What the Executive Compensation Framework means for universities

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Background

Since 2012, following amendments to the Broader Public Sector Accountability Act, compensation for executives at broader public sector institutions have been “frozen”. In September 2016, the new Executive Compensation Framework Regulation came into effect, lifting the freeze. The Framework allows broader public sector institutions to increase compensation for executives, but puts in place requirements designed to improve the accountability and transparency of the process by which compensation is determined. At postsecondary institutions, this framework applies to university and college presidents, vice-presidents, as well as certain other senior positions.

Framework details

The framework requires university boards of governors to justify proposed increases in executive compensation by:

  • Developing a philosophy that explains how their compensation program is designed to support the university in achieving its operating goals and strategic objectives;
  • Conducting an analysis of the compensation currently provided to executives at comparable institutions, with the understanding that comparator institutions should fulfill a similar purpose, have similar student enrolment, be located in similar regions, and that the positions compared should have similar responsibilities; and
  • Detailing the total compensation and performance-related pay proposed for each position based on comparable positions and salaries.

The details of how executive compensation will be set at each institution have to be posted on the university’s website for 30 days to allow for members of the university community and general public to be informed about the proposed changes. The university is also responsible for developing a process by which public feedback is collected, evaluated, and retained for evaluation by the government.

All public sector institutions, including universities, are required to post this completed package of information to their website by September 5, 2017.

Recent developments

Ontario’s colleges have released their proposals for executive compensation in the college sector, and the numbers were astounding. Colleges are proposing that they should be able to increase the already high salaries of their presidents by an average of 32 per cent (in many cases, a raise of over $100,000 per year).

How did this happen? As the Executive Compensation Framework currently exists, there are few restrictions on how governing boards select comparable positions, so they are able to cherry-pick comparators to maximize executive salaries. For instance, Seneca College chose the University of Guelph and York University as comparators while Algonquin College chose several large hospitals, the LCBO, and Toronto Pearson International Airport.

OCUFA’s position

OCUFA has been concerned about the excessive compensation that some senior university executives receive and the often opaque processes by which these compensation packages have been determined in the past. While this new Executive Compensation Framework may increase the transparency of the process, OCUFA is alarmed by the amount by which Ontario’s colleges are proposing to increase their presidents’ salaries and the precedent that might set for university executives. It raises serious concerns about the effectiveness of the Framework for ensuring reasonable salaries for Ontario’s university executives.

It will be important for faculty associations to pay close attention to the executive compensation proposals brought forward by their universities and actively engage in the consultations. The additional transparency required by the new framework is a good first step. However, meaningful community consultation that sees governing boards take action on issues of executive compensation and executive hiring practices, will also be critical to ensuring good governance of the province’s postsecondary institutions.

The guide for the Executive Compensation Framework is available online.

This article originally appeared in OCUFA Report. To receive stories like this every week, please subscribe.

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