University of Louisville-funded study vastly understates President James Ramsey's pay
LOUISVILLE, Ky. (WDRB) – An executive compensation study paid for by the University of Louisville understates U of L President James Ramsey’s annual compensation by at least $700,000 and likely more, according to a WDRB analysis of university and U of L Foundation records.
In a report that cost the university about $23,000, Verisight Inc. of Chicago found that Ramsey’s total annual of compensation of $1.1 million is 60 to 80 percent above the median pay for presidents at similar universities.
Verisight’s report was unveiled in a trustees committee meeting on Monday shortly before the committee voted to recommend a 6 percent pay increase and 25 percent bonus for Ramsey.
The report captured the basic components of Ramsey's pay: about $650,000 in base salary -- some from U of L, some from the foundation -- a potetnial annual bonus of about $156,000 and Ramsey's deferred compensation of $250,000 a year through 2020.
But WDRB found Verisight failed to include several other components of Ramsey’s pay from the $1.1 billion foundation, a tax-exempt charity that provides most of Ramsey’s compensation.
The discrepancies help explain why Verisight’s $1.1 million figure for Ramsey’s total pay from both the foundation and university is less than what the foundation alone reported paying Ramsey in the two most recent years: $2.7 million in 2012 and $1.3 million in 2013.
Most significantly, Verisight failed to include “tax gross up” payments from the foundation, which are extra payments meant to cover the income taxes on much of Ramsey’s pay.
In 2013, $356,691 in gross ups were paid on Ramsey’s behalf, according to a breakdown by foundation accountants previously shared with WDRB News.
Not only were gross ups not part of the study, but Verisight Principal Mark Reilly was unaware Ramsey even receives them.
On Monday, when Reilly presented Verisight’s preliminary findings, trustee Larry Benz made a passing mention to the gross ups, calling them “legacy” items that had inflated Ramsey’s reported pay in the past.
“Larry, did you say there’s a tax gross-up for some of the payments of the deferred comp?” Reilly asked during the meeting.
“In the past, there was,” Benz replied.
In fact, the tax gross up payments are ongoing and will continue through the end of Ramsey’s employment in 2020.
The gross ups are mentioned in the foundation’s annual tax disclosures, which Reilly said his group examined for the study. They are also outlined in Ramsey’s employment and deferred compensation contracts with the foundation – both updated in 2014.
In addition to the tax payments, Verisight’s study also failed to include an annual grant of $75,000 in deferred pay to Ramsey, which dates to 2005.
That’s also in Ramsey’s foundation employment contract and was even mentioned in a PowerPoint presentation at a U of L Foundation meeting on Friday.
Reached by phone Tuesday, Reilly declined to comment on WDRB’s findings about the compensation study, but he said Monday’s report was a draft and could be updated.
“I don’t really want to go item-by-item and all that kind of stuff. I know that, at the compensation committee meeting, there were questions about different things, so we may have to do some follow-up analysis to review some other things,” Reilly said.
The follow-up work would be “to double check perks and benefits and to make sure they are included in the analysis,” he said.
Brucie Moore, who chairs the trustees’ compensation committee, referred questions about why certain portions of compensation were not included in the study to Verisight.
“My goal was to provide to the rest of the trustees the amount of money Dr. Ramsey is being paid and from what sources,” she said before excusing herself from a group of reporters after Monday’s meeting.
Study missed significant insurance benefits
During Monday’s meeting, trustees asked Verisight to update the report to reflect the value of perks like university cars and country club memberships, which were not included because “we really didn’t have the time to pull all that detail out,” Reilly said.
Robert Hughes, who chairs the Board of Trustees and the foundation’s Board of Directors, assured fellow trustees that Ramsey’s perks are likely negligible.
“You'll probably find (the perks) are a small percentage, but … we ought to know what they are,” he said.
