Executive Investment: Are College Presidents Worth What They're Paid?

California State University students are facing a yearly tuition bill that's nearly doubled since 2008. What was $2,400 will now cost $5,500, and although the hike was passed 13-2 by the Cal State trustees, one of the two voting "nay" was trustee -- and Lieutenant Governor -- Gavin Newsom, no stranger to staking out bold positions.

"We’ve almost gotten used to the notion that there’s going to be a tuition increase not once every cycle but potentially 2 or 3 times," he said in a KPCC report from July 12.

But at the same time as students are being asked to pay more for a Cal State education -- if they can get in at all, given that enrollment has been slashed by 10,000 -- they're seeing pay at the top keep pace with a national trend. Elliot Hirshman, San Diego State University's new president, will get a $100,000 raise over his predecessor, Stephen Weber.

Are college presidents really worth this kind of scratch? Especially when the state that employs them is dealing with a major fiscal crisis?

Um, well, yeah...

It depends on how seriously you take the idea that higher education is as big a management challenge as a private-sector enterprise. Hirshman's compensation package adds up to $400,000, which makes him ... very average, as far as college president pay goes. (CSU's Chancellor, Charles Reed, pulls down about $421,000 a year.)

The national median pay for presidents in 2009-10, according the Chronicle of Higher Education, was a little over $375,000. Ohio State's E. Gordon Gee, however, makes $1.3 million. Sounds rich, until you consider that J.S. Watson, the CEO of California-based oil giant Chevron makes $16 million.

Rising pay for college presidents has been controversial for a while now. We don't expect them to take a vow of academic poverty, but because they run non-profit institutions that are supposed to be devoted to the development and edification of the young, private sector-esque earnings strike some as unseemly.

How to hook the talent

But schools in the Cal State system are facing some major challenges. Their mandate is to educate serious but less-than-elite students, the ones who don't get into the University of California system. CSU bears a critical burden: providing the still-high-caliber learning environment that the state needs to maintain a competitive edge in an increasingly global economy.

If it weren't for CSU, California might lose these students -- and their economic potential -- to other states. CSU trains a lot of teachers, but also a huge number of engineers. It's also staked out a leadership role in biotech, an industry that could be critical to California's future growth.

Maintaining those standards amid a statewide fiscal crisis is a brutal commitment. In the private sector, a CEO with a reputation for turnarounds might be paid substantially more to fix a troubled firm than a CEO who's steering a company at profitable peace with itself.

Dealing with the backlash

Obviously, this doesn't always make students happy (although successful college presidents tend to capture the loyalty of the student body). But education is, unfortunately, becoming more of a necessity and less of a bargain every year.

Should California really be under-investing in leadership? The worst-case scenario is a death spiral of declining endowments and flagging academic credibility. On balance, a president represents a very small expenditure, relative to a college's overall budget.

For example, Mark Yudof, who runs the University of California system, makes about $800,000 against a total budget of ... wait for it ... $20 billion, according to the Chronicle of Higher Education. That's a pittance, when you consider how complex Yudof's job is.

And the job is only getting more complex. Accomplished CEOs could wilt in the face of what SDSU's Hirshman is up against -- but still cash checks with several more zeroes on them. Remember, Cal State is battling its finances at a time when some policy provocateurs such as Charles Murray are questioning the four-year college degree as the gateway to a better version of the American dream.