What Didn’t Work: Tongue-Tied at the Top
AMERICAN’S ERROR
In 1994, American University elected Ben Ladner, a former ethics professor, to be its president. Although American had only a small endowment, Ladner required that the university pay virtually all of his living expenses, which included salaries for a chauffeur and a cook, on top of his $225,000 salary. He also demanded expensive renovations to the president’s residence.
From the time he arrived on campus, Ladner’s financial habits invited controversy. For example, one student established a Web site to highlight the president’s excesses. Ladner unsuccessfully sued to have the site shut down.
Although most board members treated students’ concerns as rogue complaints, a few spoke out. Trustee Robert Pence questioned Ladner’s spending in 1996, for which he was removed from the audit committee. “I think I was asking too many questions,” he said in a letter to the board. Another trustee, Paul Wolff , repeatedly asked for a full account of Ladner’s spending. But Ladner did not provide the requested information, and the board continued to ignore early signs of the president’s excessive spending.
Meanwhile, Ladner’s compensation mushroomed. In 1997, then board chair William I. Jacobs renegotiated Ladner’s employment contract without asking the board to authorize the agreement. The new contract added lucrative incentives so that by 2004, Ladner’s total compensation had grown to some $880,000—more than that of most university presidents. Nevertheless, in that same year Ladner asked then board chair George Collins for an additional $3 million to $5 million in compensation. An excellent strategist and communicator, Ladner had indeed strengthened the university, expanded its global reach, and improved the quality of both the faculty and student body. But Collins knew that Ladner’s request for more pay would anger many trustees, and so he did not tell the board about it.
At that point, the compensation committee became concerned that Ladner was among the highest-paid university presidents. It also began to distrust his tightly controlled communication with the board. As a result, the compensation committee retained the consulting firm Towers Perrin to conduct an independent review, which concluded that the highest reasonable compensation for Ladner was $780,000. Ladner attacked the consultant’s credibility and persuaded the board to hire a second firm, Mercer. Frustrated with Ladner’s arrogant defense of his compensation and no longer able to support him, I resigned from the board.
