University of California President Robert C. Dynes today (Sept. 20) announced a wide range of reforms regarding the ways in which compensation, benefits and perquisites for UC’s senior managers are approved, monitored and disclosed.

The reforms reflect Dynes’ ongoing commitment to address recommendations that resulted from several recently-concluded reviews of UC’s policies and practices, including an analysis by an independent task force, outside audits by PricewaterhouseCoopers and the California Bureau of State Audits, and an internal UC audit. Taken together, the reviews represent the most thorough and rigorous review of UC executive compensation ever conducted.

Immediately following the reviews, Dynes formed a committee comprised of senior administrators and other members from throughout the UC system to begin promptly implementing recommendations from the outside reviews .

Dynes said the reforms signal the university’s commitment to public accountability and to correcting the administrative deficiencies noted by the reviews.

“While none of the reviews indicated excessive compensation levels, they all pointed to a variety of operational shortcomings in the way senior management compensation, benefits and related matters are approved, monitored and reported,” Dynes said. “These reforms are aimed at swiftly and permanently correcting those problems so they never happen again.”

The presidential reforms include the following:

1. A new policy to clarify the approval requirements for exceptions to policy
This new policy requires that when exceptions to policies are made, they shall be documented, including the reasons for the exception, and reported on a regular basis to the newly-established vice president/chief compliance and audit officer. The vice president/chief compliance and audit officer will review exceptions and report to the president and the regents, any exceptions to policy that do not meet the appropriate standards. In addition, the interim policy enacted by Dynes in February that any exceptions to employment-related policies for senior managers will require approval by the president, in consultation with the regents, will continue to be in effect until a comprehensive policy review that is currently underway is complete.

2. A new presidential policy for the public disclosure of compensation
This new policy requires that the following employment and compensation information about university employees be released upon request, except where disclosure would constitute “an unwarranted invasion of personal privacy” as defined by the California Public Records Act:

Name Date of hire and date of separation Position title Annual base salary Organizational unit Job description Full-time or part-time and appointment type Stipends Bonus compensation Incentive compensation (including Clinical Enterprise Management Recognition Plan, Health Sciences Plan, Treasurer’s Annual Incentive Plan, etc.) “By-agreement” payments Senior Management Supplemental Benefit Program participation Automobile allowance or leased automobile Eligibility for standard benefits package Benefits received outside of standard package or normal program/policy (e.g., exceptional vacation accrual/allowance) Senior Manager Life Insurance Executive Business Travel Insurance Executive Salary Continuation for Disability University home loan amount, interest rate, length of term University-provided housing Relocation allowance Temporary housing allowance Moving expenses Exceptional educational expenses Post-retirement employment agreements Consultant/independent contractor compensation agreements Severance/separation/settlement agreements Sabbatical/administrative leave in lieu of sabbatical accrual Offer letter reflecting final terms and conditions of employment Administrative fund allocation Corporate board service Employment of family or other personal relationships that are explicitly part of any formal or informal employment agreement

3. New guidelines for the reporting of compensation information
In addition to other reports the university is obligated to provide the regents and the public on executive compensation, corporate board service, and other forms of compensation, Dynes said the university:

Will provide an electronic annual report of compensation for all UC employees including, but not limited to: Name Date of hire/separation Position title and organizational unit assignment Base salary Status of appointment (full time, part time, contract, etc)
The annual report shall include a section solely on executive compensation, which shall include total compensation; Will provide quarterly reports of recent hires of executives and staff earning the amount that currently requires regental approval; separations; and regental approval of raises; Will post all compensation actions immediately following action by the regents at regularly-scheduled board meetings and within one week of actions taken between meetings (interim actions). The mode of reporting shall be through the standardized template that has been developed to report total compensation; Has enacted a new systemwide policy regarding the disclosure of compensation information in press releases as follows: Regent-approved appointments:  All press releases on appointments approved by the regents will include total compensation.  This means that the press release will include a clear statement of the base salary approved, and a listing of the other approved elements of compensation.  The press release will also provide a link to the regent’s template that details these other elements of compensation; All other appointments:  When a press release is issued for other appointments that do not require approval of the regents, the press release will include base salary, with an offer to make other compensation information available upon request.

