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Executive compensation must be performance based

The recent announcements of employee layoffs in the largest technology companies have also been followed by announcements of reductions in executive compensation.
It’s easy to see why executive compensation has become a target of budget cuts: since 1978, executive pay has increased nearly 1,000% while employee compensation has increased by a more modest 12%. During the COVID-19 pandemic, a Just Capital survey showed that the majority of respondents – 70% – thought that cutting CEO pay was a good way to avoid layoffs among the non-executive workforce. In contrast, 30% thought that reducing executive compensation was a gesture that would not have any significant impact on the non-executive workforce.

As it turns out, the 30% “circle gets the square.” Eighty-four (28%) of the 300 largest firms in the United States cut executive pay during the COVID-19 pandemic. Sixty of those eighty-four companies also laid off non-executive personnel in response to the need to cut costs. And those numbers may be artificially low. Certain companies received federal aid during the pandemic conditioned on them retaining jobs that they would otherwise cut. Once the federal public health emergency orders expire in May, there is likely to be an additional wave of layoffs and staff reductions by these corporations.

Unfortunately, the private sector fascination with excessive executive compensation has leaked into the public sector. Higher education has been particularly smitten. Right now at WCC, the chief executive makes nearly thirteen times as much in total compensation as the college’s lowest paid employees do. Additionally, the Chief Executive receives more compensation than the presidents of Macomb Community College and Oakland Community College.

Objective performance doesn’t justify executive compensation

So what exactly are Washtenaw County taxpayers getting from our highly compensated executive?

Lower Enrollment. Every year – except one – since 2011, WCC has lost enrollment year-over-year in terms of both full-time equivalent students and credit hour enrollment. While the unduplicated headcount may have remained stable or even increased slightly, this did not translate to more students taking more credit hours.

Fewer faculty. Since 2011, WCC has lost full time faculty. In 2011, WCC had 166 full time instructors on staff. In 2022, WCC had 155 full time instructors on staff. This is significant because full-time instructors are exclusively responsible for course and program development work. Fewer full-time instructors represent a reduced capacity to develop new courses and new instructional programs.

Fewer degrees. Also since 2011, WCC’s Department of Education classification has changed from a two-year school to a certificate school. This is nothing short of an embarrassment for Washtenaw County, and it should not be thought of in any other way.

The designation change means that WCC issues more non-degree certificates than associate degrees. WCC receives more local property tax dollars than nearly all other community colleges in the State of Michigan. The WCC administration has used our tax dollars to convert the school from a predominantly degree-granting institution to a predominantly non-degree certificate institution. WCC now has more in common with truck driving schools and beauty colleges than with other community colleges in Michigan.

More administrators. Worse, the size of the administration has increased by nearly one-third since 2011. WCC now has more Vice Presidents than any comparably sized community college in the United States. So, we have fewer students, fewer faculty, fewer courses, fewer programs, and fewer students graduating with degrees, but we have more highly compensated administrators.


Photo Credit: Marco Verch , via Flickr