Monday, January 3, 2011

Moral turpitude at the University of California

Thirty-six executives of the University of California "believe it is the University's legal, moral and ethical obligation" to implement changes to the system's pension plan that would allow them to retire with pensions calculated on their actual, exceptionally high pay levels rather than the (lower) federal limit for such pension calculations -- the federal limit is $245,000/year.

This change, if it goes forward, would give some of these executives a post-retirement raise of more than sixty percent -- from a pension worth $183,750 annually to pension pay at $300,000 per year for an exec whose working salary is $400,000.

The Whinging 36 are threatening legal action if they don't get their pensions plumped.

These executives claim in their letter and attached position paper (from which the foregoing quote was drawn) that the changes they demand were promised by the University's governing Board of Regents and other executives. This is actually pretty important, and I'm inclined to believe them on that point. I'm not qualified to debate signatory and Whinging 36 leader Christopher J. Edley, the dean of UC Berkeley's law school, on questions to do with the legal obligations in play.

I do note, however, that it was apparently legal for the princes of Wall St. to slurp down bonuses that make UC executive compensation look like couch-cushion change, even after financial firms accepted billions of taxpayer dollars in bailouts for the mess they made of the economy. Never mind that the "recovery" that this bailout effected has yet to return millions of people to work at real-world wages.

So it's not so surprising that some executives at the University of California feel entitled to demand exceptional pensions to wash down their exceptional pay, even though the state's and university's budgets are in crisis, layoffs are rampant, belts are tightening, employee pension plans are requiring greater contributions from staff and faculty, retirement age is being pushed back, new-employee benefits will be offered on lesser terms, and ...

Well, if you're reading this you probably know the story, or one just like it from an economic sector near you.

There has been plenty of outrage at Dean Edley & company's letter voiced by the San Francisco Chronicle's editorial board, by that paper's four letter-to-editor writers who sounded off on 30 Dec and eight more who weighed in on 1 Jan. I can't wait to hear what my colleagues say when I return to work today, the first our campus has been open for business since news of the execs' threatening letter to the Regents broke.

But with the mud still flying, here's what this UC Berkeley employee does feel qualified to say to Edley and his gang of grasping execs: the assertion that a public university, in major fiscal crisis, has a moral obligation to spend scarce resources on exceptionally high executive pensions is a gross misapplication of the concept of morality. The University of California has a public mission. We operate on a (shrinking) public budget. We struggle to serve a constituency drawn from all walks of society -- not only a privileged, overcompensated elite.

When a public university's leadership throws tantrums about wanting to be paid like administrators at Harvard and Princeton and Goldman-Sachs, they stain the work and reputation of faculty and staff who have been working for years and decades at below-market wages.

(In case readers are drinking the jihad-against-the-public-sector kool-aid peddled by Tea Party leadership, and therefore imagine that public-sector employees are, on average, making out like bandits, read the evidence that the NY Times attested to yesterday: "A raft of recent studies found that public salaries, even with benefits included, are equivalent to or lag slightly behind those of private sector workers. The Manhattan Institute, which is not terribly sympathetic to unions, studied New Jersey and concluded that teachers earned wages roughly comparable to people in the private sector with a similar education." Why do public sector employees accept below-market wages? Judging from a long-term, completely unscientific study of my colleagues across lines of work and areas of the UC Berkeley campus, most of us chose our careers because we are more committed to public service than we are to feathering our own nests.)

So if, by "moral [...] obligation" the Whinging 36 mean a morality based on principles like "What's mine is mine, and what's yours is your problem but I might take that too" -- well ... that sounds a lot like class war to me, so at least I know how to understand what they're after. But if morality refers to a notion of right conduct that is grounded in common good and social obligation ... well ... sorry, highly-paid UC execs, you're way off base.

Let's look at some numbers. The U.S. Census Bureau pegged median earnings for an individual (2009 stats) at $35,285. At the University of California, where the demographics skew high due to an above-average workforce share of highly-educated faculty, medical doctors, and professionals, average compensation was $68,089 in October 2009.

So, for an exec earning $400,000, what the Whinging 36 are whinging about is a pension worth over five times the median working income in the United States, or over 2.5x the average income of working University of California colleagues. What do they demand instead? A pension worth 8.5x median U.S. income, or 4.4x average income of UC colleagues for the example given. As a post-retirement benefit, mind you. This is after taking home pay, in this example, at a rate more than eleven times higher than the U.S. median, for years and years.

