When David P. Gardner, president of the University of California, announced his retirement unexpectedly in April 1992, he received a severance package worth $1 million—in a year in which the university’s budget was cut by $255 million. The university also announced that student fees would rise for the third straight year—for a 3-year total increase of 85 percent.

Mr. Gardner, who retired early at age 58, earned an official salary of $243,500—double that of California’s governor. But his actual compensation was more than $400,000. And although his official pension will be $126,000 a year, he received an additional $933,000 when he departed.

In addition to Mr. Gardner’s base salary, the regents found ways to pay him an additional $160,000 annually. Deferred income, severance pay, and a special supplemental retirement program made the difference. In fact, a secret deferred- income plan was established by the regents in 1988 for about a dozen top UC executives, after a private study concluded that their compensation lagged behind that of top administrators in a nationwide comparison group of universities. (The conclusions of the study have since been challenged by the California Postsec¬ ondary Education Commission, an independent state agency.)

[SOURCE: Adapted from Jon Wiener, “Lavish Compensation Is Not Appropriate for Top Executives at Public Universities,” Chronicle of Higher Education (November 25, 1992), p. B3.j

a. Assume you were one of the students in the UC system. Discuss your per¬ ceptions about Mr. Gardner’s compensation package.

b. How ethical do you think it was for Mr. Gardner to accept such a compen¬ sation package. Consider both the information in the comparative study and the budget problems that California has experienced.

e. Could this simply be a case of trying to retain the “best and the brightest” in a not-for-profit institution? Discuss the rationale for your answer.