What Must Jim Ryan Do to Earn a $100,000 Bonus?

James Ryan — what has the Board of Trustees incentivized him to accomplish? We don’t know, and the University of Virginia won’t say.

by James A. Bacon

When the University of Virginia hired Jim Ryan as president in 2018, the terms of his employment were spelled out in a contract. Anyone can obtain a copy of the document under the Freedom of Information Act, as Bacon’s Rebellion has done.  You can view it here.

Among other things, the six-year contract calls for paying Ryan a base salary of $750,000, provide him a $20,000-a-year car allowance, cover membership fees for two clubs, give him free housing (including the cost of housekeeping and utilities), grant him 22 vacation days a year, allow him to accrue Sabbatical leave at the rate of two months per year, and award him a performance bonus of up to $100,000 a year.

While the details of a university president’s compensation are interesting, the most important clause from a governance perspective covers the performance bonus. The contract says this about the bonus:

An evaluation of the President’s performance shall be conducted annually by the Rector after consulting with the Board of Visitors. The evaluation shall be based on the achievement of mutually agreed upon performance objectives determined by the Board of Visitors and Mr. Ryan.

For the purpose of evaluating the direction UVa is heading, the document spelling out the president’s marching orders is every bit as important as the university’s budget and strategic plan. But the University of Virginia declines to make that document available. Here is the response I received to my FOIA request:

Under FOIA, the University of Virginia shall withhold records when their release is prohibited by law, or the University may exercise its discretion to withhold records in accordance with a specific FOIA exemption. The University of Virginia has not disclosed records subject to the following exemptions: Personnel Information. Va. Code § 2.2-3705.1(1).

In recent posts I have highlighted the new book co-authored by James V. Koch, former president of Old Dominion University, “Runaway College Costs: How College Governing Boards Fail to Protect their Students.” In discussing how to improve governance of public universities in the United States, Koch stresses the importance of creating incentives that align the interests of university presidents with the goals and objectives of the boards.

When incentives are misaligned, or improperly implemented, campus performance falters. Boards need always ask, What behavior (virtuous or not) might we expect from an individual who is confronted with this set of incentives?

Boards should not assume that their president and key campus administrators will automatically default to the behavior trustees prefer. Reality may be very different. The principle-agent problems may arise between boards and presidents. This is one of the reasons why incentives must be chosen carefully and with an eye to the potential ways they can be gamed as well as the side effects they may induce.

For example, a board might create a monetary incentive for a president to boost a university’s enrollment. There are any number of strategies for accomplishing such a goal: spending more money on marketing, lowering admission standards, increasing acceptance rates, allocating funds to financial aid, or tweaking policies that the public would never think of. (In theory, universities could lower their tuition & fees, but that option never seems to be on the table.)

Citing an article in the Chronicle of Higher Education, Koch describes how in 2006 UVa terminated its early-decision admissions program for freshmen out of concern that relatively few lower-income students used it. Under early decision, high school applicants had to commit to UVa by December — before lower-income students knew how much financial aid they would receive. In June 2019, shortly after Ryan became president, the university announced that it was restoring its early-decision admissions program.

Was Ryan monetarily incentivized to make the change? Had he and the Board agreed to a goal to boost the exclusivity of the student body, perhaps in order to improve UVa’s rankings in Best College ratings? We have no way of knowing.

Due to the FOIA exclusion, members of the University of Virginia community are left in the dark about what the Board of Visitors and President Ryan regard as the most important goals for the university as well as the criteria by which Ryan’s performance will be evaluated. We have no way of knowing which of his actions might be rewarded monetarily.

I can understand the importance of keeping the evaluations themselves confidential. But there is no excuse for keeping the goals and objectives a state secret. This FOIA exclusion is detrimental to the public interest. The General Assembly needs to roll it back.