By Matthew Kurtz
At the University of Ottawa, the aggregate cost of our senior administrators has been increasing rapidly for years. They are no longer affordable public servants. Nor is uOttawa unique. Across Ontario, this class of employees is demonstrably consuming an ever larger portion of university expenses.
The issue is timely. The Board of Governors at the University of Ottawa recently released its proposed executive compensation program. As required by Ontario’s Executive Compensation Act, they asked for comments in a (now closed) public consultation. Queen’s University went through this process in December. I expect Carleton University will be doing the same shortly.
At uOttawa, our board proposed to set limits on the compensation of our five chief executives to prohibit the recurrence of excessive bonuses. In compliance with the new legislation, the upper limit is set at the median among comparable positions at ten research-intensive universities across Canada.
The problem is, our board wants to be able to increase – at a rate of 5 per cent per year – the budget line-item from which these five executives get paid, and to do so until their salaries approach these limits. That means the board could allocate an additional $78,000 for our executives.
This increase does not have to be allocated evenly, so our president could soon make $454,000, which is just under the limit. With a 5 per cent line-item increase next year, our four vice-presidents can come closer to their caps, which are currently in the $310-$370,000 range.
Meanwhile the limits will increase, because benchmark universities will assuredly ratchet up their executive pay. So if this proposal is approved, we will likely be giving our top managers something like a 5 per cent raise for years to come.
These salaries may seem unfathomably large. I can help put those figures into perspective. Last year at REGI Consulting, in support of our work for various stakeholders in higher education, we built a database from the sunshine lists (which identify any publicly employed person making $100,000 salary or more). The data allows us to track yearly changes in income for 6,496 distinct university managers in Ontario over 21 years, including 457 administrators at the University of Ottawa.
For points of comparison, we incorporated data about the annual median income in Ontario , which was $33,200 in 2015. That means half of Ontario’s individual taxpayers made less, and half made more.
Since the Great Recession of 2008, this median – i.e., the income of the typical taxpayer in the province – has increased at a rate of just 1.9 per cent annually, which is barely ahead of inflation. In short, Ontario’s working people and middle class have made little headway in recent years.
Nonetheless, their taxes help fund the operating grants that provide a major source of revenue for Ontario’s universities. It makes sense, then, to compare executive salaries to a clear measure of progress among such taxpayers. And if you know that the top five public servants at uOttawa were paid an average of $311,446 in 2015, a quick calculation shows they made 9.4 times as much as the typical taxpayer in Ontario.
This multiple – the one where our executives make almost 10 times as much as the typical taxpayer – is a ratio that we can track over time (see Figure 1). For uOttawa’s top five executives, it had remained steady from 1996 to 2001. Our university executives were comfortable making about seven times as much as the average Ontarian before the 21st century. Then the ratio increased rapidly, leveling off in 2010 when the province imposed a wage-freeze on its top-level executives.
We can also compare uOttawa to the average for four similar research universities: McMaster, Queen’s, Waterloo and Western. As Figure 1 also shows, their incomes had climbed until 2008, when they peaked around 11 times the typical taxpayer’s income. Since then, these universities reduced the salaries of their top executives on average. The University of Ottawa did not.
What happened to the salaries of other high-income administrators? If we look at the income of the 20 best-paid campus administrators – excluding the president and the vice-presidents – the data for uOttawa shows an increase in average pay, from 5.3 times the median in 2001, to 6.8 in 2016. If we look at the four comparable universities, this ratio climbs from 5.7 to 7.8 over the period. So these administrators – deans and so on – are getting paid better, which adds something substantial to total operating costs.
We can also look at annual salary increases for those who continue in the same job. For this analysis, we defined any administrator who earned over four times the median as a high-income manager. Then we divided these university managers into three groups.
First were the executives – that is, the president and vice-presidents for each university. Second were the non-executives who made over five times the median income. We called them senior administrators because they tended to be deans or associate vice-presidents. Third were the non-executives who made between four and five times the median. This group included associate deans and executive directors. We called them mid-level administrators.
What are the results? In the seven years before the Great Recession, senior administrators at uOttawa saw their salaries increase at an average of 4.1 per cent annually. You would expect this to drop after 2008, but it does not drop much. From 2009 to 2015, the average annual raise for senior administrators was 3.4 per cent.
For mid-level administrators, the average annual raise was 4.9 per cent after 2008. At the four comparable universities, annual raises for this group averaged at 3.4 per cent. These raises were for managers whose salaries were already over four times the median – over $128,000 in 2016 dollars. They were doing the same job but, during these contentious years of campus austerity, the top executives chose to increase the compensation of their mid-level administrators, and to increase it rather appreciably.
Here, we can begin to see an important reason why the costs of university education are increasing in Ontario. Salaries for the top five executives have largely been stable since 2010, but we are paying more and more to the upper-level administrators just under them.
At uOttawa, our board alludes to this problem on page 12 of their executive compensation proposal: “For a number of years, our senior executive pay levels have not kept pace with the pay levels of our deans and other non-executive senior managers.” Yet they do not argue for cost containment in the salaries of these high-income managers. Instead, they want to be able to offer larger salaries at the top: “We need changes in our senior executive pay levels to keep pace with those of their subordinate[s].”
So salaries are climbing. What about the number of university managers who earn such salaries? It turns out these numbers increased even faster. Across Ontario, the strongest growth was among senior administrators. At uOttawa, we had 5.5 senior administrators for every 10,000 full-time equivalent students in 2001. By 2016, we had 12.4 such employees per 10,000 students. Carleton took a similar path, but there the sharpest increase occurred among mid-level administrators.
In short, our analysis shows two trends. First, the number of well-paid administrators in Ontario’s universities climbed much faster than enrollment. Second, salaries increased quickly for a large swath of university managers. The latter contributes to an upward trend in income inequality in Ontario, but the two together add substantially to the cost of a university education in the province.
Figure 2 shows the rising cost of our high-income administrators at the University of Ottawa since 2003. Since 2009, the total cost increased from $6.1 million to $15.7 million in 2016.
Let’s put this into a broader perspective. If we look at all of the universities in Ontario, we can consider the aggregate compensation provided to executives and senior administrators relative to the total salary expenditures used annually in the university sector.
The results are notable. A rapidly rising portion of our universities’ salary expenses has gone to our senior administrators. The one-percent increase in Figure 3 represents over $60 million spent annually across Ontario. This money could instead be going toward scholarships, a tuition freeze, better working conditions, better raises for front-line workers, research or community partnerships.
At the University of Ottawa, our Board of Governors argues that we need highly competitive compensation packages to attract the best talent. Yet it is not so clear that higher salaries are necessary to get the best people in academia.
Our board also recognizes that the salaries of close subordinates in administration are catching up. Yet this is not a reason to ratchet up the salaries of our top-most executives. Rather, it is a reason to ask for concessions from the associate vice-presidents, deans and so on. Board members and executives could gently remind such subordinates in upper-level administration that if their happiness depends on another raise, they can leave.
When upper-level administrators receive ever larger portions of the revenue that we generate for the campus community as instructors, researchers, students, and taxpayers, we have a problem with the sustainability of our university. When public servants make increasingly huge salaries – four, seven and even ten times as much as the typical taxpayer in Ontario – we also have a problem with rising disparities in income.
At uOttawa, the Board of Governors should reconsider their proposal. They should craft a compensation policy that is socially responsible and truly distinctive. Our thought leaders claim to be concerned about the growth of inequality. I believe their concern is genuine, and University of Ottawa would be a great place to start.
his article first appeared in the Leveller Vol. 10, No. 6 (Mar/Apr 2018)