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Before you sign on the dotted line

Five mistakes college and university presidents make in negotiating their contracts
University Business, November 2015

The skill set required for today’s top jobs in higher education has never been more extensive or demanding. Boards of Trustees are looking for leadership in several areas: academic authority, fundraising ability, public relations and media savvy, legal and political sensitivity, as well as ease of movement between constituent groups—alumni, students, faculty, parents, donors, business leaders, government—all with significant claims on the president’s time and attention. And then there’s the “Vision Thing,” of particular importance to Boards which want to reconfigure, re-energize or even just test, their school’s brand.

Handling many of these tasks (much less all of them) simultaneously, under the pressures of our social media-driven, “24/7” world, requires a person of substantial gifts and abilities. Senior college and university administrators have tough jobs that require personal and family sacrifices, and they should be compensated accordingly.

Which makes the terms of the contract between the president and the college or university, as represented by its Board of Trustees, all the more important.

Nonetheless, prospective presidents—and not just new or first-time presidents—are often not as careful with their own interests as with the interests of the academic institutions they will soon be leading.

That is why Board Chairs, Trustees and search committees have increased respect for prospective presidents who recognize that the process of negotiating their own contracts, whether an initial agreement or a renewal of an existing arrangement, is not merely some administrative “detail” which needs to be hurried out of the way so that the parties can make a celebratory announcement and get on to the “real business” of running the school. It is, instead, a laboratory where the terms of potential success—for both the president and the institution—are weighed and tested with an eye to strength in the future.

What are some of the big mistakes that presidential candidates make in negotiating their agreements? Research as well as our direct experience representing college and university presidents turns up five of them.

Mistake 1: Failure to negotiate at all

A surprising number of presidential candidates either accept the first contracts they are offered, or do nothing more than tweak a few compensation terms. Their thinking plainly is: “If the Board has decided that it needs me, and I am the last man or woman standing after an extensive search process, I can assume that the Board’s contractual first offer represents its ‘best shot’ at getting me and I should just accept its offer.” Other successful candidates may fear that any meaningful negotiation over contract terms may interject an unnecessary element of contentiousness into what should be a honeymoon period between a college or university’s Board and its new leader.

Having been involved in negotiations on behalf of both first-time and returning presidents, I understand their fear. But I also know that Boards, like other institutions and individuals, are unlikely to make their first offer their final offer. If a first offer were indeed to be the final offer, it’s far better to learn this before accepting the position; at the very least, the prospective president will learn a great deal about the mind-set, resources, flexibility and temperament of his or her most immediate, and often most important, constituency. Moreover, as discussed below, there are many significant terms in a president’s contract beyond those affecting pure compensation issues, so even if the Board says that it has “gone about as far as it can go” in terms of the compensation it is willing to offer (which is rarely the case), there are other essential aspects of the relationship between the contracting parties which can have powerful repercussions for the president if things go bad in the future (and, perhaps surprisingly, even if things go well). These terms need to be understood, addressed and negotiated at the outset.

Finally, presidents must seriously negotiate their contracts, whether it is a first contract or a seventh renewal, not only to protect their own needs, but to make it clear that they approach their own agreements with the same thoughtfulness, care, particularized attention and mettle that they will employ in handling the multitude of challenging matters with which they inevitably will be confronted in the job itself.

Mistake 2: Not having a lawyer negotiate on their behalf

Put another way, they take a “do it yourself” approach rather than seek professional guidance. You might be thinking, “He would say this, wouldn’t he?” After all, my livelihood depends on people having me represent them rather than acting as their own advisor and negotiator. Fair enough. But even if you discount my self-interest, the reasons for seeking professional assistance are compelling:

First, professionals bring to bear their unique skills and experience. Unless a prospective president is also an attorney practicing in the field of employment law in higher education, the most brilliant presidential candidates are no more qualified to “do it themselves” than I am qualified to spearhead a hundred million dollar capital campaign. As only one example, how many college presidents know the subtle yet critical differences between agreeing to arbitration rather than litigation in the dispute resolution clause of their employment contract? Moreover, if they opt for arbitration, do they agree to have all disputes arising out of the president’s contract arbitrated before the American Arbitration Association or JAMS? Do they know the difference between those organizations and why one might be a much better choice for them than the other depending on their contract terms and the particular nature of their own situations? The take-away should be that just as in their administrations of the affairs of their institutions, in their personal contractual dealings effective presidents rely on effective expertise.

