomely."

The open letter notes that in November 2012, president Mary Sue Coleman, provost Phil Hanlon, and CFO Slottow all had base salaries in excess of half a million. In December, the Ann Arbor News reported that in 2013, the base pay for the university's top sixteen administrators totaled $7.5 million.

"We see where the real [administrative] bloat is," says women's studies prof Maria Cotera. "It's in the upper administration."

---

Regent Larry Deitch dismisses such criticism as "simplistic and unsophisticated ... The university is a complex enterprise. We are competing with both public and private universities and the private business sector for talent. We cannot be as great as we aspire to be without top talent, and all of those people ... have been paid consistent with the market. In fact, a strong case can be made for the fact that they are underpaid and have worked at Michigan because they love it and are supportive of its mission."

University spokesperson Rick Fitzgerald makes the same case: "While we are very proud to be a public institution, we compete with both public and private universities for top talent on the faculty and among staff. We need that top talent across all areas to remain a university that offers students a world-class education.

"U-M is a very large and complex institution with total expenditures at $6.7 billion. That is, for example, significantly larger than one of our strong competitors, UC-Berkeley, which is at $2.1 billion in total expenditures.

"Given that, our top administrators are paid to remain competitive among our private and public peers and commensurate with that larger, more complex scope ... Between 1993 and 2007, U-M was one of the few leading universities that actually reduced the number of administrators (by 5.5 percent). During that same period, the number of full-time instructional, research, and service employees increased significantly."

Fitzgerald adds that U-M administrators are "paid consistent with the market." While acknowledging that faculty and staff get "additional compensation," he notes this is "most often paid to faculty who take on administrative duties."

Bentley Library director Terry McDonald, a former longtime dean of the College of Literature, Science, and the Arts, urges caution when making comparisons between U-M and other universities. For example, Berkeley's administrative salaries may be lower than Michigan, he says, but Berkeley has a "much better defined [benefit] pension" plan than Michigan. While it's true that new administrators at Michigan are being hired in at noticeably higher rates than in the past, he adds, that's happening everywhere.

If so, it's not evident in the data attached to the open letter. Its position-by-position comparison between Michigan and four other major public institutions as of November 2012 shows that Coleman's base salary was $28,000 less than the president of the University of Texas at Austin--but also $118,000 to $187,000 more than the top officials at Virginia, Berkeley, and UCLA. Slottow's $568,000 base salary made him by far the best-paid financial VP, outearning his counterparts by $118,000 (Virginia) to $251,000 (UCLA). The only top official whose base pay was lower than most of her peers' was VP for external relations Cynthia Wilbanks, but with her additional payment of $53,375 added to her $286,000 salary, she was the best paid in the group. (California universities report all compensation; whether Texas and Virginia pay bonuses is unknown.) And 2012 was not unusual: in the past seven years, Wilbanks' additional payments total more than $300,000.

The payments are identified as "administrative differential," which Fitzgerald says is "most often paid to faculty members who take on administrative duties" in addition to their teaching work. He says that in Wilbanks's case, they reflected additional administrative duties, including doubling as interim VP for two other units.

According to the open letter, Wilbanks is just one of more than two dozen full-time administrators who've received such "ADM" bonuses in the past decade, including human resources staffers, several deans, and then vice provost Martha Pollack. Pollack's ADM was reduced last year, after she promoted to provost--at a salary of $450,000.

---

The faculty the Observer spoke to don't buy the argument that the university needs to pay corporate-level salaries to attract top talent. Instead, they see it as a sign that the institution has lost its way--and they cite AST as Exhibit A. "People who are making these decisions [to hire Accenture] were people who came in from the very company we contracted with," says women's studies prof Cotera. "That ought to be offensive to any right-thinking person." For Cotera, the bonuses revealed in the open letter only confirm her belief "that we have been occupied by the corporate sector."

Cole, the historian, sees a larger context but reaches much the same conclusion: "Because the state legislature has diverted money from supporting higher education to other things ... what could the institution do but ... find other sources of funding, and therefore it's been forced to be more like a corporation.

"Once you become more like a corporation, you start acting like a corporation--and you start giving big secret bonuses."

In an email, regent Andrea Fischer Newman defends administrators' pay, explaining that "our goal is to remain successful at recruiting and retaining the best faculty and staff, and that is in part achieved by offering a competitive compensation package that has been benchmarked with peers." She also objects to describing the bonuses as "secret," noting that "[c]ompensation information is publicly available, as you know, since your publication has requested and received such information." Of course, without the leak, the Observer wouldn't have known the information existed.

The letter's authors call for "[a]rresting the steep increases in salaries to top administrators, reforming the secretive bonus culture of the Fleming administration building, terminating the toxic AST project, and refocusing the attention of the University on its core mission of teaching, research, and service."

Whether the regents find that persuasive may depend on how they interpret two recent personnel changes. In December, Rowan Miranda gave up management of the AST project, telling the Michigan Daily that he requested the change "because something that should have been an honest disagreement between the faculty and the administration turned out to be very personal and when those things happen, it's just good to get out of the way and depersonalize it." In January, he left Michigan to become treasurer of the University of Chicago.

Then, on April 1, Tim Slottow also took a new job--as president of the University of Phoenix, a for-profit business with "campuses" in office buildings around the world. In reporting the move, the Detroit Free Press quoted a 2010 Bloomberg News report that its previous president earned $1.8 million a year.

That can be seen as either proof of the argument that top talent deserves top compensation--or an indictment of the merger of corporate and academic cultures. According to Wikipedia, the University of Phoenix "attained a peak enrollment of almost 600,000 students in 2010, but its numbers have declined almost 60 percent since 2010. The enrollment drop has been attributed to operational changes amid criticism of high debt loads and low job prospects for university students."

Slottow's presumed pay raise, then, will come with serious financial and ethical challenges. But the departing administrator gets no sympathy from Maria Cotera.

"It's very appropriate," she says of his return to the corporate sector. "I thought it was an April Fool's joke. It couldn't be more perfect."    (end of article)

[Originally published in May, 2014.]

 

 
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