In fact, Ramsey’s foundation employment contract affords him a life insurance policy with a $1 million death benefit; a supplement to the university’s group disability policy that would cover 60 percent of his base salary; and a long-term care insurance policy providing a $100,000 annual benefit for life.
Verisight’s study does not include any of these, and the foundation has yet to fulfill WDRB’s open records request filed in March for any records showing the actual cost of the insurance benefits.
Ramsey is also provided a 2014 Cadillac Escalade, a $12,000 annual car allowance for his wife, two country club memberships and foundation-paid family health insurance, according to his contract.
More than $700,000 not mentioned in study
Examining Ramsey’s 2013 compensation, WDRB identified $771,668 – not including the insurance benefits -- that was not factored into Verisight’s analysis. Click here to see a list of those payments, benefits and perks.
To be sure, Verisight’s report attempted to estimate Ramsey’s 2015 pay, and some of the items from his 2013 pay may not apply in all years. Ramsey’s tax gross ups in 2013 were for two years’ worth of his annual bonus because no bonus was paid the year before, for example.
Still, the 2013 items help illustrate the extent of the foundation’s ongoing obligations to Ramsey.
For example, Ramsey received $91,041 in 2013 because accountants working the foundation underestimated his income tax liability in 2012. The payment was to reimburse Ramsey for taxes he had to pay out of pocket.
The foundation also paid $71,345 in 2013 to cover future taxes on an annuity that will pay Ramsey $100,000 a year for 10 years. Ramsey had earned the annuity by staying on the job through July 1, 2012.
Meanwhile, Ramsey’s deferred compensation earned $94,455 in interest in 2013, another form of income. The foundation credits Ramsey’s account with the same investment returns that the university’s endowment earns until Ramsey withdraws the money.
WDRB learned the specific amount of Ramsey’s various tax payments and interest earnings because the foundation voluntarily shared information from his 2013 Form W2 in May to help a reporter understand the foundation’s most recent IRS tax disclosure.
But Verisight did not get that same information for its study.
“We really typically do not ask to the look at the W2s. W2s can be really personal and private, so a lot of executives we work with do not like us to work with their W2s,” Reilly said in a brief interview on Monday following his presentation. “They would just like us to work with what’s reported in terms of salary from the organization.”
Trustees praise report, criticize media
Trustees were quick on Monday to accept Verisight’s report as confirmation that Ramsey’s pay is in line with his tenure and job performance.
They then recommended a 6 percent raise for Ramsey and that he receive his annual performance bonus of 25 percent of his base pay – or about $156,000.
Trustee Bob Benson – who was “so impressed with the report” – said: “I think the great news is, our president is the highest paid ACC president…That means we’ve had tremendous success.”
Benson added, “The president of this ACC institution brought his institution into the ACC. The other presidents in the ACC institutions -- they were already there. It was done for them.”
Trustee Bruce Henderson said the salaries of U of L executives may be highly “skewed” in the Verisight study – because some of the other schools in the comparison don’t provide deferred compensation like U of L.
“We’re not comparing apples to apples here, people,” Henderson said.
Hughes, the trustees chairman, criticized a recent analysis by The Courier-Journal comparing Ramsey’s $1.6 million pay for the most recent year -- as reported by the university and foundation -- to that of other university presidents.
Hughes said the $1.6 million figure was “one year taken out of context” when a “ten-year running average” would be more appropriate.
Trustee Ron Butt agreed, saying even the $1.1 million figure reported by Verisight might not be “fair” to Ramsey because it’s “one point in time” when 10 years of data would show Ramsey was paid much less early in his career.
“The news media loves to take that one year and say, ‘Well gosh, he got paid a huge amount of money,’ when in reality that’s an amalgamation, an accumulation of several years just paid out in one,” Butt said.
In fact, Ramsey has earned a total of $12.7 million from the foundation since 2003, according its public tax forms for the last 12 years – an average of $1,063,087 a year.
If his university pay were added in, the annual average would be higher.
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