CSU pulls $200,000 bid request for executive pay consultant

6:42 AM, May 22, 2012   |    comments
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By Erica Perez

After recently posting a bid for an executive compensation consultant for the first time in eight years, California State University officials decided late last week to cancel the request for proposals - citing budget concerns.

In bid documents posted in March for a three-year contract, the university estimated it would pay $200,000 for one survey of presidential pay, one survey of faculty pay and one larger, executive-level total compensation study - work that has been done in the past by human resources consultant Mercer. The smaller reports would be done once per year, and the larger study would be done less frequently. Mercer's contract is up in June.

University spokesman Michael Uhlenkamp told California Watch last week that the bid was on hold. Yesterday, he said CSU had decided not to move forward with the bid because the university does not have the money or need for an executive compensation study.

Uhlenkamp said the CSU human resources group initially posted the bid to do "due diligence" and see whether any cost savings could be achieved with potential vendors.

But CSU didn't budget a compensation study in 2012-13 because of the dramatic cuts to the system's state funding.

And changes to the CSU executive compensation policy, first enacted in January and revised in May, imposed caps on presidential pay. That means salaries for new campus chiefs are locked in to certain amounts until at least 2014, making an executive compensation study before then unnecessary.

Bidders responded to the proposal in April, and the university was scheduled to interview potential vendors last week, but no interviews took place, Uhlenkamp said.

Decisions on pay and benefits for CSU executives - and the studies that inform them - have generated controversy, especially when raises for new presidents have coincided with tuition increases. Previous compensation studies by Mercer have concluded that while both faculty and executives' compensation lags behind their peers, CSU executives are particularly undercompensated.

In July 2011, trustees relied on the findings of a Mercer study to determine the compensation for San Diego State University President Elliot Hirshman, who received $100,000 more in base salary than his predecessor, including $50,000 from the campus foundation. The move sparked outrage, especially because it was approved at the same time as a 12 percent tuition increase.

Critics also have taken issue with Mercer compensation studies because the university keeps the underlying data private, calling it proprietary.

That's a concern for Kim Geron, vice president of the California Faculty Association and a professor of political science and public administration at CSU East Bay.

"If they're going to spend all this money, it should be very transparent what data they come up with, and it shouldn't be used to advance a position," Geron said.

The most recent Mercer contract rider shows that the three compensation surveys were estimated to span 11 to 14 weeks of work. In total over the last five years, the university has paid the company about $388,000 for these types of services, according to figures provided by CSU.

Executive pay for the next two years is locked. In January, the Board of Trustees adopted a policy capping the state-funded portion of new presidents' salaries at 10 percent above their predecessors' pay.

A newer CSU executive compensation policy, approved by trustees May 9, went further by freezing the state-funded portion of new presidents' salaries at current levels for two years. Trustees can supplement executives' pay up to 10 percent above that cap using funds from campus foundations through 2014.

The university posts base pay for each campus president, as well as housing and auto allowances and supplements from university foundations, on its website.

Uhlenkamp said the university contracts out for compensation consultants because it lacks the resources to do the surveys in-house.

But Geron questioned that point. He said that when he used to work for county government, such work was done internally.

"What is going on in the chancellor's office that they can't do this work?" Geron said. "I think it's more political, so they can say, 'We're not cooking the books. Someone else who's neutral is telling us this.' "

While CSU has canceled the March bid, Uhlenkamp said the system will still need executive compensation consulting in the future.

"The bottom line is we still do need to have a relationship with a vendor that can provide this," he said. "Despite the fact that we don't have the budget this year, that doesn't mean we won't have it next year."

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