IRS filing shines light on Vanderbilt finances

Sunday, July 18, 2010 at 10:45pm
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Since the early 1990s, the Internal Revenue Service has gradually forced nonprofit entities to disclose more and more details about how they spend their money. As a result, through three administrations spanning the past two decades, Vanderbilt University has repeatedly found itself in the national spotlight for how much it pays its top leaders.

As far back as 1991, VU made news when it emerged that Chancellor Joe B. Wyatt was the highest-paid university chief in the country at $300,000 a year — more than double the salary of his former boss, Harvard President Derek Bok. (Wyatt’s comment to reporters: “I am worth it.”) The university’s board of trust continued its practice of paying the chancellor top dollar throughout the term of Gordon Gee from 2000 to 2007; Gee’s total compensation in 2006-7 reached $2.4 million.

The familiar pattern is playing out once more this year. Earlier this month, The Chronicle of Higher Education, which doggedly tracks down and sifts through universities’ publicly available IRS Form 990 submissions every year, reported that Vanderbilt had rather outdone itself by paying more than $1 million each to 10 different campus muckety-mucks in the fiscal year ending June 30, 2009. VU filed its 990 covering that year in mid-May, and it provided a copy to The City Paper last week.

The 151-page document shows quite a sharing of wealth among VU’s senior officials. Former Medical Center honcho Harry Jacobson, who resigned in June 2009, pulled in by far the biggest pile at $5.28 million, more than double the pay of Chancellor Nick Zeppos, who took home $2.41 million. Beyond the 10 employees in the million-dollar club, five more earned between $800,000 and $1 million.

Some of the numbers were boosted by retention bonuses that the board decided to pay out after Gee announced in 2007 that he was leaving to become president of Ohio State University. Several key personnel — most notably Gee’s right-hand man, David Williams II — had come to VU with Gee, and the university did not want them all to follow him up north at once.

One informal element of the chancellor’s pay package appears to have changed in the Zeppos era, at least for now. Wyatt and Gee each took on multiple directorships at publicly traded companies, as well as private firms, in situations that usually involved some connection between the company and the university. Those relationships yielded hundreds of thousands of dollars in fees and stock-based compensation for each chancellor.

Gee in particular appears to have collected board seats like souvenirs at various stops in his peripatetic career. He took up a seat at Columbus-based Limited Brands Inc. the year after he started his first term as president at Ohio State in 1990. He also joined the board of mine operator Massey Energy Co. some years after he left West Virginia University, took up a directorship at Providence-based Hasbro Inc. during his two-year tenure at Brown, and held board seats at Dollar General Corp. and Gaylord Entertainment Inc. during his time at Vanderbilt.

So far, Zeppos has joined no public-company boards, and the 990 discloses no private directorships either. It may be that the potential downside of having a relationship with any given corporation these days is just too great to make membership in the corporate club worthwhile. One can only imagine how relieved Gee is that he left the Massey Energy board last July, before last spring’s West Virginia mine explosion led to harsh accusations against the company.

Other figures divulged in the VU filing shed light on the scale of its business relationships with just a few companies, while revealing that VU has 278 vendors with which it does $100,000 a year or more of business. The IRS form requires the university to divulge info on its five highest-compensated independent contractors. In VU’s case, four of them are construction firms based locally or with a large local operation, sharing just under $92 million in work among them: Balfour Resource Group (in the lead at $34 million in payments from the university), Turner Universal Construction Co., Batten & Shaw Inc. and Orion Building Corp.

Most of those construction costs appear to be related to expansion at Vanderbilt University Medical Center. It’s small wonder that the hospital would draw so much investment, given the return it provides to Vanderbilt as a whole.

The numbers in the 990 point to a fact that has become more and more salient at VU in the past couple of decades: The hospital’s operations have reached a financial scale far greater than those of any other part of the university. Medical activities produced $2.05 billion in revenue for Vanderbilt in 2008-09, accounting for 77 percent of its total revenue of $2.66 billion.

All of which suggests that $5-million-man Harry Jacobson, who led the Medical Center through a period of dramatic growth, may well have deserved every penny he was paid.