You can find my current blog at:

http://usfblogs.usfca.edu/donaldheller/

Please visit my new blog

I've moved this blog over to the site at my new job as Dean of the College of Education at Michigan State University.  So please come visit there, where I am broadening the scope of my observations  beyond higher education to include K-12 education and other topics.

Time for a hiatus

The Itinerant Professor blog is going on a hiatus until after the first of the year.  I've recently accepted a position as Dean of the College of Education at Michigan State University, beginning January 1.  I'm going to be spending the next six months finishing up work here at Penn State, and working on the transition to MSU.

Look for the blog to return after I begin the new position, possibly with the assistance of my colleagues at MSU.  In the meantime, if you have ideas for a new name for the blog (something more creative than "The Itinerant Dean"), please send them my way.

It's not about excessive executive compensation, it's about tax rates

This past Sunday's New York Times  business section had a story about how executive compensation at large corporations has returned to pre-recession levels.  Here's the total compensation (salary, bonuses, perquisites, and stock options) of the top 5 CEOs in 2010 (change from 2009 compensation in parentheses):

1. Philippe Dauman, Viacom: $84.5M (+149%)
2. Ray Irani, Occidental Petroleum: $76.1M (+142%)
3. Lawrence Ellison, Oracle: $70.1M (-17%)
4. Michael White, DirecTV: $32.9M (n/a - new in 2010)
5. John Lundgren, Stanley Black & Decker: $32.6M (+253%)

Poor Larry Ellison, who had to take a pay cut this year.  Don't feel too badly for him, however - the article notes that his holdings of Oracle Stock are worth over $26 billion.

The Times  article discusses shareholder concerns over rising compensation, and whether companies are truly getting value for what CEOs and other executives are paid.  But as much as the federal government has tried to control compensation through regulation, i.e., Sarbanes-Oxley, passed in 2002, it has had little impact.

The real issue is not how to control executive compensation, but the fact that tax rates on these mega-millionaires are as low as they are.  Each one of these CEOs paid the same marginal tax rate last year - 35% - as anyone who made over $373,650.  And they paid only 10 percentage points above the rate paid by someone with an income as low as $68,000.

The chart below shows the marginal tax rates for married couples with the mean income in each quintile, the top 5% of all earners, and the top marginal tax rate, from 1969 through today (click the chart to see a larger version of it).  The largest reductions have come for the top rate, dropping from 77% to 35%.  In contrast, the bottom rate has decreased only five percentage points.  For families in the middle, there has been a nine point drop.

The fix to this problem is far simpler than crafting legislation to try to control how much corporations pay their executives.  All Congress (and the president) needs to do is to have the fortitude and political courage to increase the top tax rate.  I am not arguing to return the top marginal tax rate to the 1960s level of 90% or even the 1970s level of 72%.  But can anyone convince me that any of these CEOs would work any less hard if the top marginal tax rate was increased to the pre-Bush tax cuts level of 39.6%?  Or even a ten percentage point increase to 45%?  I'm ready to listen to your arguments.

What does this have to do with educational policy?  The debate about controlling federal government spending - much of which of focuses on discretionary spending, including spending for education at all levels -  could be made easier if upper-income Americans paid a fairer share of taxes.

More on bogus rankings - "The Best Colleges"

Last year, I wrote about what I described as "embarrassingly bad" rankings published by Bloomberg Businessweek.  Those rankings were based on the return on investment earned by students attending various colleges, and in the post I described why they were suspect.

Last week, Penn State issued a press release touting its World Campus' selection as the "the No. 1 online institution for 2011."  This designation was conferred by the website, TheBestColleges.org, which I had never heard of before - and I've seen lots of different rankings over the years.  So I spent a little bit of time going through the website, and after about 30 minutes or so, I sent this message to Penn State's Director of Public Information:

I read your press release, and not having heard of “Best Colleges,” took a look at the website.  Unless you have some information establishing the validity and/or reputation of the website, I’d be a little cautious about how much you want to promote the WC and other rankings from this site.  While they say “We do not accept paid placements for our school rankings,” it appears to me that this is a site supported entirely by advertising fees from universities.  When you do a search for any of the degrees they show there (not the rankings, but a degree search), no matter what the degree, you get a list of for the most part for-profit and online universities, and very few of what most of us would consider more traditional universities whose quality and rankings are more universally recognized.

Here are the “criteria” they say they use to calculate the rankings for the 25 best online universities:

“We’ve relied on the following criteria to generate our online colleges and universities rankings: student satisfaction (as measured by graduation and retention rates), peer and instructional quality (as measured by acceptance rate and student-teacher ratio), affordability (as measured by tuition costs and availability of financial aid), and credibility (as measured by years of accreditation, reputation and awards).”

To be blunt, this is garbage.  Graduation and retention rates are not measures of student satisfaction, any more than acceptance rates and student-teacher ratios are measures of peer and instructional quality.

We can all agree there are problems with the U.S. News & World Report rankings, but they are at least considered reputable by most parties.  I would be cautious about trumpeting rankings from “Best Colleges” externally unless you know more about this organization (which I’d be interested in hearing).

Don Heller

There may be more substance to this website and their purported "rankings," but I certainly couldn't see it.  If you click on the "About" page for the website, this is all it says:

The Best Colleges reviews publicly available data and then produces independent ranking assessments of colleges in various disciplines. Our goal is to produce resources that are useful to prospective students. We recognize that no ranking system is perfect, and for this reason we recommend that our ratings be used only as a general guide when choosing a quality school.

We do not accept paid placements for our school rankings as this would defeat our primary goal of creating resources that students find useful.

They may not "accept paid placements" for their school rankings, but it appears that they do have quite a bit of advertising from many of the schools that do end up being ranked. And I'm guessing that they get click-through fees for students who go from their website to these schools.

I'd be happy to hear from anyone who has more information about this website.