Hershey: Let’s be fair about Levin’s bonus

Last Thursday, students gathered in Beinecke Plaza to hold a protest concerning the recent announcement that University President Richard Levin will receive a $350,000 bonus this year. The protesters hosted a mock cocktail party congratulating President Levin on his raise, and they circulated flyers urging financial aid reform following last year’s $400 increase in the student self-help portion of financial aid. For many Yale students, it seems egregious that President Levin would receive such a substantial bonus — one that he could certainly survive without — in light of the University’s demand that its least fiscally secure students contribute more to their financial aid packages.

But the question of executive compensation, and more broadly of what one deserves for his or her work, is a complicated issue that cannot be settled by strident cries of injustice and vague calls for “reform.”

In the first place, Richard Levin has done extraordinary things for the University that all Yale students should recognize. When Levin assumed the presidency in 1993, the University’s endowment was valued at roughly $3 billion. Since then, Levin and his team of investment advisors made incredibly wise decisions concerning how to invest Yale’s money and increased the University’s endowment by roughly $20 billion prior to the recent fiscal crisis, which has done severe damage to nearly all colleges’ endowments. This massive increase in Yale’s endowment was entirely unprecedented and has gone a long way towards improving the quality of life and education of Yale students. That’s something that we ought to be grateful for, not resent.

In addition, Levin’s plans for renovating Yale’s residential colleges proved successful and worthwhile. Our living spaces are clean, well-furnished and aesthetically pleasing. Our facilities are abundant and top-notch. Anyone who has visited the nation’s other top-ranking schools will plainly see that Yale gained a competitive edge by undergoing such thorough renovations, and we enjoy the fruits of Levin’s ambitious renovation project on a daily basis.

It is most important to note that President Levin dramatically increased the availability of financial aid for students who seek it. While Thursday’s protesters were quick to condemn Levin for enjoying a bonus at the supposed expense of Yale’s least well-off students, they neglected that under Levin’s tenure as president, the self-help portion of financial aid has dropped substantially. In 2001, student self-help ranged from a low of $5,500 to a high of $10,420. Now all students seeking financial aid are expected to pay $3,000 in self-help.

Of course, none of this is to suggest that President Levin can do no wrong or that his actions will always be beyond reproach. But I am willing to argue that in light of these facts, there is an element of frivolity and intellectual laziness underlying the harsh criticism that the president has recently received.

The recent increase in the student self-help portion of financial aid is not relevant to the issue at hand — Levin’s bonus — as the self-help increase was fiercely protested long before Levin’s bonus was ever announced, and one could reasonably expect that students would complain about a bump in Levin’s pay even if the self-help portion of financial aid had never been raised at all. Further, Yale spends money on a lot of things that theoretically could be redirected towards making tuition more affordable for low-income students, but none of the protesters complained about any of that spending — their only concern was Levin’s bonus. Thus, for these protests to have any substance at all, an argument must be presented as to why the bonus is in itself unjustified.

And such an argument has not yet been made. Levin oversees a corporation that recovered $400 million last year following substantial losses due to the financial crisis. Considering these gains, is $350,000 (0.0008 percent of the endowment rebound) an inappropriate amount to add to his pay? Frankly, I’m not qualified to judge, and neither are Thursday’s protesters. My point is not that $350,000 was the perfect amount to add to Levin’s salary; I only seek to criticize those who regard it as self-evident that a $350,000 bonus is exorbitant and unjustified, without giving any thought to what Levin has done for the University and its least well-off students, and without taking the time to consider any other factor that ought to help determine what Levin should be paid.

Executive pay is a complicated issue, and there are no obvious answers — there is no universally accepted, objective standard as to what constitutes “reasonable” compensation for one’s work. I only regret that last Thursday’s protesters were so quick to condemn what may in fact be an entirely justified raise on such dubious grounds, and that they did so in such a haughty and obnoxious manner.


  • theantiyale


    $360 thousand dollars is about A THOUSAND DOLLARS A DAY.

    People are STARVING two blocks from Yale palaces.

    Anything can be “justified”.

    It’s still unseemly.


  • theantiyale

    The U.S. President’s ENTIRE SALARY is 400 thousand dollars, 40 thousand more than the Yale President’s “bonus”..

  • comment

    PS What good is 400 million more in the endowment if it means that financial aid is being cut? Levin turned this university into a corporate business machine, that is his legacy, pure and simple. And that is nothing to brag about. Why does Levin get credit for a rebounding endowment and no fault for the much larger crash preceding it? He was also in office to allow the kind of reckless, heartless, investing that led to the evisceration of our endowment. Or, is he only responsible for the ‘good’ things that happen?

    Also, this bonus is utterly relevant to the increase in the self-help portion of financial aid. The Yale Corporation is making a choice here to fund an embarrassingly huge bonus to an already overpaid administrator and is also making a choice to decrease financial aid. All monies run through the same pocket at Yale. People need to be help responsible for this conscious decision.

