CEO Pay Comparison Unrealistic

Our teacher was always clear to lay out the rules for Career Day. The last 45 minutes of class would be taken up by a classmate's father or mother who would speak about their daily responsibilities in the workplace, and we'd sit cross-legged on the tile in our elementary school's foyer with our minds in that strange half-place between concentration and hallucination. We were to pay attention, be respectful, and above all else, obey this one critical rule that was stated outright: "Don't ask how much money they make."

Sometimes, it was said aloud again: "Remember, do NOT ask how much money they make."

The guest would then enter, perfectly timed. And then after close to an hour of rapt attention and refraining from touching one another, someone in our class would decide we all deserved a good laugh for our decent behavior. When the presenter was finished speaking and ready for questions, several hands went up, and every time, the first child would ask, "Um … how much money do you make?"

Some would respond with a figure, some wouldn't. And we would laugh.

To this day, I don’t recall a single salary that was stated – and I remember just one of the jobs these people had (a gentleman who worked on phone lines and led us outside to watch him climb a utility pole to demonstrate his abilities.) We didn’t, at that age, have any idea what amount of money constituted a lot and what didn’t – and that is merely based on the fact that we didn’t understand money then, let alone those issues that come along later like job performance, the difference between jobs in the public and private sectors, charitable work, regional pay, years of service, tenure, and those other factors that contribute to what we earn.

I’m sharing this story to shed some light on the inevitable but far-from-realistic comparison we are soon going to be presented with in the higher education realm. Executives from the larger higher education companies are making somewhere in the $3-$5 million range including salary, bonuses and stock options, while the presidents and chancellors at private colleges and universities – at the very top of the pay scale – are making somewhere around the $5 million mark. Those will be the cold, hard numbers that will eventually be upturned in Rep. Elijah Cummings’ (D-Md.) “investigation” of for-profit school CEOs’ salaries.

There’s no need to pretend that for-profit schools are hiding what executives make, and therefore a thorough exploration is required. The political posturing – this time around from Cummings, the ranking member on the House oversight committee – can come to an end.

The reaction from the government once the salaries are official, though, will be sheer outrage. The media will write and write about the discrepancy for three reasons: they love comparisons, they love numbers, and they hate for-profit schools (they are also underpaid, and the salary figures will be particularly offensive to them.)

The real issue here is that it’s time for the for-profit naysayers to make news again, and apparently it’s also time to introduce a new face into the debate since Senator Tom Harkin’s (D-Ia.) efforts to condemn the sector went terribly awry at several critical points last year.

What salaries CEOs make and what leaders at traditional colleges and universities are an apples to oranges comparison. For-profit schools are, after all, private companies. They are led by business men and women with an eye on profits. Yes, they receive federal funds through their students’ tuition payments. They also function efficiently and rely on no other sources of federal funding to run their operations. Higher education CEOS must oversee school groups that provide the best education they possibly can to their students because, if they don’t, their competition will put their school out of business. And those CEOs lose their jobs.

The risks are high. Does it warrant a $6 million salary? I can’t say that it does. But then again, we’ve reached a point in our nation where the discussion of fairness is not exactly crystal clear.

That discussion has been clouded by the sentiments of those who don’t understand capitalism is an essential principles of this country. There are those who feel it’s fair to take a slice of what someone else earns. There are others who believe it’s impolite to even ask about pay.

The government is not shy in this area, about their pay or others’. Elected officials are matters of public record – and so are the votes when they decide they need to be paid more. School groups are also sharing their salaries. According to a filing made this week b the Apollo Group, much of the information Cummings requested can be found in public documents filed with the Securities and Exchange Commission.

Rep. Cummings’ approach here is flawed. Would it be realistic to compare the pay of the Salvation Army’s CEO with that of Target simply because both offer department store goods? Probably not. The comparison we are all about to be subjected to is just about as outrageous. If you don’t support a $5 million salary for the work of a for-profit school CEO, I doubt you can realistically support it for a private college president.

This latest argument is not about salaries, or protecting students – it’s about creating an impression that for-profit CEOs are running off with taxpayer money. To really get at the truth, leaders from both sectors of education should be called before the classroom so we can see who is more comfortable justifying their salary for a well-run, efficient operation.

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