Second, individuals cannot negotiate for themselves as well as they can for someone else. This should be self-evident. Whether this is their first or sixth presidential contract or merely a renewal, even experienced college and university presidents have emotions about hammering out the terms of an important agreement which is going to govern their compensation and personal obligations for the next three to five years and maybe longer. Can you speak as effectively on your own behalf as you can for someone else? It’s the very rare individual who can.

For a president to obtain the most satisfactory deal, someone has to discuss a variety of terms with the institution, usually in the person of the Board Chair or some lawyer designated by the Chair. A skilled and objective negotiator, free from the president’s worries about his or her own situation, as well as from his or her understandable desire to maintain a cordial relationship with the Chair and the Board, can speak far more effectively on the president’s behalf. This leads to my next point.

Finally, attorneys act as a buffer, a shield, a sword and even a carrier of blame. An attorney negotiating on a president’s behalf not only can obtain the best terms possible, but also can protect the president’s on-going relationship with the Board. If the Chair or the Board feels that the president wants too much, it is the attorney who can shoulder the blame, and absorb any bad feelings. Take, for example, the sports mega-agent Scott Boras. Many Americans perceive him as greedy, while his superstar athletes are lauded for their professional success. Boras plainly is willing to take the heat to get the best deals possible for his clients. A good lawyer negotiating on a prospective president’s behalf will provide the same service.

Furthermore, some presidents may feel squeamish about injecting their personal needs, particularly their monetary needs, into the college or university’s agenda; they will, therefore, shun hard-nosed negotiation, deeming it more appropriate for the football coach (who often is paid many times what the president earns).

Quite understandably, presidents-to-be do not want to detract from their on-going dialogue with the Board about the significant issues being faced by the academic institution. As a result, their attorney advocate should be there to advance and protect the presidential candidate’s own interests.

Also, with multi-year contracts now the norm, presidents are going to have only a small number of opportunities to improve their own situations. A skilled attorney negotiator can maximize these opportunities while protecting a president and keeping any potential controversy in the background.

Mistake 3: Accepting a “one size fits all” contract

Every human being’s factual situation is unique and, as every good lawyer knows, the facts set you free. A 40-year-old first-time presidential candidate who sees the first school to come calling as a stepping stone to eventual jobs at other, larger or more prestigious institutions, is different from a candidate who is a 50-year-old single parent, and the sole supporter of her family seeking a long-term appointment. And both are different from a 65+-year-old candidate who has served in several previous Presidencies and desires a shorter-term, transitional appointment.

A good presidential contract negotiation starts with an exhaustive consideration of the particular candidate’s personal, highly individualized needs and the school’s ability to meet them. After all the meetings with the search firms and the interviews and on-campus visits are over and a Board finally settles on a presidential candidate who is primed to accept the position, the resulting pre-marriage euphoria—as well as the pressure (sometimes legitimate, but often manufactured) of coming to an actual agreement before word leaks out—can and often does prevent the potential president and his or her professional advisor from drilling down to the questions they should be asking.

Rushing this process, which leads to not asking enough questions or the right questions, is guaranteed to get the prospective president less than he or she deserves, and not just less money, but also diminished appropriate protections. Lawyers for the college or university have a tendency to start with a more or less “form” contract, often based on what the previous president had signed. It may be a starting point, but it should not be an ending point for a good contract, let alone the best possible contract under the particular circumstances. The old aphorism applies here: Sign in haste, repent at leisure.

Mistake 4: Not fully considering options

This is the tough one, and often the biggest mistake a president on the verge of signing a new contract can make. When I receive a call from a candidate inquiring about representation in a contract negotiation (whether it’s for the CEO position of a major financial services firm, entertainment conglomerate, or college or university), more often than not the candidate is fielding more than one, and sometimes several, potential offers.

Yet many candidates in higher education are extremely uncomfortable with simultaneously exploring the terms of multiple offers to achieve the best possible contract with the candidate’s preferred institution. Although I assure my clients that the process can be handled with discretion and sensitivity, they often fear that the process will turn into an unseemly “auction” which will ultimately damage their professional academic integrity. In my experience, this fear is not borne out in practice, particularly if they entrust the process to their lawyer, who can provide the necessary cover.

