Compensation and Recruiting: Private Universities versus Private Corporations

Bradford Cornell

University of California at Los Angeles, Anderson Graduate School of Management from Anderson Graduate School of Management, UCLA

Abstract: This paper attempts to shed light on the continuing debate regarding executive compensation by comparing the income of S&P 500 CEOs with that of the Presidents of elite private universities. The results reveal that university presidents are paid only a fraction of what CEOs are paid – less than 5% in 2000. Nonetheless, universities are able to attract leaders with qualifications and accomplishments equivalent to that of the most distinguished CEOs. Furthermore, university presidents appear to be willing to work as hard and as much in the interests of their constituents as corporate CEOs despite the lack of any meaningful incentive clauses in their contracts. These results suggest that the standard principal agent model used in evaluating compensation needs to be extended significantly before it can be applied to situations in a few select people are recruited for highly paid and visible jobs that offer the chance to lead major institutions.

Date: 2002-04-01
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