Goudge Report targets an end to monetized administrative leave

A recently released independent investigation into Western’s presidential compensation practices calls for, among other items, an end to monetizing administrative leave for university presidents. That practice, and the process by which it came about for Western President Amit Chakma, was the focus of the report conducted by Stephen Goudge, a former Ontario Court of Appeal justice.

The Review of Presidential Compensation Practices at the University of Western Ontario – or what has become popularly known as the Goudge Report – refocuses the university community’s attention of the last five months back on the original subject of debate – the president’s monetized leave. The report was released Monday.

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“My job was to try to be useful to the university and help them move forward from this unfortunate situation,” Goudge said in an interview with Western News. “To do that, I have to make recommendations that I think make sense, but also recommendations that they think have value. That’s what I have tried to do.”

Incorporating interviews with 47 stakeholders, the report details a presidential hiring and renewal process mostly in line with peer institutions. However, the anomalies that did occur raise questions about the openness of the process and the soundness of some practices.

“I tried to, first, talk to the people who had a good knowledge of what happened and why, but with this particular incident and with the background,” Goudge continued. “Then, I thought it important to talk to, and particularly listen to, those who had the views, one way or the other, about what happened. I tried to gather all that information and put it together and make my own judgment about what ought to serve Western’s best interests going forward.”

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At Western, the Board of Governors’ Senior Operations Committee, known as ‘Senior Ops,’ is responsible for negotiating and approving a contract with the university president. That committee includes the Chair of the Board, who also serves as the committee’s chair; Vice-Chair of the Board; and the chairs of the Board’s other standing committees. No members of the academy sit on Senior Ops.

This process has been questioned by some in recent months. However, the report stresses Western stands in line with its peers in this method of negotiating presidential contracts. Other universities operate the same way, including most of the larger ones, although an almost equal number leave president contract responsibility with the entire board. A few delegate the task to the board chair alone.

Goudge, however, saw Western as having it correct.

“To have the full Board do it would be quite cumbersome and run some risk of eroding the necessary confidentiality around these negotiations. That was not the problem in this case; it wasn’t a problem that needed fixing,” he said. “You cannot conduct a sensible negotiation with a senior executive with a group of 25 or 30 people. You just cannot do it. You could delegate it to one person – I think it is better to delegate it to this committee.

“Somehow, or another, it has got to get done. Most people recognize asking a board to do it is asking the impossible of that institution.”

In July 2009, Senior Ops agreed to a contract with Amit Chakma for him to become Western’s 10th president, after he served the University of Waterloo since 2001 as Vice-President, Academic & Provost. Signed by then-Board Chair Michele Noble, Section 11.1 of Chakma’s original contract included the following clause:

 

11. Administrative Leave

11.1 Administrative leave will be accrued at 2.4 months for each year of completed employment as President in the Term provided that no accruals will be earned for any period during which Dr. Chakma is Totally Disabled. Dr. Chakma will be entitled upon completion of the five (5) year Term to take this administrative leave or to receive a payment in cash, less applicable deductions, equal to the base salary in the last year of the Term, to be paid in a manner to be determined by the University. If Dr. Chakma’s contract is renewed for a second Term, these provisions for administrative leave may be carried forward, with the consent of the University, to the end of the second Term.

 

At the time, that clause drew little discussion from the Board.

In 2012, Senior Ops struck a President’s Review Committee to consider a second term for Chakma. That committee included Senior Ops members, as well as representatives of faculty, staff and students. In November 2012, the Board re-appointed Chakma to a second five-year term extending to June 30, 2019. The president’s second term started July 1, 2014.

That contract also called for a year administrative leave or payment in lieu of that leave. The renewal contract also included the following change to the wording on administrative leave:

 

Pursuant to Section 11.1 of the Appointment Contract, the administrative leave you have earned in respect of your first term shall be carried forward to the end of the Term including your additional year of service pursuant to Section 5.6(a) Special Executive Pension.

 

With the leave, and potential payout, pushed forward to the end of the second term, that clause drew little discussion.

A year later, however, Chakma and Board of Governors Chair Chirag Shah discussed changing that clause to allow the president to take his administrative leave in the form of cash payment rather than deferring to the end of his second term. Although it does not mention who sparked those initial conversations, the Goudge Report attributes that move to a desire “to provide Dr. Chakma with means to enhance his pension contributions. Advice was sought from outside legal counsel who indicated that the legislation freezing broader public sector remuneration did not prohibit this.”

As a result of those discussions, Shah sent Chakma a letter on June 30, 2014, amending the renewal contract. It now read:

 

Pursuant to Section 11.1 of the Appointment Contract dated July 10, 2009, the administrative leave you have earned in respect to your first Term will be paid in cash, less applicable deductions.

