Apart from a home game against an archrival, few things capture the attention of trustees, faculty, students, alumni, and the news media more completely than the compensation paid to presidents, executive officers, and sports coaches.
Governing boards, in exercising their fiduciary duties, are responsible for determining presidential compensation. This task of determining presidential compensation may be assigned to one of several board committees, including the executive, budget, audit, and governance committees.
But the use of a dedicated compensation committee—a best practice—is a growing trend. Currently, about one in ten public boards (9.7 percent), one in three independent boards (32.1 percent), and three in five foundation boards (57.8) have compensation committees.
The compensation committee is responsible for all aspects of determining the president’s compensation, which include establishing reasonable agreement terms, ensuring both legal compliance and internal institutional compliance, facilitating the assessment of presidential performance, developing policy, and integrating the president into the process. The eight core responsibilities of an effective compensation committee are below.
- Negotiating the employment agreement.
- Analyzing reasonable compensation.
- Facilitating presidential assessments.
- Obtaining input from the president.
- Making recommendations to the full board.
- Educating board members who do not serve on the compensation committee.
- Collaborating with other committees as needed.
- Reviewing and updating the institution’s compensation philosophy and policy as necessary.