The Public Eye

UC regents consider tougher rules on outside pay for top administrators

University of California regents this week will consider new restrictions on when top administrators can accept outside work after months of controversy about lucrative board positions UC Davis Chancellor Linda P.B. Katehi had with a textbook publisher and for-profit university.

The recommendations by UC President Janet Napolitano would reduce the maximum number of outside paid jobs from three to two, add a second layer of approval and require consideration of whether an outside board seat poses a “reputational risk” to the university.

“The revised policy is strengthened to prevent actual conflicts of interest or commitment,” states the recommendation from Napolitano.

Regents will consider the changes Thursday at their meeting in San Francisco. The vote comes after The Sacramento Bee reported in March that Katehi accepted board seats with for-profit DeVry Education Group and textbook publisher John Wiley & Sons that students and watchdog groups said were a conflict of interest.

Katehi has been on administrative leave since April 27 amid allegations of misusing student funds, nepotism and misstating her role in hiring online image consultants.

Ed Howard, senior counsel for the Center for Public Interest Law, said the new policy doesn’t go far enough. He said it should offer specific guidance on avoiding conflicts of interest and preclude senior managers from taking board seats with companies that do business with the University of California.

“I think there is no there there,” he said. “It’s like they don’t understand why people were mad.”

In February, Katehi accepted a position with DeVry Education Group, a for-profit company under federal scrutiny for exaggerating student outcomes. She did not receive final sign-off from Napolitano before accepting the seat that paid $170,000 annually in stock and salary. She resigned the post days later under pressure from the UC president, Assemblyman Kevin McCarty, D-Sacramento, and watchdog groups.

She previously received $420,000 in income and stock across the 2012-14 fiscal years as a board member for John Wiley & Sons, a publisher of textbooks, college materials and scholarly journals. Critics said that represented a conflict because students and state leaders were simultaneously seeking to reduce the cost of textbooks and push for the use of free, digital alternatives. She pledged $200,000 toward a UC Davis student scholarship in March but has withheld those funds and may rescind her pledge depending on the outcome of the UC investigation, her private spokesman, Larry Kamer, said earlier this month.

Kamer could not be reached Friday afternoon to comment on her board positions. Katehi previously told The Bee she erred in accepting the DeVry seat before getting Napolitano’s approval but defended her Wiley tenure as a way to make textbooks more accessible for students.

George Mason University professor James Finkelstein, an expert on corporate board participation by university executives, estimates that a board seat requires at least 10 days of service per year.

Howard said the policy should have restricted how much outside time administrators can spend on outside work.

“What they did was to limit it to two boards,” he said. “One could be a massive time distraction and three could take little time at all. The problem is the amount of time moonlighting for a second job.”

Finkelstein said that the review of outside board seats should not take place behind closed doors. He said that administrators seeking UC approval for board seats should be required to post their pre-approval form and other supporting documents online, with a window for public comment.

“This seems to us to be critically important,” he said. “Without such discussions in open session, this becomes yet another instance of disclosure rather than transparency.”

UC Office of the President spokeswoman Dianne Klein said she could not address those criticisms because it would be inappropriate to comment before regents consider the proposal.

The proposed policy applies only to the university’s 165-member Senior Management Group, which includes Napolitano, campus chancellors, medical center chief executive officers and directors of national laboratories, as well as some directors that report directly to them. Similar policies for staff and faculty won’t be revised, according to UC officials. Senior managers who already hold more then two paid outside positions will be allowed to continue in those positions.

Despite the recommended changes, UC officials have long defended the practice of allowing its top leaders to take outside work, saying it enhances the university’s reputation and strengthens ties to the community. Napolitano said she serves only on nonprofit boards and is not paid for her time. She says she chooses instead to focus on her job at the university.

The outside professional activities policy for senior management was last revised in 2010 after public outcry over the extensive activities of some campus chancellors. Faculty policies underwent a major revision in 2014, and there are no current plans for additional revisions, Klein said.

Nine University of California chancellors received nearly $1.5 million in cash compensation, in addition to deferred compensation and other stock options for outside work for corporations and nonprofits from 2012 to 2014, according to data provided by UC.

In 2014, the most recent year data are available, top university officials earned at least $2.58 million in jobs as consultants, advisers, speakers and corporate board directors. The exact compensation is hard to determine because the report, which lists income from cash and stocks, doesn’t always include the value of the stock.

The biggest earner appears to be Mark Laret, chief executive officer of UC San Francisco Medical Center, who earned $589,820 serving on the boards of medical firms Nuance and Varian, according to UC records. In 2014 Laret earned $1.59 million in salary and other compensation from UC.

Eight senior managers with outside jobs, including Katehi, held three or more outside paid positions in 2014. That would exceed the proposed policy’s maximum of two, though UC will only apply the limit when current administrators seek new positions rather than ask them to step down from existing ones.

Katehi sat on the Wiley board, National Science Foundation Division of Electrical Communications and Cyber Systems, as well as on the board of a company in which she has ownership, EMAG Technologies. Katehi did not list income for EMAG Technologies but said she spent 80 hours on company work that year.

UC San Diego Chancellor Pradeep K. Khosla had seven outside jobs in 2014 that included being member of two corporate boards, advising three companies, chairing the Infosys Foundation Jury of Engineering and Computer Science and being the the co-founder of Biometricore. He lists $24,000 in income and stock valued at about $106,000. He says he spends 45 hours a year on these outside jobs.

Acting UC Davis Chancellor Ralph Hexter, who served as the school’s provost before Katehi’s leave, falls within the limit, having received $1,500 in 2014 for serving as a review board member, according to UC records.

Katehi earns $424,360 a year as chancellor of UC Davis. Napolitano ordered a review of the board seats of all senior managers and chancellors to ensure each had accurately reported the compensation they received. The report has since been completed but was not available Friday, Klein said.

Diana Lambert: 916-321-1090, @dianalambert

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