Anxiety is the enemy of successful negotiations. It often drives a candidate’s refusal to consider, test, and balance competing offers. Of course, “real world” factors often do complicate the negotiation mix, allowing the anxiety plenty of quasi-legitimate places to hide. For instance, offers from competing colleges and universities are rarely on identical timetables. It is understandable for a presidential candidate to gravitate toward the most complete and exigent offer, particularly if another institution’s Board is at a slightly (or considerably) earlier stage in the process. I concede that it is challenging for a busy provost to juggle an actual presidential offer from School A, a weekend visit (sometimes requiring air travel) to School B, and a written response to initial inquiries from School C, which may be at a more exploratory stage in its search.

However, the fact that certain choices may be dictated by reality—in fact, School C simply may be too far behind the curve—emphatically does not mean that the candidate should give in to his or her anxiety and accept the first decent offer merely for the sake of being done with an uncomfortable process. The presidential candidate in search of the best deal eases off, takes a step back, and allows a lawyer advocate to find out where the best deal can be obtained.

This process is, if expertly handled, not as crude as it may appear in the popular imagination. It rarely, if ever, involves the sort of crass bargaining which tells the representative of School B: “I have a sign-on bonus of $100K from School A. Will you double that?”

What it does do, however, is provide, through dignified and subtle inquiries rather than explicit comparison shopping, the basis on which a presidential candidate can decide which prospective school has the will and the resources to be flexible, and whether the Board Chair is sufficiently responsive to the candidate’s needs and creative enough to find previously unconsidered ways to accommodate those needs. This kind of knowledge can only be gained through actual negotiation, which not only leads the candidate to a much better contract, but at the same time promotes a greater understanding of the strengths and weaknesses of competing academic positions. I’m always happy to work through any presidential candidate’s natural anxiety if he or she will trust me to explore all the realistic options by simultaneous fact-finding and negotiation of competing offers.

Mistake 5: Failure to look beyond salary

A provost or vice president, presented with an offer to become the chief officer of a college or university, can expect a meaningful increase in compensation. All too often, that jump in salary becomes the sole focus of a candidate’s concern. In fact, however, there are many other important aspects of the presidential contract which demand analysis and negotiation. One of my earliest legal mentors sharply corrected any young lawyer who had the temerity and bad judgment to describe any part of an agreement as “boilerplate.” He was absolutely correct to do so. Having now litigated over the meaning and effect of almost every so-called “standard” clause in a commercial agreement, I can show you, clause by clause, how each of them has or could have dramatic repercussions for the entitlements and obligations of my clients.

In that regard, here are just a few of the important considerations other than base salary:

Q. How do you handle the Board’s attempt to depress the president’s base salary under the guise of keeping proposed compensation from running afoul of those tax penalties known as “intermediate sanctions”?

A. You may be able to structure incentives, ranging from a sign-on bonus to performance incentives so as to boost the president’s overall compensation (which incidentally forces the Board to articulate the most important metrics they are expecting the new president to address). Q. Is it a good idea to agree to have disputes between the president and the college resolved by arbitration held within the same community where the school is located?

A. Well, good luck with that. This is why, in a recent contract between a president from the West Coast and a university on the East Coast, it was ultimately agreed that disputes would be arbitrated in Chicago, where no party has a geographical advantage.

Q. How do you handle the new president’s customary contractual requirement of academic tenure, when the decision belongs to the faculty, and the faculty won’t consider the question of tenure until after the contract has been signed?

A. In at least two different ways, and probably more, depending on the particular circumstances; the point is, it can be done.

Q. How important is the definition of “Cause” for termination?

A. Extremely important, and it is often a term carefully and heavily negotiated between the parties. Plus, even though there are some grounds for “Cause” which are absolute (criminal behavior, moral turpitude), there are other types of “Cause” which the president must have the right to “cure” after due notice (for example, the president may have misunderstood that a specific task was not optional, but was a time-sensitive Board directive). In addition, the whole issue of grounds for termination, or lack thereof, is connected to the issue of severance, which always must be separately negotiated.

There are many more specific issues, but the bottom line is that any employment contract, and especially a contract designed to embody the crucial relationship between a college or university and its most important officer and employee, defines significant terms and conditions far beyond the basic salary numbers. A thoughtful president understands and appreciates the value of tailoring each of those terms and conditions for a fair and efficient outcome.

George Birnbaum is a lawyer in private practice who provides executive employment counsel to top-position candidates in higher education, media and financial services. For more info, visit www.gbirnlaw.com.

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