 

“The renewal contract was amended with those doing the amending acting entirely in good faith,” Goudge stressed.

That change in the contract, however, led to the university president being paid $924,000 (plus $43,244.88 in taxable benefits) in 2014. That number was a total surprise to many – including, as the report points out, members of the Board.

Neither Senior Ops nor the full Board saw the amended contract.

“There was a gap in the communications as to whether the governance provisions, entirely apart from tweaking the contract, required Senior Ops to pass it,” Goudge said. External counsel advised that Senior Ops did not need to be consulted after the change was made, he continued.

That monetizing of academic leave also sparked almost immediate outrage from the campus community, and culminated in the university Senate conducting an unprecedented pair of non-confidence votes on the leadership of both the president and Board chair on April 17. Neither vote passed, however both the president and Board chair committed to taking action on a series of concerns.

The report calls the president’s right to monetize the administrative leave earned for his first term, and to do so at the start of his second term, as “not in line with the practice at most peer institutions.” In fact, only one university allowed such a possibility – the University of Waterloo, where Chakma had a similar arrangement in his previous job.

At the time of Chakma’s contract amendment, Ontario’s Liberal government was discussing the Public Sector and MPP Accountability and Transparency Act, 2014, which included a wide range of measures to “strengthen accountability, increase oversight across the government and reform executive compensation in the broader public sector.” As part of that act, The Broader Public Sector Executive Compensation Act, 2014, would have authorized the government to establish compensation frameworks, including sector-specific hard caps for designated executives in broader public sector organizations – including university presidents.

It is this pending legislation to which the Goudge Report makes reference.

“What they (Shah and Chakma) were trying to do was see what they could do that the legislation permits. And that’s fair enough,” Goudge said. “This does not offend the provincial legislation – that’s not my opinion, that’s outside counsel’s opinion. And nobody has taken the position since it came to light that it does offend the provincial legislation.

“Outside counsel said you can do it within the parameters of provincial legislation.”

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The Goudge Report is prescriptive about changes Western needs to make going forward.

The report backs Senior Ops as the primary negotiator of presidential contracts as it “serves the efficiency and confidentiality of the negotiating process.” It also does not recommend including “anyone from the academic community at Western” into the mix.

However, the report calls for the Board Chair and Senior Ops members – “outsiders to the University community” – to consult confidentially with strategic members of the university community early in the negotiation process to gauge university reaction to what the committee proposes to do.

The report states: “This proposal would not change the decision-making authority of the Senior Operations Committee. It does, however, minimize the risk of a repetition of what happened here, namely that the reaction of the University community to a senior executive contract, in this case the President’s Amended Renewal of Appointment Contract, comes as a complete surprise to those who negotiated it.”

The report stresses university legal counsel should always be consulted – as outside counsel is not familiar enough with university governance rules to render a useful decision.

“He (Shah) acted entirely appropriately. He just wasn’t fully informed,” Goudge said.

And, finally, the report called for Senior Ops to table a completed presidential contract with the entire Board for information. The report stated: “Doing so is simply in the best interest of sound reporting and transparent governance.”

On the topic of monetizing administrative leave, the report is less forgiving as it calls for an end to taking administrative leave as salary alone.

Beyond that, the report recommends all future contracts make the purpose of administrative leave be more explicit in the definition of leave.

“This was a huge part of the reaction. If one looks at administrative leave, and just takes that concept, as ill-defined as it is in the abstract, does it include simply taking money?” Goudge asked. “In my view, it doesn’t. If you want it to include just taking money, you should call it salary enhancement. The person on the street would equate administrative leave with sabbatical leave, except for senior administrators. It doesn’t simply involve money alone.

“There are a few contracts across the country – a very few number because most don’t define administrative leave at all – that define it as, in effect, ‘reinvigorating yourself in your discipline.’ Had that been it, nobody would say, ‘In order to reinvigorate yourself in your discipline, what you really need is a year’s pay. That doesn’t compute.”

The report also states a president should have the option of deferring earned administrative leave to the end of his or her full term(s). When a president is renewed for a second term that would allow them to preserve what he or she has earned, if it is agreed that continued uninterrupted service is important for the university, the report states. If that happens, however, a number of payout alternatives may arise and can be provided for in the presidential contract.

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The Board received and accepted the report and committed to implementing the recommendations during its Sept. 22 meeting. But Goudge hopes they resonate outside of Western, as well.

“I very much hope the discussion I engage in about administrative leave will be found to be useful in the broader postsecondary world,” Goudge said. “It is a problem everywhere. How you address it to avoid this kind of eruption is in everybody’s interests.”

 

Correction: A previous version of this story did not identify external counsel as advising Senior Ops did not need to be consulted.