Pitt Board Committee Sets Officers’ Compensation

PITTSBURGH—The Compensation Committee of the University of Pittsburgh Board of Trustees met today to approve fiscal year 2011-12 salaries for Chancellor Mark A. Nordenberg and six other officers of the University.  

Last July, the Trustee Executive Committee, acting for the Board, approved a fiscal year operating budget that includes a 2 percent salary increase pool. Salary increases were effective as of the July 1 beginning of the fiscal year only for those employees whose annual base earnings were $40,000 or less. Increases awarded to other employees were deferred until Jan. 1. Jan. 1 also will be the effective date for the officer salary increases approved today.

Average salary increases awarded to faculty members outside the School of Medicine averaged 2.9 percent for the current fiscal year. The average increase approved by the Committee for the six officers other than the Chancellor is 3.1 percent. If the Chancellor, who requested that his salary be frozen, is included in the calculation, the average increase for all seven officers falls to 2.6 percent.

Board of Trustees Chair Stephen R. Tritch, who presided at the meeting, underscored both the very substantial challenges faced during the past year and the remarkable record of progress that Pitt continues to build. Clearly, the most significant challenge was presented by historic reductions in state support. “The efforts of Pitt’s leadership team, and particularly the advocacy efforts led by Chancellor Nordenberg, were critical in reducing the cuts originally proposed, which totaled more than $100 million, to $40 million. However, that still left Pitt with a huge budget gap,” said Tritch. “The ability of the University to deal with such a substantial reduction in state support, and to craft a budget that included both a modest salary-increase pool and tuition increases that were less steep than might have been expected in the face of such cuts, not only is a credit to the resourcefulness of Pitt’s senior leaders during the past year, but to their determined and effective efforts to build institutional strength over a much more extended period of time.”

Among the many highlights of the past year:

      • Reflecting the more general stature of Pitt’s educational programs, the University set yet another record for applications to the undergraduate programs on the Oakland campus, tripling the number of applications received in 1995. The academic credentials of enrolled students also continued their dramatic rise, with average SAT scores climbing from 1100 in 1995 to 1280 this fall and with 54 percent of this year’s freshmen ranking in the top 10 percent of their high school graduating classes, compared to 19 percent in 1995. Enrolled students also continue to achieve in ways that are a source of broad institutional pride, as is reflected in the recent naming of Pitt’s seventh Rhodes Scholar and in the University’s recent recognition as one of the country’s top producers of Fulbright Scholars;

      • The University finished the fiscal year with record-setting research expenditures that exceeded $800 million, a total that is an accepted sign of institutional strength, that fuels pioneering work, and that supports, directly and indirectly, some 28,000 local jobs. Pitt ranks among the top five American universities in support competitively awarded to members of its faculty by the National Institutes of Health, ranks 10th among American universities in total federal science and engineering research and development support, and is generally regarded as one of the country’s strongest public research universities; and

      • The University’s endowment returned more than 22.4 percent, net of fees, exceeding its policy benchmark by more than 2 percent, and it grew by $466 million.  This was the highest fiscal year return that Pitt ever has recorded. Despite unsettled economic times, Pitt also continued to move the current capital campaign significantly closer to its $2 billion goal and received the largest gift in its history from former Board Chair William S. Dietrich II.

“One of the most important aspects of the Board’s oversight and support responsibilities is to ensure that the officers of the University are appropriately compensated, remaining mindful of the academic culture, the metrics of the marketplace, and the financial circumstances that may exist at any particular time,” said Tritch. “Meeting that responsibility this year is complicated by Chancellor Nordenberg’s express request that, in light of the ongoing economic challenges faced by the University, he forego any salary increase. The Committee has accepted that request but has done so reluctantly, given the strong leadership that the Chancellor has provided over the course of many years, the extent to which he was such a forceful and influential advocate for all of public higher education during this past year, and our knowledge that his current salary places him below competitive benchmarks, particularly given his accomplishments and seniority.

“Of course, the progress of Pitt is the product of the work of large numbers of talented and committed people. Within that group, the other officers have made unique and very significant contributions,” Tritch continued. “The Committee fully appreciates the fact that the University has benefitted immensely from their service, and while it wishes that even more could be done with respect to their compensation, has worked with the Chancellor, and been guided by his recommendations, in setting salary increase levels that seem appropriate for the current fiscal year.” Those increases are set forth in the tables below.

*Retention Incentive Plan Phaseout.  The retention incentive program was adopted in 2002 and applied to the four officers—Executive Vice Chancellor Cochran, then-Provost James V. Maher, Chancellor Nordenberg, and Vice Chancellor Ramicone—whose base salaries fell most dramatically short of their benchmarks. At that time, this was a true deferred compensation plan, with no payments made until each of these officers had served an additional five years. At the end of that five-year period, mindful of the fact that compensation gaps for the four participating officers had grown, the plan was modified to provide that payments under the plan would be made to participating officers at the end of each additional year of service, in order to make officer compensation more competitive. 

When Provost Beeson was named to her current position in the summer of 2010, the Committee focused on base salary and decided not to further extend the incentive retention program. And at its Dec. 6, 2010, meeting, the Compensation Committee passed a resolution authorizing the Board Chair “to work with the Committee’s compensation consultant to determine if the retention incentive program should be further modified and to make appropriate changes to that program, recognizing that closing market-place gaps in officer compensation remains a high priority for the Committee.” 

Acting on that authority and working with the compensation consultant, the Board Chair effected the final phaseout of the retention incentive program as of Dec. 31, 2010, moving the annual retention payment ($75,000 in the case of the Chancellor and $50,000 in the case of the two other officers remaining in the plan) into the annual base salary. In doing so, total compensation was not increased, since each participating officer had been receiving these payments, in recent years on an end-of-year basis, since the program was implemented in 2002. Instead, only the method of delivery was changed—from a single year-end payment to a series of end-of-month payments. This method of delivery also conforms more closely to the general payroll practices of the University. 

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12/2/11/mab