10. December 2012 08:37
Received a call or letter from the alma mater asking for an end-of-year donation this holiday season? A recent compensation survey by the Chronicle of Higher Education might prompt you to check where that donation may be applied as private-college presidents’ hefty compensation packages are on the rise. According to Forms 990 filed in 2010, 36 earned more than $1 million. The report found median compensation for private-college presidents was $396,649, a 2.8% increase over 2009.
Another interesting finding was that about half of the highest-paid college presidents were given cash payments to cover taxes on bonuses and other benefits. This practice of "grossing up" has been dropped at many publicly traded companies in recent years because of shareholder pushback. Alums may not be aware that their donations are helping to pay taxes for a college president already making a high salary and, furthermore, may not think that such a practice is a good use of their money.
The revised Form 990, first used in 2008, now requires nonprofits to disclose perks like first-class travel for executives, and also whether highly compensated employees have received payments to cover taxes. However, about 75% of the private colleges with the 50 highest-paid presidents reported paying cash to cover taxes, but did not say which employees received the gross-up benefit on their 990s. So, it may be difficult to learn about the details of this practice.
Another common perk for college presidents is deferred compensation, and some have hundreds of thousands of dollars set aside for them in a given year. Although invested tax free until paid out, that money would be forfeited if a president voluntarily resigns before an agreed-upon payout date. When the president does leave, the total compensation reported in that year may be huge because of the payout of money that had been set aside in previous years. What’s reported to the IRS is both money set aside for deferred compensation and any actual disbursement of deferred compensation. Thus, some of the dollars may be double counted. Simply looking at a list of total compensation data does not tell the whole story.
Check out your college’s Form 990 using this quick search tool. You can review past years’ forms as well as the most recently filed reports. If you want you see how presidents of similar-sized schools are paid, download the demonstration version of ERI’s Nonprofit Comparables Assessor. It’s free and worth checking to make sure your hard-earned dollars are being used for purposes you support.