New England Law Dean Reportedly Paid $867,000 A Year For Fourth Tier Law School

obrienNeslsealThere is a surprising piece this week on the New England Law, Boston. New England has long been ranked in the lower ranks of law school — ranked 154th in the country according to TaxProf though this site shows the schools as unranked with the lowest schools. Either way, this is a school that continues to fall well-below the standards of most law schools. However, the school appears to achieve the top spot on one ranking: Dean salaries. The school’s longtime dean, John F. O’Brien, is reportedly making more than $867,000 a year in salary and benefits, including a [$650,000] “forgivable loan” for a Florida condominium. The school is in Boston.

O’Brien’s salary is equal to that of Harvard’s president and three times the average for law deans. In the meantime, students are paying roughly $42,000 a year for what is considered by many to be a substandard education. Only 34 percent of students even got jobs in the 2011 graduating class. Yet, former Associate Justice Sandra Day O’Connor honored O’Brien for his contributions to legal education.

225px-NESLBostonO’Brien’s own record does not suggest a basis for such a high salary. After graduating Manhattan College in the Bronx, he graduated at the top of his class at New England School of Law. He then worked as an attorney for the Internal Revenue Service for a few years before joining the faculty of New England Law as a professor of constitutional law and tax law. After a stint as Associate Dean, he became dean in 1988 when he was only in his 30s. He has been dean ever since despite the school’s continued problems and low rankings.

The key to his longevity and high compensation appears to be a board of long-standing associates. The problem of “pocket boards” is well known. However, if this school is a non-profit, it is hard to see how such an obscene salary would not trigger review of its status. It is unclear why such a grotesque over-payment does not raise questions of fiduciary violations or other violations. It is certainly a matter that the AALS and ABA should investigate.

My attempts to find a complete list of board members was unsuccessful. There is no readily available listing at the school’s site. Just an article on a couple of replacements. I am curious how board members could vote such ridiculous levels of compensation and who would be willing to associate themselves with such a board.

Below is a column I wrote in 2004 on this problem:

Non-profits’ executives avoid scrutiny, valid reforms
By Jonathan Turley

At a time when efforts to reform the corporate world are getting all of the attention, there is another group of chief executives who remain insulated from the effects of scandals at Tyco, WorldCom and the like. They are America’s not-for-profit profiteers: the executives who cash in at universities, foundations and other tax-exempt organizations.
A review of media accounts and public information reveals that many of the same questionable transactions detailed in the corporate scandals are occurring in the world of non-profits. University and foundation presidents are using tax-free dollars for luxury apartments and cars, personal loans and other perks. These abuses occur because non-profits are getting a pass from some promising corporate-accounting and conflict-of-interest reforms.

Recently, the Nature Conservancy, the world’s largest environmental organization with nearly $3.3 billion in land and investments, was accused in a series of Washington Post articles of violations ranging from hiding the personal income of employees to sweetheart land deals for favored parties to using not-for-profit funds to give a $1.5 million loan to a board member. Congress is looking into the transactions, and the IRS took the rare step of announcing that it will physically move into the headquarters of the charity for a long-term audit.

Last fall, corporations faced mounting calls for reform after the disclosure of a $187.5 million pay package for former New York Stock Exchange chairman Richard Grasso. While the stock exchange is a not-for-profit organization, the public attention focused on for-profit corporations, to the relief of many non-profit executives.

Under federal law, including the 2002 Sarbanes-Oxley Act that was passed in the wake of Enron and other Wall Street scandals, for-profit corporations now are required to fulfill new requirements of transparency and ethics. They include 1) requiring top executives to attest personally to the truth of financial statements; 2) assuring greater independence of auditors and outside reviewers; and 3) creating conflict-free procedures of corporate governance.

These rules, however, were not extended to not-for-profit corporations, despite the huge size of some of the 850,000 U.S. charities. As a result, the chances for conflicts of interest and out-of-control executive compensation remain high.

The public pays dearly for such excesses. By granting universities, foundations and charities tax-exempt status, the public forgoes billions in revenue. For that reason, federal law prohibits not-for-profits from being operated for financial gain. But profits — both personal and institutional — now are the focus of many of these institutions. Giving huge loans and personal perks to executives absorbs millions of tax-free dollars that are supposed to be spent advancing education, the environment and other causes. Besides the public’s loss of revenue, these excessive compensation packages are supported by increasingly scarce donor and student funds that should be given even greater protection from abuse.

A survey last November by The Chronicle of Higher Education for example, found that the number of college presidents earning more than $500,000 in 2001 was double the number in 2000. Some of these academics make $1 million when their salaries and benefits are calculated. More than a quarter of schools pay their presidents more than $400,000 annually. In comparison, the average college or university academic salary is $62,895, and the average salary for community college teachers is $51,000. Some executives have secured as much as 50% increases in a single year, while others have received personal loans that later were written off by their boards.

If the market sets salaries in a fair and open process, these salaries could be accepted as the price of high-quality labor. But a close look reveals a system rife with conflicts of interest and self-dealing.

Because of the structure and laws governing academic institutions, a university president often heavily influences or dictates the selection of the board of directors, which sets the president’s salary.

Sound familiar? In the Tyco trial, for example, former CEO Dennis Kozlowski’s defense lawyers claim that the board of directors approved all of the multimillion-dollar loans and bonuses he received. Similar accusations were made in other corporate scandals.

