The University of California must substantially reform its oversight and disclosure of employee compensation in order to meet its obligations to public accountability, according to a task force report issued today (April 13) to the UC Board of Regents and Chairman Gerald L. Parsky.

The Task Force on UC Compensation, Accountability, and Transparency called in its report for policies and protocols ensuring timely disclosure of total compensation information to the Regents and the public; upgrading of UC’s antiquated human resources information systems; clearer delineations of authority for compensation decisions, with more rigorous controls over exceptions to policy; new limits on externally compensated board service for senior executives; and stronger mechanisms for enforcing compliance with University policies, among other things.

“All of us on the Task Force are great believers in the University of California, and all of us find the current situation with respect to compensation wholly unacceptable,” said former Assembly Speaker Robert M. Hertzberg, who co-chaired the Task Force. “This report includes 21 major recommendations aimed at remedying these compensation problems, replacing outdated policies and practices, and putting in place rigorous checks and balances. We hope the Regents seriously consider them.”

The Task Force, one of several official inquiries into compensation-related issues in the UC system, was appointed in December 2005 by UC Chairman Parsky. Its members include representatives from government, education, business, and the media.

The charge of the Task Force was to conduct an independent review of UC’s policies and practices on compensation for faculty and senior managers and on the release of public information regarding compensation and related matters, and to recommend improvements. The Task Force met 10 times by telephone and in person and presented its report at a special Regents’ meeting today.

“No question has been raised about the academic leadership of the University of California, and no question has been raised about the importance of the University being able to continue competing for the best people available,” said Regent Joanne C. Kozberg, co-chair of the Task Force. “But greater disclosure, stronger controls, and functioning compliance mechanisms are needed with respect to compensation issues at the University. The University must take concrete actions to fix the problems of the past and demonstrate fully its commitment to public accountability. In doing so, UC has the opportunity to emerge as a national leader.”

The report contains 21 major recommendations to address compensation-related problems identified by the Task Force, building on the steps already taken by the Regents to establish a Regents’ Committee on Compensation, review and reorganize the structure of the Office of the President, and call for the hiring of a Compliance Officer, among other actions.

Excerpts from the Task Force report are attached, and the full report can be found at
www.universityofcalifornia.edu/news/compensation/taskforce_report.pdf

A summary of findings and recommendations is also available at
www.universityofcalifornia.edu/news/compensation/report_summary.pdf

The Task Force members, in addition to co-chairs Hertzberg and Kozberg, are:

Dede Alpert, former member of the California Legislature and currently special advisor in the law firm Nielsen, Merksamer, Parrinello, Mueller & Naylor, LLP; James J. Duderstadt, president emeritus of the University of Michigan, university professor of science and engineering, and director of the Millennium Project; B. Kipling (Kip) Hagopian, managing partner of Apple Oaks Partners, LLC, a private investment company; Jay T. Harris, former publisher of the San Jose Mercury News and currently the Wallis Annenberg Chair in Journalism and Communication at the Annenberg School for Communication at the University of Southern California; Monica C. Lozano, member of the Board of Regents and publisher and chief executive officer of the La Opinión newspaper; James E. (Jay) Morley, Jr., president and chief executive officer of the National Association of College and University Business Officers; and John B. Oakley, chair of the UC Academic Senate and professor of law at UC Davis.

For more information about the task force report and UC compensation: www.universityofcalifornia.edu/news/compensation/taskforce.html

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Excerpts from the Task Force Report

The Preamble

“While the nature and scope of compensation-related problems in the University system will not be known conclusively until several current inquiries are completed, it is already clear that the current situation is wholly unacceptable. Necessary steps must be initiated immediately at all levels to remedy the problems. Outdated policies and practices must be replaced. Necessary and appropriate checks and balances must be put in place and rigorously adhered to.”

* * *

“Going forward, the senior executives of the University must ensure that neither the appearance nor the reality develop yet again that the resources with which they are entrusted are used in ways that fall short of the public’s reasonable expectations or the highest ethical and professional standards.”

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“The Task Force believes that the leadership of the University—both its senior executives and the Regents—must accept full responsibility for the problems that occurred and take whatever actions are necessary to ensure full accountability both retrospectively and in the future. To be effective—and accepted by the public whose trust and support are essential—accountability must include consequences, and the consequences must be consequential.”

Disclosure and Transparency

“Full, proactive, and timely disclosure of information is central to the University of California’s (UC) obligation to the people of California. Without full disclosure, the legitimacy of the University’s role as a steward of public resources cannot be assured.”

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“For the University to fulfill its responsibilities as a public trust, there must be an institutional commitment to public disclosure. This commitment must be codified in disclosure policies that are clearly and broadly communicated, both internally and externally. Such policies must be implemented with vigor and monitored with care. In doing so, UC has the opportunity to emerge as a national leader.”

* * *

“UC can establish the best disclosure policies and practices but still fail to achieve them without a modern, integrated human-resources information system that enables comprehensive analysis, monitoring, and reporting of compensation information. UC’s antiquated and decentralized human-resources information systems are inadequate to the task.”

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“Confusion over policy has contributed to an impression that rules and regulations are being deliberately manipulated. The University must provide clear, simple, and easily accessible explanations of UC’s compensation policies and practices.”

Governance and Accountability

“While … innovation requires a certain amount of flexibility for senior managers at the Office of the President as well as at the campus level, the need for local flexibility cannot be allowed to excuse or mask a failure to comply with existing policies and rules.”

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“There are legitimate reasons to grant exceptions to compensation policies … [but] an ‘exception’ to policy that is neither documented, justified, nor reported to and/or approved by higher levels of authority, constitutes a violation.”

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“University policy fails to specify consequences for violations or to contain adequate enforcement mechanisms. At the least, the Task Force believes violations should have consequences.”

Specific Policies and Practices

“The pressure … is intensifying to recruit and retain outstanding faculty, administrators, and staff in an increasingly competitive environment at a time when the University’s financial resources are severely limited by constraints on state spending. In this environment, policies and guidelines must be carefully crafted, transparent, well-understood, and rigorously implemented.”

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“Policies governing leaves for senior managers who also hold faculty appointments are particularly unclear and can be easily misinterpreted—and thus, easily manipulated to provide the desired outcome.”

Competitive Compensation

“For UC to best serve the people of California, the Task Force believes that the University must remain in the top tier of the world’s research universities. To maintain this level of distinction, it must be able to provide its faculty, administrators, and staff a level of compensation that is competitive with that offered by universities in its peer group.”

Conclusion

“UC needs a sea change in current policies and practices, as well as in a University culture long accustomed to using exceptions to work around inadequate or obsolete policies rather than establishing and ensuring compliance with clear guidelines. To institutionalize and sustain the Task Force’s recommendations, the University must focus simultaneously on disclosure and transparency, governance and accountability, and competitive compensation.”

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