Executive Compensation-University Policies - Carnegie Mellon University

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Executive Compensation

Policy Title Executive Compensation Policy
Policy Owner Office of the President
Responsible Office Secretary of the Corporation
Contact Information Questions concerning this Policy or its intent should be directed to the Secretary of the Corporation at 412-268-5345.
Pertinent Dates Approved on May 15, 2016
Approved By The Executive of the Board of Trustees.
Entities Affected By This Policy n/a
Who Needs To Know About This Policy Board of Trustees, president, and provost of the university.
Definitions n/a
Forms / Instructions n/a
Related Information n/a
Reason for Policy / Purpose Establishes the principles and practices for executive compensation.
Abstract This Policy provides procedures for the review and approval of executive compensation as further defined below and consistent with applicable federal tax law and Pennsylvania law.

Policy Statement

Attracting and retaining talent, including faculty, students and staff, is key to Carnegie Mellon’s success. Recruiting a highly qualified, talented and diverse executive team is a crucial part of that success. The university’s Executive Compensation Policy is overseen by the Compensation Committee of the Board of Trustees (an independent body), and establishes the principles and practices under which Carnegie Mellon rewards executive talent. This Policy provides procedures for the review and approval of executive compensation as further defined below and consistent with applicable federal tax law and Pennsylvania law.

Executives

The Executive Compensation Policy covers the following key employee positions:

  • President
  • University officers including Secretary, Treasurer and Chief Investment Officer
  • Provost
  • Vice Presidents
  • Deans of Academic Units
  • Director CEO of the Software Engineering Institute (SEI)

Elements of Total Compensation

  1. Base Salary: Salary is the primary component of executive total compensation. It provides a competitive foundation for pay and reflects the individual’s role, stature in his/her field, unique skills and abilities, experience and performance against established metrics.The university’s salary pool applicable to base salary is determined annually. Salary increases are not an entitlement but rather determined based on an individual’s performance against defined metrics, salary pool, available budget, market conditions and internal equity considerations.
  2. Annual Incentives: With the exception of the Chief Investment Officer and certain members of the Investment Office staff, Carnegie Mellon does not have a broad annual incentive program for executives. However, based on market circumstances and individual situations, compensation for certain positions may include incentive compensation from time to time.
  3. Health and Welfare Benefits: Executives are provided with health and welfare benefits that are competitive with CMU’s peer/comparison universities, most of which are offered to all employees of the university.
  4. Retirement Benefits: Executives are provided with competitive retirement benefits offered to all employees of the university.
In addition to the above, some executives may receive select additional benefits and perquisites.

Total compensation, including base salary, incentives, health and welfare benefits, deferred compensation, retirement benefits and other additional benefits and perquisites will be reviewed and determined annually for the President and each position within the purview of the Committee.

Comparability Data

For executive positions, Carnegie Mellon competes and recruits for talent nationally, and for some positions, internationally, among both public and private institutions.  For some administrative roles the university may consider talent from outside higher education if the candidate is a particularly good fit with the institution and position.  Carnegie Mellon primarily considers comparative data for similarly qualified persons in functionally comparable positions at similarly situated institutions.

Criteria used to determine this comparison market includes:
  • Classification as a research university
  • Membership in the Association of American Universities (AAU)
  • National rankings overall and by discipline
  • Highly selective, primarily private institutions
  • Highly selective public institutions in certain disciplines
  • Institutions with which the university competes for students and faculty talent

Carnegie Mellon participates in an annual survey of Executive Compensation among Select Universities conducted by the independent firm of Towers Watson.  The approximately 30 universities included in this survey reflect the above criteria, and the survey data are used as the primary comparison market.

Certain positions where the talent is unique to a different set of institutions will require a different comparison market.  In those instances, the above survey data is supplemented with data from the College and University Professional Association (CUPA). The Compensation Committee is responsible for periodically evaluating the comparison market(s), which may change from time to time.

Compensation Philosophy

In the aggregate, Carnegie Mellon seeks to set competitive rates in the comparison market.  Salary ranges for each position will be determined using the relevant survey’s 25th to 75th percentiles as lower and upper bounds for the ranges. Salary ranges will be adjusted annually based on new survey data and validated by the Compensation Committee.

Matters such as performance, stature in one’s field, resource planning and management, donor cultivation and fundraising, internal and external engagement, communication, rare and unique qualifications for the position, leadership experience and other factors will be considered for each position when setting total compensation and may lead to pay above or below the target.  Total compensation will be reviewed and established annually during spring compensation review for all positions and for deans, also upon established reappointment reviews or as dictated by other significant events.

Performance Measurement and Approval Authority

In consultation with the chair of the Board, the Compensation Committee of the Board of Trustees is responsible for determining the President’s annual performance expectations, evaluating the performance of and recommending to the Executive Committee of the Board for approval total compensation for the President.  The chair of the board is responsible for communication of performance and compensation decisions and rationale to the President.

The President is responsible for performance evaluation and Total Compensation recommendations for officers, vice presidents and the Provost.  The Provost is responsible for performance evaluation and total compensation recommendations for deans and the Director/CEO of the SEI.  The Compensation Committee is responsible for approving all executive total compensation as defined except for that of the President, which, as noted above, must be further approved by the Executive Committee.  For all other positions, the President and the Provost are responsible for communication of performance and compensation decisions and rationale for their respective reports.

In addition to base compensation, the chief investment officer is eligible for bonus compensation as further defined in his/her employment agreement.  The Compensation Committee, the President and the Investment Committee, and in particular, its chair, are responsible for establishing and evaluating performance against the CIO’s bonus compensation criteria and approving same.  Any other executive bonus compensation will be as defined in the relevant employment agreement and subject to the approval of the Compensation Committee on the recommendation of the President.