Cap nonprofit CEO salaries to the US President’s salary

college-president-salaryRunaway executive salaries aren’t limited to corporate America. Top universities and many other nonprofit institutions also shower their top executives with sky-high compensation packages, even as these entities benefit from generous taxpayer subsidies and often tax-exempt status. Although the income disparity between a university president and a typical employee might not be as severe as with major businesses, salaries of some university presidents are well north of $1 million. Meanwhile, other university employees like adjunct professors and cafeteria servers are usually left to fight over the crumbs.

In response, the Center for Economic and Policy Research offers a simple remedy: as a condition of enjoying tax-exempt status, require universities to cap CEO salaries to, say, $400,000 per year. Of course, that’s the salary paid to the President of the United States—the most powerful position at the helm of the most powerful public service entity in the country. CEPR further explains in this blog post:

If the public felt it was more important that adjuncts made $40,000 a year than university presidents made $1,000,000 a year, there could be a limit on compensation levels that would allow an institution to receive tax-exempt status. For example, if the cap for total compensation was set at $400,000, university presidents would still be able to earn twice as much as cabinet officers.

Of course universities would complain about such a restriction as government interference, but this is nonsense. They are free to pay their staff absolutely as much as they like, the restriction only applies if they want a government subsidy. (It’s sort of like restrictions the government imposes on people who get TANF.)

The universities will also complain that they cannot get qualified people for $400,000 a year. This one should invite a healthy dose of ridicule. If we can get qualified people to run the Defense Department and Department of Health and Human Services for half this amount, perhaps their school is not the sort of institution that deserves taxpayer support if it can’t find anyone willing to make the sacrifice of running the place for twice the pay of a cabinet secretary.

For more information, see “Should Taxpayers Subsidize the Pay of College Presidents?” The Center for Economic and Policy Research (CEPR) (2014); “A solution to inequality and stagnant nonprofit fundraising: Cap CEO pay,” Progressive Pulse (2014).