The Dallas Morning News, Wall Street Journal and New York Times all reported on a recently released survey conducted by The Chronicle of Higher Education about the salaries of private university presidents in 2008.
In those reports, it mentioned SMU President R. Gerald Turner’s high compensation (No. 1 of all sitting presidents, No. 3 in the nation, No. 2 in Texas). It also mentioned the one-time payment of $1.58 million to Turner, which The Daily Campus reported in October.
However, all of the reports described the payment as a cashed-out life insurance policy:
- Chronicle: “he cashed out a life-insurance policy and bought his own policy”
- WSJ: “Mr. Turner’s compensation package was “inflated” by a one-time $1.6 million life insurance payout”
- DMN: “But that figure includes Turner cashing out a $1.5 million life insurance policy.”
- NYT: “The Chronicle said that according to the university, $1.5 million of that total compensation was a result of Mr. Turner’s cashing out a life insurance policy and buying his own.”
This is somewhat misleading, as the split-dollar insurance program SMU and Turner entered into functioned as a non-qualified deferred compensation plan.
The object was to provide Turner with $1 million cash and a $2 million life insurance policy for his family at some point in the future. That is how Michael Boone, the Vice Chair of the SMU Board of Trustees’ compensation committee, explained it to me in an interview I conducted for my story:
The Board adopted a split-dollar life insurance, deferred benefit program for Dr. Turner. The objectives of that program were basically to provide him with $1 million cash, at some point in the future is the plan developed, and $2 million of insurance, life insurance protection, for his family.
SMU’s tax form also describes it as a deferred compensation program:
Other compensation for R. Gerald Turner includes a one-time payment to him of $1,586,108 in connection with the early termination of a nonqualified deferred compensation arrangement entered into in 1999. (Page 45)
According to Boone, the Board of Trustees wanted to do something to show Turner how much they appreciated his achievements at SMU:
It’s dramatically improving. The Board [of Trustees] feels very strongly about making sure he understands how much we appreciate what he’s doing, and so we look for a way to provide a deferred compensation benefit to him, hoping he stays for a long period of time.
So, yes, it was an insurance policy. But there’s a little more to the situation than that, and it deserves to be explained. Otherwise, it makes that one-time payment (which was more than Turner’s total compensation in FY2008, FYI) seem a little inconsequential.
Additionally, Boone told me in our inteview that the Board of Trustees ended the policy, not Turner:
We finally terminated it in December of ’08. As a result of that, this whole plan that we wanted to go way on out, gets accelerated to this… point in time, and we end up, to unwind it, we basically give him the cash value of the policy.
The outcome of all of this was not what the Board of Trustees or Turner had planned. Indeed, if the tax law hadn’t changed, the program would still be in effect.
Instead, Turner received $1.58 million in cash (which after taxes came to around $1 million, according to Boone). Turner released the Board from the planned $2 million insurance policy and bought his own policy separate from the university.
And for the time being, Turner is the highest-paid sitting president of a private university.
If you’re up for a little torture, here’s the audio of my interview with Boone.
What do you think? Am I splitting hairs here?