Leftists enjoy griping about the supposed inequity of business executives who earn X times as much as the lowest paid employee. I don’t doubt that some executives are seriously overpaid, but there is a market mechanism that can deal with those cases — a hostile takeover. If the execs pay themselves more than their performance warrants, outsiders might spot a profit opportunity, buy up enough stock, and then oust them.
Too bad that can’t happen in our overwhelmingly non-profit higher education sector. Top administrators often boost their compensation not because they’ve earned it, but simply because they can. As we read in “Higher Education’s Aristocrats” by David F. Mihalyfy, the top brass at the University of Chicago has been doing exactly that. The author writes that top administrators have “enriched themselves at great cost to their institution.”
If the University of Chicago were a business, I think it would be ripe for a hostile takeover. But it isn’t, so it’s not, and the administrators need not worry about any adverse consequences of their propensity for lining their pockets.
Recently, Professor Henry Manne wrote a piece for the Pope Center, attacking the common idea that non-profit management is somehow superior to for-profit management. We have solid support for his argument here.
Hat tip: Harry Lewis