The same phenomenon is occurring in not-for-profit organizations, according to an annual survey by The Chronicle of Philanthropy For example, Susan Berresford, president of the Ford Foundation, receives $651,713 in salary plus $169,477 in other benefits. Likewise, Philippe de Montebello, director of the Metropolitan Museum of Art, has been paid more than $866,000 in a single year. (His spokesman emphasized that his salary is a paltry $518,151; the rest is “expenses,” charged to the museum.)

While many such institutions have faced declines in revenue, their chief executives have continued to receive salary increases. For instance, although the American Museum of Natural History’s income declined 26% in 2002, the salary of its president, Ellen Futter, increased 15% to $623,000. It recently was disclosed that Chimes, a Baltimore not-for-profit handling vocational training and disabled care, paid its chief executive, Terry Perl, $1.07 million at a time when such groups’ government support and donations are shrinking.

Of course, these executives insist that they run huge corporations and are entitled to salaries commensurate with their budgets and fundraising. When asked about de Montebello’s compensation, a spokesman said he is “worth every penny” due to his prestige and experience. Phone calls to other executives and the American Association of University Administrators were not returned.

The reasons that these non-profit salaries are soaring have little to do with market forces, earnings, reputations or other objective criteria. The salaries stem from a system without meaningful checks and balances: No shareholders exist to sue for violation of fiduciary duties or corporate abuses. Tax regulations impose only limited restrictions. Presidents can influence the selection of boards, which return the favor in increased salaries.

Not-for-profits remain one of the last unexplored territories for reform. It is time to extend corporate-governance laws to large not-for-profit corporations. Until then, not-for-profits will continue to be a draw for profiteers.

Jonathan Turley is the Shapiro Professor of Public Interest Law at George Washington University Law School.

Source: Tax Prof

14 thoughts on “New England Law Dean Reportedly Paid $867,000 A Year For Fourth Tier Law School

  1. Given the large amount of whining I have read about law school on several sites there are a lot of people that think $8,700 a year would be too much.

    I think you have hit the sweet spot on nonprofit’s compensation though. They may try to justify it by saying they have to compete with the industrial pirates in order to draw in qualified people. Executive pay and perks has gotten completely out of hand in the US.

  2. You correctly point out a true national scandal. i refuse to give directly to charities after suing one once. In their financial documents it was appalling to find out the incredible pay “earned” by their executives at the expense of their beneficiaries. Gone are the days when charitable work was a low paying occupation. Now it seems that the “greed is good,” mentality has captivated even those charged with doing good for others.

  3. Mespo,

    One rule of thumb is that I’ll only consider giving to a charity that only 10% goes to fund raising….., there are some other there that over 90% of money received goes to the charitable order….

  4. Governments, Corporations, Religions, Institutions all create a Cookie jar from their combined work and efforts. Where the cookies go is a true measure of their principles and goals.

    Richard Grasso sure loved cookies. The Dean loves cookies. There are a lot of cookie hoarders out there.

    “Follow the Cookies”. “Show me the Cookies” and I will show you the true mission and goals of the corporate hierarchy.
    What is amazing, shallow, and accepted, The CEOs justifying all their whole and full cookies, and then explaining how “BIG” the tiny crumbs for others are.

  5. Executive compensation at universities has become a big problem and not just law school deans. Turley’s former prexie Stephen Joel Trachtenberg was one of the worst offenders in this trend.

  6. That second sentence needs some spulling correction. The last word should be schools in the plural.. But the Ranking of Law Schools (capitals mine) has been in the news lately. Some law schools lie about some things to get better rankings. Thus, the honest schools stay lower on the echelon. Now, you fellow commenters here please help me out, my memory is poor. Was not one of the cheating schools named George Washington University School of Law? Or was it Georgetown? It was one of those schools named after our first President. Or was Georgetown named after King George?

    No schmuck that heads up a law school should make over fifty grand. I think that there should be a test for those who teach law in law schools to budding young lawyers. They should have to represent criminal defendants in jury trials. Let us have a bottom threshold of twenty jury trials, ten civil and ten criminal in order to be in the Order of the Coif or somesuch name.
    Could you imagine going to med school and learning surgery from some schmuck who never performed one surgery? Well, that is what one gets in law schools– schmucks who have never tried even a non jury civil trial. Is there one law professor in America who has tried a criminal death penalty case to jury verdict? There is a dearth of real lawyers in the ranks of so called “law professors”. Chimne in if you have any answers.

  7. This is an amazing story. How can a board of trustees think that this guy is worth that kind of compensation? These kind of abuses in salaries give the non profits who do work every day on a shoe string budget a bad name.

  8. This is absurd — do they not know this is the United States of America? No one should be making that kind of money at a University except for the football coach? What is wrong with those people?

  9. Disgraceful but not surprising. Economics must not be a strong suit of this college. How much worse off would the school be if they got rid of this guy and brought in someone who really cared and was capable for only 300k a year?

    I agree with mespo on charities. I stopped giving to them for the same reason, the cynic in me regarding most of them as simply fronts for executives to receive six figure salaries.

  10. By comparison with the most successful sycophants and law-abiding thugs at the FORD Foundation and MMA, Michelle Obama’s $300K for being legal counsel at the U. Chicago hospital was a paltry salary…even if she ever actually did anything that could be reasonably described as providing legal services.

  11. Has John F. O’Brien ever tried a jury trial to conclusion? Has he argued cases in appellate courts? Of course he is not directly teaching. He is not even teaching teachers. He is guiding a school. But the old saw has relevance. Those who can, do. those who cant, teach. Those who cant teach, teach teachers.

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