Lasting Relationships Start with Sound Beginnings: Comprehensive CEO Contracts Are Key

• By Anne L. Deming, Dr. Scott D. Miller
• 03/01/05

The lengthy Presidential search is successfully concluded to the mutual satisfaction of candidate, search committee and Board of Trustees. The announcement is made. The whirlwind round of introductions to the town-gown communities begins. Media profiles appear. A large scale formal Inauguration is held. A year later, the new CEO moves out and on and the whole process begins anew, leaving volunteer leadership angry, the media cynical, staff and faculty puzzled and donors skeptical. What could possibly have gone wrong?

For the past six years we have coordinated a presidential best practices service, the Presidential Compensation Project, for the Council of Independent Colleges (CIC) in Washington, D.C. In the process of annually surveying the 500-plus CIC member presidents, we’ve seen this unhappy scenario played out too many times between solid candidates and institutions, even when the initial fit seemed promising. Many of our findings are also applicable to other senior level positions at some institutions. Often, in our observation, the“devil was in the details” of the contractual process. When the Presidential“honeymoon” is over, many a potentially happy marriage has been derailed by misunderstandings and miscommunications that could have been averted at the contractual stage.

While some contractual provisions — i.e., salary, retirement, etc.— are obvious, others, such as service on outside boards or consulting arrangements, may not be. It’s essential that these and other expectations be clearly defined. For example, we’ve known boards and new presidents to tangle about presidential residences soon after the contractual ink dries. Will the president be expected to live on campus? If a residence exists, what if the candidate prefers his or her own home? If no presidential home exists, will the candidate expect one to be constructed? And what about new furnishings? Is the college expected to underwrite a new CEO’s expensive tastes? The “no surprises” rule of management is key here: it’s always better to anticipate every eventuality in advance, rather than to confront unpleasant news later.

Key Elements to a Presidential Contract

We found the following ingredients to be clearly defined in most good contracts: salary; term (number of years or rolling); annual review of performance and compensation; retirement; deferred compensation; insurance (health, life, accident, disability); annual physical examination; faculty rank (and sometimes tenure); automobile; presidential home; vacation and sick leave; sabbatical; tuition for dependents; spousal considerations; memberships and entertainment; outside service on boards and consulting; retirement or exit strategy; and relocation expenses.

We’ve found several resources useful in reviewing sound contracts, including two Washington, D.C.-based associations, The American Council on Education (ACE) and the Association of Governing Boards (AGB). ACE has published a series of reports since 1986 describing the backgrounds, career paths, and experiences of college and university presidents. AGB has a number of useful publications regarding presidential evaluation and the Board’s role in setting a contract. For two-year institutions, the American Association of Community Colleges (AACC) recently published a guide for presidents and boards of this rapidly growing sector.

Individual consultants with whom we’ve worked in this arena include:

• Dr. James L. Fisher of Vero Beach, FL. A former university president and president-emeritus of the Council for the Advancement and Support of Education (C.A.S.E), Fisher has served as a consultant to hundreds of public and private institutions.
• Raymond D. Cotton of Washington, D.C., provides a wide variety of services related to the technical aspect of employment contracts and human resource law. The stakes of a premature presidential or other high-level departure are costly for both institution and individual, mandating a greater need for the institution and CEO to formalize details of their relationship in a sound contract. Stories abound of excellent presidents and high quality institutions whose images are tarnished by poor fits and ugly partings. With college presidencies and other not-for-profit leaders under increasing scrutiny, it’s good business and sound external relations to take all the time necessary to “dot the i’s and cross the t’s” up front, rather than try to do damage control later.

Dr. Scott D. Miller is president of Wesley College, Dover, DE. Now in his 15th year as a college president, he also serves as a consultant to college presidents and boards. He was recently one of a select group of presidents nationally profiled in the book “The Entrepreneurial College President.”

Dr. Anne L. Deming is president-emerita of Notre Dame College, Euclid, OH. She is an executive search consultant with R.H. Perry and Associates and heads the consulting firm Anne Deming and Associates.