Tweak by U of L foundation board puts Ramsey in line for extra p - WDRB 41 Louisville News

Tweak by U of L foundation board puts Ramsey in line for extra payout on Jan. 1

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University of Louisville President James Ramsey, July 13, 2016 University of Louisville President James Ramsey, July 13, 2016
University of Louisville Board of Trustees Chair Pro-Tem Junior Bridgeman University of Louisville Board of Trustees Chair Pro-Tem Junior Bridgeman

LOUISVILLE, Ky. (WDRB) – In a meeting that lasted five minutes in late 2014, three members of the University of Louisville Foundation Board of Directors approved a change in U of L President James Ramsey’s pay package that, while subtle, could end up being very lucrative for Ramsey now.

Ramsey, 67, needs only to stay employed as president of the foundation until Jan. 1 to earn an additional $250,000 in “deferred” compensation -- plus a “gross-up” payment to satisfy his income taxes, which could bring the total award to about $450,000.

As part of his 2012 contract extension, Ramsey got a deferred compensation deal that was originally paid out in two-year increments.  But in the five-minute meeting in 2014, the three foundation directors changed the payout to $250,000 every year instead of $500,000 every other year.

The result is that Ramsey is now entitled to receive deferred pay on Jan. 1 instead of having to remain until Jan. 1, 2018 to realize the money.

While Ramsey has said he plans to step down as university president no later than the end of the next academic year, he has repeatedly refused to say whether he might remain as president of the foundation.

The foundation – a nonprofit that manages U of L’s $680 million endowment -- provides the vast majority of Ramsey’s seven-figure annual compensation. One foundation board member has publicly urged Ramsey to continue as foundation president even after he leaves as university president.

Ramsey, through a spokesman, declined to respond to a question about whether the Jan. 1 vesting of his deferred pay factors into the timing of his departure.

To be sure, the deferred pay is a small piece of Ramsey’s total pay from the foundation. The foundation reported its total compensation to Ramsey as $3.3 million in 2012, $1.9 million in 2013 and $2.8 million in 2014, according to its latest IRS disclosures.

But the fact that Ramsey now gets “deferred” pay every year defeats the purpose of what is supposed to be an incentive for him to remain with U of L for many years, according to a university-commissioned report last year by an independent compensation consultant.

U of L spokesman John Karman suggested a reporter contact advertising agency executive Debbie Scoppechio, who chaired the foundation’s executive committee when the change was approved. Scoppechio did not return calls on Friday and Monday. UPDATE: On Tuesday, an assistant to Scoppechio said she read this story and has nothing to add to it. 

The foundation directors who approved the 2014 change were Junior Bridgeman, whom Gov. Matt Bevin recently appointed to the University Board of Trustees; Joyce Hagen; and Frank Weisberg, according to minutes of the meeting.

Bridgeman and Hagen did not return calls. Weisberg deferred comment to Scoppechio.

Bridgeman was elected Chair Pro-Tem of the trustee board last week after re-joining the board, which he had previously chaired in the mid-2000s. He is also a longtime member of the foundation’s Board of Directors and was recently named its chairman.

Deferred pay part of Ramsey’s 2011 contract extension

The compensation package at issue dates to October 2011, when the U of L Board of Trustees approved a contract extension for Ramsey through 2020. Two months later, committees made up trustees and foundation directors agreed on details, including the $500,000 of “deferred” pay every two years through 2020, funded by the foundation.

But it wasn’t until mid-2014 that the foundation began putting Ramsey’s new pay deals into writing. Ramsey’s foundation employment agreement was signed in July 2014, and his deferred compensation agreement in December 2014.

The deferred pay contract was signed on the same day that the foundation executive committee approved the change entitling Ramsey to the deferred pay every year instead of every other year.

The deferred pay contract, signed by Hagen for the foundation, requires that Ramsey remain employed only by the foundation to earn the money.

Ramsey, a voting member of the foundation board, is also a member of the five-person executive committee that approved the change, though minutes show he left the meeting before the committee dealt with his compensation.

The minutes of the meeting do not explain the rationale for the change, nor who proposed it.

But the annual vesting of Ramsey’s deferred pay has been lampooned by some former trustees and by an independent compensation consultant hired by the U of L Board of Trustees last year.

Since the point of “deferred” pay is to give executives a reward for remaining in their jobs over the long-term, U of L’s incentives should be given out no more frequently than every three years – not annually – according to a July 2015 report by Verisight Consulting.

“There is no retention element if the deferred compensation award vests immediately,” the consultant said in the report.

U of L spent a little over $20,000 on the Verisight study, but its recommendations were never implemented.

Larry Benz, who chaired the trustee board until Bevin abolished it last month, said last year that the board could not renege on contractual obligations to Ramsey.

Committee added tax payments to deferred pay

Records also show that the same foundation executive committee that approved the change in Ramsey’s deferred pay had also ensured, five months earlier, that the incentive pay would be “grossed up” to cover Ramsey’s federal, state and local income taxes.

On July 17, 2014, the foundation’s executive committee approved a change inserting the phrase “net after taxes” to Ramsey’s annual bonus and to his deferred pay, according to meeting minutes.

That move nearly doubled the value of the deferred pay, according to the Verisight compensation study.

The study, relying on information from U of L, showed that Ramsey’s deferred pay award in 2014 of $500,000 increased to $904,383 after being “grossed up” to cover his taxes.

The foundation employs an accounting firm that estimates Ramsey’s tax liabilities each year to determine the size of the gross-up payments – sometimes requiring more payments the following year.

In 2014, Ramsey received just over $1 million in gross ups on the deferred pay, his bonus and other forms of compensation, including $161,679 to make up for the prior year when accountants underestimated his income tax liabilities, according to the foundation’s IRS disclosure.

Scoppechio, Hagen and Weisberg approved the “net after taxes” language in the July 2014 meeting that lasted 23 minutes and included other business. They held the discussion about it behind closed doors after Ramsey “recused himself from the meeting,” according to the minutes.

Neither of the 2014 changes to Ramsey’s deferred pay were approved by the Board of Trustees, who last dealt with the structure of Ramsey’s compensation when they approved the contract extension in late 2011.

But Kathleen Smith, Ramsey’s chief of staff, noted that Scoppechio was a trustee at the time and her presence on the foundation executive committee ensured the trustees were represented.

“To say that there were no trustees involved in that decision is not accurate,” she said in an interview in May.

Smith added that the foundation board had actually approved the special tax payments for all key U of L employees, including Ramsey, in 2005 or 2008. The 2014 action merely clarified the language, she said.

In May, Smith said she would provide board records showing the approval, but she did not. In an email, she referred the reporter to the foundation’s attorney, who did not respond.

The state auditor’s office is expected to issue a report this summer or fall examining the relationship between the foundation and trustee boards. The auditor’s office got involved last year after some former trustees expressed frustration about being in the dark as to Ramsey’s compensation from the foundation.

“Whether you agree or disagree with what President Ramsey is paid, I would hope we can all agree as a board that the way in which he is paid is unfathomable in today’s times,” former trustee Craig Greenberg said at a July 2015 meeting. “…This compensation package – its structure and approach – has more in common with Wall Street bankers … than a public university leader.”

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