4. Comprehensive policy review and framework
As requested by the regents in May, the Office of the President is completing a competitive bidding process for an external consultant to assist in the development of a comprehensive policy framework and the development of new and revised policies and procedures in compensation, benefits, and related areas. The policy review will include a specific focus on the following two priority areas as identified by the task force review:

Outside Professional Activities. In May, the regents concurred in principle with the task force recommendation to limit the number of externally compensated professional activities and board service for senior managers and resolve conflicts in policy for senior managers but requested further analysis to ensure that any policy revisions were clear, consistent, and sound. Among the proposed modifications are: Consolidation of existing policies and guidelines governing outside professional activities for senior managers into one coherent policy; Strengthening of pre-approval and reporting requirements; Clarifying which policies (e.g., academic, administrative) govern which positions (e.g., university officers, non-faculty senior managers, senior managers with faculty appointments, academic appointees, members of the Health Sciences Compensation Plan, etc.); and Clarifying how deans will be treated for the purposes of outside activities, consistent with the policies and practices of peer institutions. Administrative and Sabbatical Leave. The regents also requested the university to further study its policies and practices on administrative leaves in lieu of sabbaticals for senior managers who also hold academic appointments, including the rate of pay for these leaves and the University’s practice of honoring sabbatical credits earned at other institutions. Among the proposed modifications are: Clarifying and consolidating various academic and administrative policies on sabbatical leave, administrative leave, and administrative leave in lieu of sabbatical; Clarifying eligibility criteria for accruing and taking sabbatical leave; Stating explicitly that no cash payments may be made in lieu of administrative leave.
It is anticipated that the conceptual basis for this new policy framework will be brought to the regents for discussion at the January 2007 meeting, along with a timeline for completion of the policy review.

5. Competitive compensation benchmarking
In order to ensure that UC is able to provide its faculty, administrators, and staff with competitive compensation and benefits packages, the president’s implementation committee is currently developing principles for compensation benchmarking, including a possible recommendation that UC use the institutions where it gains and/or loses the most faculty and the most senior managers (respectively) as the appropriate institutions for benchmarking. 

6. Strengthening oversight of travel and entertainment expenditures
In addition to compensation issues, the PricewaterhouseCoopers audit and university auditor’s review also identified issues related to travel and entertainment expenses. In response, the Office of the President requested and has received action plans from all UC locations for addressing the three primary areas identified in the audits: 1) provision of training for those personnel who approve travel and entertainment expenses; 2) enforcement of clear and appropriate approval procedures and documentation requirements; and 3) ongoing monitoring and oversight to ensure adherence to policies and procedures. Implementation of these efforts has already begun at all UC locations, with anticipated systemwide completion in early 2007.

7. The development of a new human resources information system in order to better track, manage and report compensation data
As the reviews noted, it is not possible to achieve the university’s goals in compensation disclosure, transparency, and accountability without “a modern, comprehensive, integrated human resources information system.” Accordingly, in April Dynes committed funding for the development of such a system, with the first phase to focus on senior management compensation data. The Senior Leadership Information System (SLIS) will be developed as a Web-based, comprehensive repository of demographic, compensation, and remuneration data for members of the Senior Leadership Compensation Group (SLCG) and is expected to be fully operational by December 2006, in time for the next annual executive compensation reporting cycle beginning in early 2007.

In addition to the aforementioned reforms, Dynes also proposed that the regents adopt the following:

1. A new definition of total compensation.
A new definition of “total compensation” for systemwide approval, disclosure, and reporting purposes, to make clear which elements comprise total compensation.

2. A statement of consequences relating to serious violations of compensation policies.
In order to support the university’s goal of ensuring its public accountability, Dynes is recommending that a statement of consequences for serious violations of compensation policies be added to the 1993 Principles for Review of Executive Compensation, as follows:

“Any serious violation of these principles or any University policy relating to compensation may, depending upon the facts and circumstances, result in adverse employment action, including without limitation, censure, counseling, suspension, loss of pay and/or dismissal from the employ of the University. The Vice President - Chief Compliance and Audit Officer shall provide an annual summary to the Board with respect to findings of serious wrongdoing, including the status of personnel actions proposed or taken.”

3. Bylaw changes to clarify and simply the authority and responsibilities among the regents and the president to make compensation decisions.

4. A group of named positions for whom the regents shall retain direct authority to approve compensation.
In response to the task force’s recommendation, Dynes is recommending that the regents retain direct authority to approve compensation for the following positions: the president, all vice president positions, university auditor, principal officers of the regents, chancellors and vice chancellors, directors and deputy directors of the Lawrence Berkeley National Laboratory and the Lawrence Livermore National Laboratory, medical center chief executive officers, and professional school deans.

Additional details about these actions are at www.universityofcalifornia.edu/regents/regmeet/sept06/comp.pdf

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