Task force criticizes UC's pay practices
Regents are faulted for lack of oversight
by Tanya Schevitz, SF Chronicle Staff Writer, April 14, 2006
Los Angeles -- An independent task force reviewing the University of California's compensation practices reported Thursday that top UC executives as well as the governing Board of Regents have sometimes failed to adequately oversee the spending of public funds -- and in some cases have misused them.
In a 29-page report, the task force faulted the UC president's office for routinely violating university policies in hiring, rewarding and retaining executives, among other things.
The document also scolded the regents, who created the nine-member task force in December, for sometimes failing to oversee how public money was spent.
"While the nature and scope of compensation-related problems in the university system will not be known conclusively until several current inquiries are completed,'' the report said, "it is already clear that the current situation is wholly unacceptable."
It added: "The recent disclosures ... lead (us) to conclude that, at least as regards compensation, neither the executives who lead the university nor the regents who oversee it have done all they could or should to fulfill their respective or shared responsibilities."
The review was requested after a firestorm of criticism over revelations first reported in The Chronicle that UC officials violated university policies in awarding hidden compensation and special perks to some top executives, sometimes without telling the regents. The hidden compensation, which involved million of dollars, was handed out at the same time students were being charged more for tuition.
The task force's report was released during a special meeting of the regents at UCLA.
It lists 22 findings and 21 recommendations, such as requiring the university administration to disclose compensation to the regents and the public and limiting paid participation by chancellors on outside boards. One recommendation called for ending the routine use of "exceptions to policy" in special payments to executives, such as generous moving stipends to employees barred by policy from receiving them.
Other recommendations include: timely public disclosure of employee compensation; a new data system allowing compensation information to be more easily compiled and analyzed; a strong system of sanctions -- from reprimand to dismissal -- for policy violations; limiting to three the outside, paid boards the 10 campus chancellors may serve on; and better tracking of the full compensation given to employees -- not just base salary.
"It is not the pay but the work-arounds and nondisclosures that got UC into this mess," said Robert Hertzberg, former state Assembly speaker and co-chair of the task force. "In this competitive environment where you want to bring in the best and the brightest, there was just a breakdown in terms of full disclosure. But it was a significant breakdown."
While the task force chided the UC president's office, it did not single out President Robert Dynes or any other individual.
An independent audit by PricewaterhouseCoopers looking at compensation for 32 top positions, to be released on April 24, is expected to address specific policy violations. Regents Chairman Gerald Parsky said the board then might consider discipline against those who are found to have violated policies.
In addition, a state audit is due out May 2, and an internal audit looking at compensation issues involving 342 senior managers is expected to be presented to the regents at their May meeting.
Dynes, also a regent, sat at the head of the table during the meeting but did not speak. In a written statement issued after the meeting, he said he needs to further review the report but that it appears to be taking the university in the right direction.
"This honest and hard-hitting report represents a good road map for getting where we need to go in overhauling our compensation policies and practices," Dynes wrote. "I can immediately embrace a number of its recommendations, beginning with the suggestions that all relevant information about compensation packages be provided to the regents in advance of approval and that all compensation information be disclosed to the public in a timely manner."
But during Thursday's meeting, Regent Fredrick Ruiz criticized the report for not being stronger.
"There might be a tendency for us to sugarcoat,'' he said. "The office of the president clearly has to change its attitude for how it is going to do business in the future. There have to be serious consequences if these issues are not addressed. People have to understand that in the business world, people go to jail over this kind of stuff. It is serious."
One area of concern was the occasional practice of exempting executives and other top employees from policies in order to give them additional compensation.
"A glaring problem is exceptions to policy," said Regent Joanne Kozberg, who co-chaired the task force with Hertzberg. "While there are legitimate reasons to grant exceptions, they have become commonplace, and they are used sometimes as a way to ignore or circumvent policy."
In addition, the task force recommended the regents look carefully at sabbatical practices that have allowed executives to take yearlong paid leaves at their administrative pay -- despite a 1994 regents' ban on the policy -- and that have allowed some incoming executives to be paid or given credit for sabbatical time earned at other universities.
Last fall without telling the regents, UC administrators paid UC San Diego Chancellor Marye Anne Fox $248,000 on top of her $350,000 salary to compensate Fox because she had to forfeit a paid sabbatical at North Carolina State University to come to UC San Diego. The task force said it found no other university system that makes such payments.
And former Provost M.R.C. Greenwood, who resigned under a cloud, was granted a 15-month leave at $301,840 a year despite a finding by UC that she improperly hired a business partner and friend.
"When we look at sabbaticals, maybe it should just be an exit bonus. Let's just call it what it is," Hertzberg said.
The regents are expected to consider the report further at their regular May meeting and may vote to implement some of the recommendations then.
"We need to move quickly to restore public confidence," Kozberg said.
Regent John Moores urged that Dynes' office not be involved in the reforms, adding that the regents need to act independently.
"On this issue, (the president's office) is clearly conflicted," he said.
Task force findings
A nine-member task force appointed by the UC Board of Regents to review the university's policies governing compensation and public disclosure made a series of recommendations based on 22 findings. Excerpts of some findings are:
-- UC has failed to honor, consistently and comprehensively, its obligation to public accountability.
-- UC and its leaders have failed repeatedly to inform the regents about the total compensation of senior managers as required.
-- UC's compliance with compensation policy is wholly inadequate and, in a number of cases, has failed or been circumvented.
-- UC grants so many exceptions to policy as to render the policies ineffective. The exceptions have become a convenient way to circumvent policies.
-- UC has few, if any, consequences for those violating policies.
-- UC lacks clear guidelines on participation in externally compensated activities such as consulting or board services, making it impossible to ensure that outside activities do not interfere with the performance of UC duties.
-- UC executives have not followed university policies in granting paid leaves to departing chancellors and others.
-- UC's compensation must be competitive if UC is to maintain its status as a great university.
-- UC's compensation program needs to be examined to assess its overall competitiveness.
See the complete task force report at: www.universityofcalifornia.edu/news/compensation/taskforce.html
E-mail Tanya Schevitz at .
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