The high cost of status

Take a guess: who earned the largest paycheque last year at Carleton University? If you guessed President Roseann Runte, with her $358,000 annual salary and $43,000 in taxable benefits, you’re wrong. Some high level financial manager, you say? Nope; vice-president of finance and administration Duncan Watt made a measly $256,000 annually plus $4,000 in benefits.

The highest paid employee at Carleton in 2009 was Feridun Hamdullahpur, vice-president research and international, according to Ontario public sector salary disclosure figures released Wednesday. Having earned $503,000 plus $12,000 in benefits, Hamdullahpur ranked third highest paid university employee in Ontario.

But to say Hamdullahpur enjoyed the highest salary is somewhat misleading. He stepped down from his post at Carleton in July 2009 to become vice-president academic and provost of Waterloo University, meaning that much of his 2009 compensation was likely a severance package, possibly including pension and other supplemental benefits. (He earned $230,000 in 2008.) Nevertheless, his comfortable salary and generous severance package demonstrate just how much Carleton valued Hamdullahpur’s work.

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Hamdullahpur’s compensation also illustrates a trend that is impacting universities from coast to coast. Universities, particularly large research-focused schools, are putting more and more resources into pursuing global status.

In Hamdullahpur’s case, his work overseeing international activities at Carleton was one of Waterloo’s reasons for hiring him. A Waterloo press release announcing his appointment states, “Hamdullahpur will play a key role in helping the university achieve the ambitious objectives outlined in its strategic plan, Pursuing Global Excellence,” and goes on to describe those objectives as including the expansion of Waterloo’s global reach. He will surely continue to be handsomely rewarded for his efforts at Waterloo; his predecessor ranked as Ontario’s number one earner having pocketed a whopping $737,000 in 2009 (which also likely included a severance package).

These staggering numbers are indicative of a slow shift of vision that has been occurring for years on Canadian campuses, according to Bill Smith, an independent researcher who was formerly the general manager at the University of Alberta Students’ Union for 17 years. “The focus has switched from [on] campus to off campus,” he says.

Smith’s research—a 20-year analysis of university spending based on numbers submitted by universities to the Canadian Association of University Business Officers—shows that the average university spent almost $9 million on external affairs in 2007-08. The Top 5 schools, which are most eager for global recognition, spent $15 million on average.

Smith wrote about his research in Maclean’s in January. Click here to read: “Where all that money is going.”

To Smith, the salaries of university top brass aren’t the most troubling aspect since they only account for a small portion of overall spending. What is of concern, he says, is ballooning central administration costs. “It’s all the infrastructure under these people,” he says. “These are bright people with big dreams and the only way they can make them happen is by building a big support infrastructure and then you start seeing things like international vice presidents, vice presidents of external affairs. Before too long, you’ve really jacked up central administration costs.”

Attracting high quality people to pursue goals like boosting a university’s global status is expensive, and has contributed to escalating central administration costs. In 1987-88, the top 25 universities in Canada spent 7.8 per cent of their general operating expenditures on administration costs, which rose to 11.7 per cent in 2007-08. At the top five schools, administration spending grew from 7 per cent of all expenditures to 12 per cent.

While “pursuing global excellence,” in Waterloo’s words, seems to be a noble objective, there is no indication that it benefits students. Take, for example, the University of Alberta. President Indira Samarasekera has pledged the university will be recognized as one of the top 20 universities in the world by 2020. “Was there ever any public discussion about whether that is a legitimate goal? Is that goal important to the public that is funding these universities?” Smith questions. “I don’t know if anybody had any clear idea of what the price tag was going to be.”

As an aside, Samarasekera is among the highest paid university presidents in the country. Administration costs at the University of Alberta have doubled since 2000-01 and have quadrupled since 1994-95.

With university budgets as stretched as they are, money spent on administration is money not spent in the classroom. In 1987-88 the top 25 universities spent 65 per cent of general operating funds on instruction and non-sponsored research; now only 58 per cent is spent on teaching, meaning some $30 million has been deflected from the classroom.

This is why Smith argues that some universities appear to have become preoccupied with status rather than excellence. The dangers of ballooning administrative costs go further than the erosion of education quality and threaten universities’ overall financial sustainability, he says. “When enrolment falls, and it will at some point, this massive residue of central fixed cost is going to act as a millstone and drag universities into a much deeper crisis than they’re in now.”