How much should a college president make compared to the worker who cleans his office?
According to a proposal put forward by students and faculty at St. Mary's College in Maryland, the answer is: no more than 10 times as much.
On Thursday afternoon, the faculty senate will review this proposal to tie the president's salary to that of the school's lowest-paid employees. Such workers at the public liberal arts college currently make $24,500 a year, which would translate into a $245,000 salary cap for the president — roughly $80,000 less than Ian Newbould, the college's interim president, presently makes.
The move comes at a time of budget difficulties for the college, which lost roughly $3.5 million in expected tuition this academic year when it failed to fill enrollment numbers for its freshman class. It also comes at a time when higher-ed costs are ballooning across the United States and when executive pay is under increased scrutiny. This fall, the Securities and Exchange Commission voted to propose a rule requiring companies to disclose the ratio of CEO pay compared to their median worker's. In 2012, according to the Economic Policy Institute, that ratio was 273-1.
Currently for St. Mary's, the ratio is 13-1 when comparing the president's salary to that of the college's lowest-paid employees. In this light, the proposal to cap the ratio at 10-1 is not as much a major cost-cutting effort as it is a push to further address questions of income inequality. The ratio at St. Mary's is already more reasonable than it is in many corporations or even at other universities ($441,000 was the median compensation for public-college presidents in 2011, according to the Chronicle for Higher Education). Still, those behind the initiative believe it could improve more — and that it's an important effort to keep the income gap from widening even further.
"This current push is the culmination of more than a decade’s worth of work," says Dave Kung, one of the professors at St. Mary's who's been involved in crafting and supporting the proposal. As far back as 2002, some faculty at the school have pushed to increase the living wage for low-salaried employees. By 2006, the college and its union agreed to a contract that increased the lowest salary to the current minimum of $24,500.
"I think our movement is part of a much wider move that’s really concerned about growing income inequality," Kung says.
Fixed ratios are extremely rare in the United States, at least among public companies, yet a few organizations have voluntarily opted into such caps. "It’s just not something you see in Corporate America," says Steve Seeling, lead executive compensation counsel with the consulting firm Towers Watson.
One exception is Whole Foods, which reportedly tracks workers' pay to ensure no employee makes more than 19 times the average worker's (it does not factor in stock options or pension benefits). Management guru Peter Drucker once said the ratio of CEO pay to worker pay should be no more than 20 to 1.
If the group of St. Mary's faculty who meet Thursday afternoon support the proposal, it will still need to go through several additional steps to become reality. The full faculty would need to review it, as would the school's board of trustees. The college also noted that staff wages are negotiated by a union, so it would not be within the school's ability to act independently on the proposal.