February 07, 2014
Matt Bodie on Faculty Compensation
Posted by Christine Hurt

Over at Prawfs, Matt Bodie has a provocative post on faculty compensation.  I'm not sure I have a lot to add, but that has never stopped me before.

Apropos of many current compensation discussions (faculty buy-outs, faculty reductions, faculty salary cuts), Matt throws out an example of what an alternative compensation regime might look like.  The general theme of these discussions are that many tenured faculty are overpaid compared to their contributions, but tenure insulates them from either being fired or having their salary cut substantially.  Because law schools are losing revenues, they must cut their fixed costs; salaries are the big ticket item.  Matt's thought experiment goes something like this:  If a professor's salary is X, cut it to .6X.  Then give professors the opportunity to be granted up to .3X in discretionary amounts, maybe .1X for scholarship; .1X for service; .1X for teaching.  The comments hit on a lot of points, including the benefits of public disclosure of salaries, and here are mine.

1.     My salary is public, as are all UI salaries.  I don't know if the public nature of salaries adds much to the debate, but it does provide us with data, which is helpful.

2.    In law firms, (and I would guess in other businesses), a very easy metric has emerged for differentiating the contributions of lawyers:  billable hours and the collectibles they represent.  Associates may be paid lock-step, but their billable hours (or collectibles) may be used to award bonuses or at least remembered for purposes of partnership.  Bringing in business is also easy to quantify:  how many billable hours did you provide to the firm, in the form of your billables or other lawyers.  How many lawyers do you keep busy?  Partners' compensation varies widely and is hashed out by the whole or by a committee, with partners being awarded "shares" in the profits based on billables/collectibles/business brought in that keeps others busy.  All dollars earned for the firm are equal.  Now, there may be cases where particular partners get/retain shares based on intangibles (being President of the local bar association, which takes a lot of time, etc.), but I would guess that hard numbers are used more often than qualitative measures. 

3.    This model is hard to map on to academia (or any business model).  We don't have an easy metric like dollars.  Yes, some people bring in grant money, but in most law schools that is not widespread enough to design a compensation scheme around.  So, we would have to resort to "measuring" service, scholarship and teaching.  This will be fairly discretionary -- how do my Y number of articles compare to your Y-1 peer reviewed articles or your Y-2 articles plus monograph?  Or my Y+2 articles last year and zero this year?  Or my teaching evaluations in this class compared to yours in your other class?  Or the fact that I chaired a committee, but the Dean didn't appoint you head of any committees?

4.    Raises at many law schools are to be doled out according to Matt's metric.  Say the pool would be $3000 if applied evenly.  I would guess that most faculty are put into batches, with the variance being the lowest being $1000 and the highest being $4000.  Maybe one faculty member would get lower than $1k (if any).  There just isn't that much variance.  ( I have personal knowledge of the variance at one institution being $500).  Mostly because we don't like to distinguish on squishy factors (which is why we grade students mostly A's and B's and don't use the entire grading range) and because the amount is so small.  So, in a law firm, compensation can range from the 100Ks to the millions with many, many gradations.  But in a law school, the differences between the highest and lowest paid tenured professor is not that wide (100k?).

5.    But the regime that Matt throws out would make the gap a little wider by lowering the "guaranteed" portion of the salary.  While a merit raise scheme assures your current salary will not decrease, here a large portion would be up for grabs.  I just have doubts that your peers would be that calculating.  Would anyone really get .6X?  I would predict that if the ceiling is .9X, then most faculty would end up with .8X, .85X or .9X.  As, Bs and Cs.

6.    Incentives.  Would those who expect to always be .8X take a buyout?  Because you would want the .8X people to do so, not the .9X folks.

7.    Incentives 2.  How would professors adjust the way they do service, teaching, and scholarship?  As some of the comments suggested, you would spread out your scholarship.  You wouldn't publish a lot one year and not so much the next.  (This could be fixed by being adjudged according to a 3 year-window or something.)  Also, you might not be innovative in your teaching.  Students don't reward innovative teaching, even when it is good for them -- they tend not to give good evaluations when their are written assignments or midterms in doctrinal classes.  Innovative teaching also takes time to work out the kinks, so even if the students were eventually on board, the first couple of times would have a lot of bugs, which would show up on the evaluations.  I would personally bring a lot of food and show a lot of movies.  We just don't have a great way of evaluating teaching.  We could base this component on how many courses/hours you teach or how many students, or have that be part of it.  But then professors who teach small enrollment classes (Corporate Tax, for instance) would lose out, even though the courses aren't hobbyhorse classes.  Professors may be more inclined to take on service opportunities, but the institution would have to define "service."

8.    Morale.  At least one commenter pointed to studies that showed that salary differentiation led to bad morale.  I can definitely see that.  In a law school, the decisions would be made by a dean or probably a committee, all of whom are faculty who will be subject to the same differentiation norms that they set.  So it will be in the interest of the committee members not to make the range .6X to .9X with a flat distribution.  In corporations (and law firms), those who set salary generally don't go back in the ranks to be adjudged by those that they just assessed.

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