  • purple

    This is the first interesting and thoughtful concerning President Levin’s raise I’ve seen in the YDN – thank you! Not sure I agree, though, that student contribution in financial aid is a complete red herring. I don’t claim to know anything about how university funding works, but I think it’s a fair assumption that, ultimately, financial aid and the president’s salary come from the same pot of Yale money. I would guess that, in any given year, Yale’s budget allows a fixed amount of spending, and so in this sense budgeting is a zero-sum game. Choosing to give President Levin a payraise is a statement that this bonus is a higher priority than maintaining current levels of funding for all of the parts of the university that are currently facing budget cuts (including, notably, financial aid). Yeah, maybe there are other misplaced priorities and expenditures out there in the university budget, but the fact that students are not protesting them all with equal (or proportionate) weight doesn’t invalidate the one budget point we *have* chosen to protest. (Of course, it might be invalid for other reasons, but this is not one of them.)

  • FreddyHoneychurch

    This has nothing to do with whether or not Levin’s done a great job. Have not the students, faculty and staff also done a great job? We could argue all day about which professors have outperformed expectations since 1993 or whatever. It simply looks terrible for the president to receive such a big bonus while everyone else takes cuts. The protest the other day, it seems to me, wanted only to point out how tone deaf Levin is for taking that bonus.

  • FailBoat

    > We could argue all day about which professors have outperformed expectations since 1993 or whatever.

    Merit pay: how ridiculous!

  • FreddyHoneychurch

    Merit pay indeed! Preside over a university that is booming, and reap the benefits (as we all did during the boom years). Preside over a university that has lost a lot of money, and take the hit (as we all are … oh, wait, the president just got a huge bonus).

  • JackJ

    Question: Is this bonus mandated in the President’s contract? Second question: If it is a mandated occurrence then were there specific performance criteria and mandated percentages of base salary required for payment?

    If the answers to these questions are yes, yes and yes then what the majority of the protestors are doing is taking exception to the very type of contract they will want when they enter the post Yale world.

    When students complain the President is getting more money and they’re getting less financial aid they are essentially saying they are more important than the President and that he should be wiling to sacrifice his success for their needs. Sounds a little well… just little.

  • FreddyHoneychurch

    “When students complain the President is getting more money and they’re getting less financial aid they are essentially saying they are more important than the President and that he should be wiling (sic) to sacrifice his success for their needs.”

    Wow. Who’s teaching logic around here? Looks like we could cut that position to help finance Levin’s bonus.

  • pablum

    @JackJ: He’s the president of a University, not a hedge fund. The endowment’s success or failure is contingent on donors’ generosity, investors’ smarts, and the vicissitudes of the market. If Levin deserves credit for the modest bump in the endowment (one of the smallest in the Ivy League), then he deserves reprobation for its decline (one of the largest in the Ivy League).

    More important, he’s a university president, not a CEO. His prime directive is to protect and advance the mission of the university. By slashing the core elements of the university — academics — and lining his own pockets — management — he’s failing as a university president, but succeeding, I suppose, as a businessman.

    Perhaps he should preside over the School of Management and leave the future of the University up to an academic who actually understands what a university is.

  • JackJ

    @ those who had problems with my statements.

    A. I asked questions about the contract. Nobody responded to those questions.
    B. My statements were predicated on yes answers to my questions.
    C. I see the logic questioned but not refuted.
    D. Doesn’t matter what his job is if his contract calls for such bonuses and those bonuses are based on measurable performance parameters. Then your argument is with the trustees and regents because they approved his contract.
    E. Argue all you like about business and academia but without business academia could not exist. Raising money will always be at the top of the list of skills one seeks in a university president.
    F. Tell me, honestly, that you wouldn’t want this kind of contract in your job.

  • FreddyHoneychurch

    @ JackJ

    The answers:

    No one is arguing that the legal contract (if there is one) should be summarily invalidated. Levin’s lawyer probably understands contract law.

    Yes, Yale’s student body (and faculty) are more important than the president.

    Academia has long existed without presidents who receive that sort of bonus in a down economy (or any bonus whatsoever in any economy); indeed, not every university president in THIS down economy received a massive bonus or any bonus whatsoever.

    Just about everyone I know would have some qualms about accepting a huge bonus for presiding over an institution that’s cash strapped, shedding employees and cutting costs everywhere.

    But then again, I’m not an economist, and we can see from the events of the last few years that they’ve got it all figured out.

  • pablum

    Careful, FreddyHoneychurch — you’re raising the question of *ethics*. That has no place in a university. What matters is *profit*.

  • yaylie

    Did Dick get bonuses in prior years? If so, how big and swinging were they? If not, what makes this year so special that Yale gives him one? Did he treaten to switch careers over to Wall Street?

  • gzuckier

    Well, of course, in such a bastion of analytical talent and meritocracy as Yale, it goes without saying that such an action would never have taken place without a thorough review of the efficacy of competing university presidents, the consequences for Yale of keeping Levin rather than a higher or lower placed competitor, the effect of varying bonus amounts on motivating Levin, etc. etc. To suggest otherwise, that this is just random mutual financial back-scratching between interlocking governing boards, would be just unthinkable.

  • FailBoat

    > But then again, I’m not an economist, and we can see from the events of the last few years that they’ve got it all figured out.

    At least they’re thinking critically about the problem, which is more than anyone could say for your comment.