• October 25, 2014

Farewell Payout to Spanier Made Him Priciest President

Penn State's Farewell Payout to Spanier Made Him Best-Paid Public-College President 1

Jason Minick, AP Photo

Graham Spanier (entering a courthouse with his wife, Sandra) was arraigned in November 2012 in the wake of the child-sex-abuse scandal that had enveloped Penn State.

Graham B. Spanier, who was fired amid scandal in 2011 as president of Pennsylvania State University, earned more money in that year than the leader of any other major public college.

But the story did not necessarily have to end that way.

Penn State's Board of Trustees terminated Mr. Spanier "without cause" for his handling of child-sex-abuse allegations involving a former assistant football coach. Had the board instead fired him "for cause," the president would very likely have walked away with only a small fraction of the $2.9-million he received in 2011-12.

The bulk of Mr. Spanier's earnings came from a hefty severance package and years of accumulated deferred compensation. Deferred-compensation plans, which award executives a lump sum after a specified number of years on the job, are common in presidential contracts, in part because they serve as retention incentives. But all of that money can be wiped out with a for-cause firing.

Such a dismissal also might have jeopardized Mr. Spanier's continuing position as a tenured professor at Penn State, where he earns $600,000 a year even though he is on paid leave and performs no university-related duties.

The Chronicle calculated Mr. Spanier's earnings on the basis of information previously made public by the university. Penn State officials said there was "no authorization or need" to provide compensation figures for the 2011-12 fiscal year, which is the period from July 1, 2011, to June 30, 2012, covered in The Chronicle's analysis of public-college leaders' pay.

Because Penn State is considered a "state related" university in Pennsylvania, it is exempt from the disclosure laws followed by most other public colleges in the nation. Among 191 public research institutions contacted by The Chronicle for its annual analysis of presidential pay, Penn State was the only university not to cooperate fully. Its refusal this year was a deviation from its own past practices.

In past years, the university provided compensation figures for the specific time frame covered in The Chronicle's analysis. This year Penn State officials said they would release information only from the most recent calendar year, omitting data from four key months in 2011 when Mr. Spanier received his payout.

Mr. Spanier's $2.9-million in total compensation for 2011-12 was more than six times that of the median pay of $441,392 for the 212 college presidents included in The Chronicle's analysis. His professorial salary is more than four times that of the average full professor at Penn State.

For most of his presidency, Mr. Spanier's compensation was among higher education's most tightly guarded secrets. It was not until 2005 that the university revealed his salary, $492,000, which made him the 21st-highest-paid president in The Chronicle's 2005-6 analysis. The university disclosed the information after a state Supreme Court ruling compelled it to make public the salary of the late Joe Paterno, the longtime head football coach.

Since then, Mr. Spanier has ascended the ranks of higher education's top earners. Last year, when he earned $1-million, he was the nation's third-highest-paid public-college president.

It is not uncommon for departing presidents to be among the top earners, because severance agreements and retirement packages can inflate annual earnings. For example, Alan G. Merten, who retired last June as president of George Mason University, received $1.9-million for 2011-12 largely because of a retirement payout. That moved him in a single year from the 13th-highest-paid president to the fifth.

Penn State's Board of Trustees unanimously voted on November 9, 2011, to remove Mr. Spanier from the presidency. Explaining their decision, they cited his "insufficient action" when he learned that Jerry Sandusky, the Nittany Lions' former defensive coordinator, had been spotted, in 2002, in a campus locker-room shower with a young boy. Mr. Spanier, who was charged last November with conspiring to cover up the allegations, has maintained that he was never told of any sexual or abusive behavior by Mr. Sandusky.

The former coach was convicted on 45 counts related to child sex-abuse and is serving a 30-year minimum sentence in state prison.

The fact that Penn State's board did not pursue termination for cause, even in the face of such serious concerns, highlights the rarity of such dismissals. Indeed, a for-cause firing almost never happens in academe.

At Rutgers University, for example, when officials recently fired the men's basketball coach, Mike Rice Jr., it was on a without-cause basis, even though they had video evidence of his hurling basketballs and gay-related slurs at his players.

The legal bar for a for-cause firing is typically high, often requiring proof of serious crimes or gross negligence. Such a firing also invites a lawsuit, which would assure more expenses for the institution and make it more likely that unflattering details about the specific reasons for dismissal would be discussed in open court.

"Most of the time they don't want to air dirty laundry," says Raymond D. Cotton, a Washington lawyer who specializes in presidential contracts.

Upon his dismissal from Penn State, Mr. Spanier received $1.2-million in severance pay, $1.2-million in deferred compensation, and $700,000 for a one-year sabbatical that began when he was fired. (The sabbatical was not counted as part of his total compensation in The Chronicle's analysis, because it was a benefit extended to him as a professor after his presidency was terminated.)

Under a typical contract, Mr. Spanier would have forfeited that $3.1-million with a for-cause termination, Mr. Cotton says. But the costs to the university in reputational damage and litigation might have been greater.

"Had they fired him for cause, there would have been a lawsuit against them," Mr. Cotton says. "Then the board would be in the position of having to prove that Graham Spanier knew what was going on down there in the locker room, at least on one occasion. How do you do that?"

But there may be a middle ground for trustees who are reluctant to fire a president for cause, says John J. Donohue III, a law professor at Stanford University.

