Salary shaming

Forget the Flames and Oilers – the Notley government vs. university presidents is shaping up to be the real Battle of Alberta.

Follow the money

First, a bit of backstory. Alberta is going through some lean times, racking up debt and reducing spending.

In response, some universities are putting more burden on their students to help balance their own budgets. It’s at times like these when executive salaries come under the microscope – while executive salaries are only a small percentage of an institution’s overall budget, it is much easier to criticize someone’s pay than, say, the amount a university spent on furniture last year.

As an employer you can argue up and down that someone is worth whatever they are paid, but six-digit figures always sound out of reach to the average person. In Alberta’s higher education system, the issue is particularly sensitive because of a 2016 article claiming that Alberta’s university presidents are the highest paid in the country. Presidents such as David Turpin at the University of Alberta earn a total annual compensation package of $824,000 ($500,000 of that being salary).

When asked about the issue, the Alberta NDP were quick to pass the buck to their predecessors, the Progressive Conservatives, and pledged to study the issue.

In response to the 2018 provincial budget, the University of Alberta announced plans to increase fees and cut positions. It’s worth noting that, between decaying buildings, greying employee bases, and unionized wage increases, higher tuition fees are to be expected even in good times.

The university’s president debuted the new budget to much public chagrin. Perhaps sensing an opportunity to score some political points, the Alberta Advanced Education Minister suggested the institution’s cutbacks should start at the top with executive salary cuts. It’s worth noting that these budgets are submitted to the ministry in advance – so there should have been no surprises here for the good minister.

An $824,000 annual compensation package is more than any one person might need – and that’s without even considering the fact that Dr. Turpin works for a public institution. Yet, the university’s board chair pushed back and said Dr. Turpin’s compensation is appropriate for his qualifications. In a subsequent interview, Dr. Turpin noted his compensation is less than his predecessor’s, that administration costs have been lowered to help balance the budget, and that he expects more reductions are coming.

Had I been advising the university, I would have also noted in the interview that a contract is a contract – it’s nice to say after the contract was signed that perhaps Dr. Turpin should earn less, but there is not much to be done mid-contract (Or is there? More on that in a second).

I would also have pointed out that, even if Dr. Turpin worked for (say) $124,000 a year and the rest of his salary and compensation was divided up equally, that would still only save the average University of Alberta student about $18.50. Even if the money was simply reinvested in the institution and did not make its way back to students, the extra $700,000 would not do enough to address a $14 million annual gap. It’s a start, but not enough.

Since the initial flare up, students have been protesting the fee hikes, the Alberta government has announced more money for the postsecondary system, and the union has spoken up to try and save their members’ jobs.

In the midst of the melee, the Alberta government has waded in to impose compensation restrictions on all of the most senior executives at Alberta universities.

Greed is good

The NDP have been both exceptionally shrewd and staggeringly shortsighted in implementing this new policy.

On the one hand, the government is telling university and college boards to set aside previously negotiated contracts and pay what the government tells them to pay. While this gets a handle on the money side of the issue, I cannot help but wonder what effect this might have on both the incumbent executives and future applicants for these jobs.

They can no longer have confidence in commitments made to them by their employer. A contract is no longer a contract in Alberta higher education, it would seem. Similarly, it might have a chilling effect on boards, who are appointed with input from the province, as they are now more acutely aware that the government could step in at any time to override their decisions.

Some of those executives who are affected could pursue legal options, but I suspect most won’t do that. They would very quickly be villainized in the Twittersphere for refusing to lie down and take their reduced (though still healthy) pay cheques. What I expect will happen is that many of them will not renew for another term, meaning the universities will have to undertake executive searches to find replacements.

The NDP have allowed a couple of years for this new policy to be fully implemented, conveniently setting the deadline after the next provincial election. Presumably, this will be used as a tool to try and attack the other parties. So, in one fell swoop, the NDP have taken a heavy-handed approach and made an example of an outspoken critic, performed a highly visible and mostly meaningless step to address a public relations issue, and given themselves a weapon for the next election. Politics at its finest.

My two cents

Yes, public sector executives probably make too much money. But how much should they make? No one seems to know. Ontario tried to have their public sector agencies study the issue, and that went poorly (particularly for the colleges). Salaries at Ontario’s hydro utilities are regularly under the microscope, and yet nothing ever seems to change (though it sounds like Ontario PC leader Doug Ford may have other ideas).

This is why I don’t believe the Public Sector Salary Disclosure (PSSD, or “Sunshine List”) in Ontario does much good. Sure, journalists and ombudspeople dig into the numbers and typically find a few good stories which generate some outrage. Yet, too often there is no action. It serves as a release valve for public anger, and a short while later is forgotten by all but the most engaged politicos. It actually gives them an out without having to make solutions.

Having a consistent public sector executive compensation standard – across the country, not just across individual provinces – will help resolve this issue for the long-term (so long as this standard factors in regional differences, of course). This idea does conveniently ignore the fact that our postsecondary education institutions, hydro utilities, hospitals, and the like are a provincial responsibility – yet this is an issue that transcends provincial borders (see the frequent comparisons of salaries between Hydro One and other provincial utilities). If governments want to take this issue seriously, there needs to be some inter-provincial collaboration.

Yet, is this a serious issue? Going back to where we started, while executive salaries are a highly visible and controversial expense they are a relatively small part of the institution’s budget. Cutting them back is more of a public relations exercise than an actual commitment to austerity, and they may cause the organization additional expenses – such as the need to find a new executive in a few years’ time!

And while Dr. Turpin might cost the University of Alberta $824,000 annually, an incapable leader making $447,000 might cost the university more than a mere few hundred thousand dollars if they make a poor decision. On the flip side, if Dr. Turpin’s status as president brings in even one seven-figure donation per year he has paid for himself.

Lost in all of this is that the job of university president is not an easy one. One college president I worked with noted that his only day off each year was Christmas Day. Presidents such as Dr. Turpin are being forced to make difficult choices and will bear the responsibility for them – while simultaneously being vilified for them. You can be of the opinion that the $824,000 given to Dr. Turpin by his board of governors is too much – and it is easy to criticize – but you had best be prepared to come up with your own dollar figure to pay his successor. Or let the NDP do it for you.

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