I don't know about you, but that leaves a bad taste in my mouth.

A vast majority of workers in the United States won't get pensions. Instead, people are expected to manage saving and investment for retirement themselves to augment our national retirement pension program, a.k.a. Social Security. Is that good? Is that bad? There are arguments to be made every-which-way, and they have been and continue to be made at length. I'm not going to make an argument in this post, it's long enough as written.

But I will note that Dean Edley and company are walking a cleverly thin line, standing on ground they can claim to share with, as the NY Times put it yesterday, "[u]nion chiefs, who sometimes persuaded members to take pension sweeteners in lieu of raises" over the course of recent years and decades. The Whinging 36 are claiming that at least some of them were dissuaded from taking other (higher paying) jobs elsewhere by the promise and expectation that pension rules were going to be changed to inflate their retirement income. That's a powerful argument if claims are true that their employers made promises that materially affected their employment, and are now breaking those promises.

At the same time, it's remarkable that university elites not only demand the stars as their due for lopping away jobs and benefits of the employees they manage; but simultaneously argue like union negotiators against the raging "class war on public workers," as friend and fellow-blogger katinsf put it in October.

It's a weird, weird world.

However you crunch the numbers, the Whinging 36 are demanding a very sweet deal ... one to which, in my moral universe, they really have no moral right at all ... however the legalities are sorted out.

If you want to do some digging into details about the Whinging 36, the SF Chronicle's posted copy of their letter to the UC Regents gives each signer's name, title, and campus. Then you might hop over to the Sacramento Bee's State Worker Salary Search, which permits anyone to look up the salaries of public employees. For example, you can learn that Dean Edley was paid a fraction of that mythical $400,000 salary in 2009 (the fraction, roughly 27/32, works out more accurately to 84.13%).

Here's how J.J. Lamb, of Novato, summed it all up in the lead letter to the SF Chronicle on New Year's Day: "Of course, greed is greed. The UC justification for outlandish staff compensation has always been 'We must compete with the private sector.' I say, release every one of these people to the private sector. Immediately."

That's one way of looking at it. And in the heat of reaction to Dean Edley and his buddies claiming pensions that could dwarf the lifetime earnings of most Americans, it might feel like the right way to think of the Whinging 36: if these guys want to make rapacious salaries as big shot executives, the private sector is where that's rampant.

But a more considered analysis -- in which that morality thing, you know, about common good and social obligation, carries some weight -- might lead one to conclude that certain degrees of differential in compensation ain't right no matter where it happens. There's enough; there's reward & incentive for extraordinary skill or initiative; and there's too bloody much. The Whinging 36's efforts to tilt high-end compensation further toward too bloody much doesn't look attractive to me as a blueprint for the future, whether that future is in the public or private sectors.

What do you think?





Thanks to Adrian van Leen for the photo.

4 comments:

  1. Competing with private sector jobs means, among other things, waiving certain privileges like tenure and sabbaticals. It also means employment at will, such that, if money is not there to pay them, they're free to pursue other positions (fired). Academia carries with it certain privileges. At least the students at UC are learning an ethics lesson, and that it's not just for students.

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  2. As you misspelling the word "whining" or am missing something with the word "whinging?"

    Cheers

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  3. @sburo2: I suppose that's so, but quite a few of the executives in the U of C are not professors. They don't have tenure, and I believe they earn vacation leave -- not sabbaticals. If they're not professors and don't have tenure, I believe their managerial status makes them at-will employees. Alas, then, the problem is not that they are emboldened by tenure to act greedily. As a group, they're just acting greedily.

    @Michael: "whinge" is a Britishism, mostly: to complain fretfully: whine.

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  4. Naturally, it is always the powerful to wield weapons of legality to protect their perks. When the Wall Street capitalists were bailed out, Obama administration didn't demand them to take less payment or bonuses, due to existing contracts. Yet, when auto companies were rescued, the existing contracts of the auto workers were modified and the waged workers were make to take less home.

    For Every Bill Gates, There Are Thirty-Six of These Executives of UC - Matthew Felix Sun

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