"Boards often say they don't want to air dirty laundry with a for-cause firing, but they often don't have to go to the other extreme of paying large sums to top executives who really should be fired for cause if their misconduct merits it," he wrote in an e-mail. The best approach, he added, might be to threaten a for-cause firing if the president will not take a reduced payout.

Mr. Spanier's indictment, which only came after his firing, would surely have warranted a for-cause firing, Mr. Donohue added. "If that isn't grounds for a cause-based dismissal, then something is really wrong with that employment contract."

Keith E. Masser, chairman of Penn State's board, declined an interview request. University officials would not discuss the decision to fire the president without cause. "It is inappropriate for public rehashing," Lisa Powers, a university spokeswoman, wrote in an e-mail. Mr. Spanier also declined an interview request.

Anthony P. Lubrano, who was elected last May to the board as an alumni representative, has criticized the trustees for not affording due process to Mr. Spanier and Mr. Paterno, who also lost his job in connection with the scandal. Mr. Lubrano says he believes that the trustees rushed to judgment on both men and lacked sufficient evidence to fire either of them for cause.

"If they were going to ask the president to step down without knowing all the facts," he says, "then it had to be without cause."

Mr. Lubrano, who has pushed for greater transparency at Penn State, also took issue with the university's decision not to provide The Chronicle with fiscal-year compensation figures for Mr. Spanier. "I don't see any reason why that information shouldn't be shared," he says. "It's curious that they deviated from providing information in the same format."

Because Penn State officials refused to provide Mr. Spanier's contract, it is unclear what would have justified a for-cause dismissal.

The university has made public the contract of Rodney A. Erickson, Mr. Spanier's successor as president. Mr. Erickson's contract is posted on a campus Web site that describes Penn State's dedication to being "a more open university."

Some alumni and public officials have criticized what they describe as a culture of secrecy at Penn State, arguing that Mr. Sandusky's crimes went undetected in part because of the university's cloistered nature. Sensitive to that criticism, Mr. Erickson has spoken publicly about his commitment to transparency.

Yet the university remains inconsistent in its openness, as evidenced by Penn State's seemingly conflicting positions on releasing presidential contracts.

"We have made information available that we believe is appropriate in the circumstances," Ms. Powers wrote.

The fact that the university can choose which contracts it will release is evidence of the need for an overhaul of Pennsylvania's public-disclosure laws, says State Rep. Kerry Benninghoff, a Republican.

"Why would you play cat-and-mouse like that?" he asks. "The mere fact that you're cherry-picking is a red flag."

Mr. Benninghoff is sponsoring a bill that would apply the state's Right to Know law, which requires state agencies to release e-mail correspondence and other public records, to all state-related institutions. They include Penn State, Lincoln University, Temple University, and the University of Pittsburgh.

Some of the provisions in Mr. Erickson's contract appear very much informed by recent events at Penn State. The president can be fired "for cause" because of "actions or omissions" related to crime, fraud, or moral turpitude. That gets to the heart of what concerned trustees about Mr. Spanier, who they say was less than forthcoming about the allegations made against Mr. Sandusky and played down the related grand-jury investigation.

Mr. Erickson's contract also states that he can be terminated for cause if he is indicted for any felony. Of the eight counts that Mr. Spanier faces, five are felonies.

Mr. Erickson's contract goes on to specify that he can no longer work at the university if he is fired for cause. Applied to Mr. Spanier, that provision alone would save Penn State his salary of $600,000 a year as a professor in the department of human development and family studies.

It is often controversial, but not uncommon, for a president to be fired or resign under pressure, only to move on to a high-paying professorship. Richard H. Herman resigned as chancellor of the University of Illinois at Urbana-Champaign in 2009 and now earns $212,000 a year as a professor there. He is on the campus about once a week and does little teaching compared with his colleagues, the Chicago Tribune reports.

As Mr. Spanier's legal battle continues, the question of his status as a tenured professor lingers. Larry C. Backer, immediate past chairman of the Faculty Senate, says the dismissal of a tenured faculty member is and should be a process wholly separate from the removal of a professor from an administrative position, such as the presidency.

"Whether or not, in addition to being fired as president, his conduct merits action on his tenure status really should be left to the procedures Penn State has developed over the last 50 or 60 years," Mr. Backer says.

For a tenured faculty member to be dismissed, Penn State's policy manual states, he or she must be given written notice from an administrator "within a reasonable time" after the occurrence of events that might give rise to termination. As of now, it appears, no such notice has been given to Mr. Spanier. But university officials will not confirm that. "These are personnel decisions that are, for the time being, considered confidential," Ms. Powers wrote in an e-mail.

Adequate cause for removing a tenured faculty member at Penn State includes "moral turpitude," "grave misconduct," and "lack of competence or failure to perform."

Mr. Backer says there is a "sharp split" on the issue among faculty members, some of whom believe Mr. Spanier was scapegoated and others who have serious problems with his continued pay and affiliation with the university. But there is also a sense that Mr. Spanier deserves a fair hearing.

"Spanier really hasn't had his day to say his piece," Mr. Backer says. "And until that happens, you have to be careful about judgment."

Correction (5/15/2013, 5:17 p.m.): This article originally was inconsistent in reporting Mr. Spanier's compensation in 2011-12. It was $2.9-million, not $2.7-million. The article has been updated to reflect this correction.

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