A firm hired by the University of Louisville to assess the pay of its president, James Ramsey, and other top officials significantly revised its findings late last week.
The new report, presented to the U of L Board of Trustees at a retreat in Prestonsburg, Ky., a small mountain community 190 miles east of Louisville, estimates Ramsey’s total compensation for 2014 to be $2.53 million — more than double the $1.1 million initially reported by Chicago-based Verisight, the firm hired by the university to conduct the analysis.
Ramsey has been criticized by some trustees since IL, WDRB and The Courier-Journal began reporting earlier this year on his and other top executives’ pay, which includes millions of dollars in deferred compensation paid out by the U of L Foundation, a separate nonprofit that manages $1.1 billion in funds. In June, state Auditor Adam Edelen announced he would investigate governance and oversight of the university, the Board of Trustees and the Foundation.
Here are key takeaways from the report.
Tax gross-ups push Ramsey’s pay higher
A big part of Ramsey’s compensation last year and going forward through 2020, when his current contract expires, are tax gross-ups, or payments to offset income taxes he has to pay on benefits he receives.
For FY 2014, Ramsey is projected to receive gross-up payments totaling $873,422, according to the Verisight report. The firm estimates he will receive $600,000 per year in gross-ups going forward.
Ramsey is provided gross-up payments on contributions made to his deferred compensation plan, earnings on that compensation, and bonuses he receives via that plan, according to the report. The gross-ups are based on an estimated 50 percent income tax rate and are themselves taxable income.
In its report, Verisight advises the university to stop paying Ramsey’s income taxes.
“Tax gross-ups are not common practice and should be eliminated, going forward,” the report says, adding that more of Ramsey’s compensation should be tied to his performance rather than the income taxes he owes.
Deferred compensation that isn’t really deferred
The firm, which the university paid roughly $23,000 to produce the report, also concluded that the vesting period for Ramsey’s main deferred compensation plan be extended to at least three years. Ramsey is currently paid $250,000 per year in “deferred” compensation through the plan.
Former Foundation board vice chairman Burt Deutsch told IL in February that the deferred compensation was part bonus, part retention package — in other words, a future payout to entice Ramsey to stick around.
Trustees criticized the short vesting period on Friday. According to WDRB, trustee Craig Greenberg called it “an oxymoron.”
How high is Ramsey’s compensation compared with others’?
In its analysis, Verisight compared Ramsey’s pay with that of the chief executives at 26 other universities, including eight schools from the Atlantic Coast Conference and others — such as the University of Cincinnati — of a similar size. The firm used data from the Chronicle of Higher Education, IRS 990 forms, and the College and University Professional Association.
In its revised report, the firm says Ramsey’s total compensation is higher than every one of those schools. Per the Chronicle data, the U of L president’s compensation is 142 percent higher than the median. Using the publicly available IRS 990 forms, it is nearly 172 percent higher than the median.
Here are the universities used in the comparison:
The University of Virginia is ranked No. 23 in U.S. News and World Report’s annual academic rankings. Georgia Tech, Rutgers, UC-Irvine, UC-San Diego, the University of North Carolina-Chapel Hill, and the University of Washington are in the top 50. U of L is No. 161 — tied with South Florida for second-lowest of the group, behind the University of New Mexico.
Why the change?
In a conversation with reporters after last Monday’s meeting of the Board of Trustees’ Compensation Committee, Verisight principal Mark Reilly said his firm used data provided by the university as well as publicly available IRS 990 forms to calculate Ramsey’s pay. In response to a question, Reilly said he was unsure whether tax gross-ups were part of Ramsey’s current compensation package.
The initial report left out more than $1 million in compensation, including tax gross-ups and other benefits, which the revised report details here:
The revised report was delivered after WDRB’s Chris Otts reported extensively on the deficiencies in the initial version.
Asked whether the university provided incomplete information to the firm, a spokesman did not respond. IL also reached out to Reilly to ask the same question, but a spokesperson at the firm did not respond.
On Friday, the trustees voted to raise Ramsey’s base pay by 3 percent, which is in line — by percentage — with raises being provided to faculty members next year. His base salary of roughly $650,000 will go up by about $20,000.
The trustees also voted to give Ramsey a 25 percent bonus — the highest that his contract allows. That will amount to roughly $162,500.
Ramsey’s current contract expires in 2020.