Exclusive: NYU Emails Faculty Amid Fallout Over Jack Lew’s Shady Bonus

NYU has taken significant heat lately over the news of large exit bonuses and other financial perks doled out to Jack Lew, NYU’s former VP of Operations, and a select group of other “star” NYU employees. In an email sent Friday and acquired by NYU Local, university administration attempted to address the controversy with the population for whom it hits closest to home: NYU’s faculty members.

When Lew worked at NYU from 2001 to 2006, he received a $840,000 salary and $1.4 million home loan, much of which was forgiven. When he left, Lew got a $685,000 severance bonus. A select group of other faculty have received similarly lavish rewards, and NYU maintains that these deal-sweeteners are what it takes to attract and retain top staff. But for the vast majority of professors who make a fraction of that money, those figures are unsettling. (Read the full text of the email below.)

In the email sent to faculty, Martin Dorph, NYU’s executive vice president for finance and information, writes “that feeling is understandable.”

The University administration is keenly aware that the salaries people earn here are often not as much as they want or feel they need;

we value the sacrifices that have been made in light of the financial pressures on the University [...] So, we know these factors make it particularly hard to read of someone receiving a significant benefit from the University.

But according to “economic truth,” Dorph wrote, these compensation deals are appropriate:

While that feeling is understandable, it is important to note the economic truth that the markets for different positions often dictate different levels of compensation, whether that is embodied in salary payments, loans, or an overarching agreement about terms of employment.  And, when we commit to provide such compensation, we do so only when we are sure that the benefit to the University far exceeds the cost.

In the case of Jack Lew, Dorph writes, the benefit NYU received from his management ranged in the “tens of millions of dollars,” so the employment agreement that dictated his hefty rewards was a successful venture for the university.  “To be clear: We do not give gifts – we honor employment agreements,” Dorph wrote.

“Also, in some schools – for example, in the School of Medicine – at times we have used buy-outs of tenured positions to free up long-term positions for recruiting new faculty,” the email continued. This presumably refers to the $1,230,000 check written to Dr. Harold Koplewicz, a N.Y.U. Medical Center executive who left around the same time as the payment was issued, according to the New York Times.

The complete text of the email is below:


From: Martin Dorph- NYU Exec Vice President for Finance and Information Technology<office.president@nyu.edu>
Date: Fri, Mar 8, 2013 at 2:52 PM
Subject: Follow-up on Recent Reports about Loans and Severance Packages

Dear Colleagues,

At the University Senate yesterday, President Sexton was asked about recent press reports regarding loans and separation payments provided by NYU.  I send this note today to summarize to the wider community the information that John presented.

The University cannot go into the details on specific individuals or financial arrangements; nevertheless, the information below should provide some useful general context on the specific questions that have been asked and the recent information that has been disseminated in the press.

NYU provides a number of benefits for the purpose of recruitment and retention of excellent faculty and staff.  Among the notable benefits are tuition remission, a highly competitive medical benefit and pension plan, and retiree medical benefits.

One of the most important recruitment and retention benefits is faculty housing – both providing University rental housing to faculty in the very desirable Greenwich Village neighborhood, and providing opportunities for home ownership through loan assistance programs

Over 1,200 active or retired faculty reside in NYU rental housing.  In addition, the University and the Law School have currently outstanding loans to 168 individuals (of whom 164 are faculty members) totaling approximately $72 million.

These loans are offered under a variety of terms, and may vary by school.  The vast majority of loans provide an investment return to the University, either bearing a market rate of interest or sharing in the increased value of the property upon maturity or sale.  It is important to understand that these loans do not have any negative impact on tuition or expenses; indeed, the loans – like our other investments – generate funding for the core enterprises of the University.

Few loans are forgiven, and forgivable loans are made for retention purposes only, typically at the request of a dean.  In addition, under the “Home Ownership Program”, the University has in the past provided loans to encourage faculty to become homeowners, thereby making available more of our stock of on-campus rental housing, and particularly the two- or three-bedroom apartments that are necessary to recruit faculty with young families.

With regard to the question about the payment to Jack Lew (who served as the Executive Vice President of NYU), it is important to begin with the fact that high level administrators are typically brought here to focus on the financial health and operational efficiency and effectiveness of NYU, which directly benefits the academic enterprise in terms of enhanced support and increased available funding.  When they have been successful – as was the case with Jack Lew – the benefit to the University can range in the tens of millions of dollars.  In some cases, when such people are hired, there are employment agreements that dictate obligations – such as severance — when they depart.  To be clear:  We do not give gifts – we honor employment agreements.

Also, in some schools – for example, in the School of Medicine – at times we have used buy-outs of tenured positions to free up long-term positions for recruiting new faculty.

The University administration is keenly aware that the salaries people earn here are often not as much as they want or feel they need; we value the sacrifices that have been made in light of the financial pressures on the University.  We are mindful, as well, of the limits of financial aid, and the sacrifices many families make to enable their sons and daughters are able to attend NYU.  So, we know these factors make it particularly hard to read of someone receiving a significant benefit from the University.  While that feeling is understandable, it is important to note the economic truth that the markets for different positions often dictate different levels of compensation, whether that is embodied in salary payments, loans, or an overarching agreement about terms of employment.  And, when we commit to provide such compensation, we do so only when we are sure that the benefit to the University far exceeds the cost.

Please remember that – underlying all the issues described above – is NYU’s deep commitment to its research and teaching missions, and to attracting and retaining the faculty, students, and administrators who together contribute to NYU’s advancement.

Martin S. Dorph

Chief Financial Officer

Executive Vice President, Finance and Information Technology

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    5 Comments

  1. Ernesto G. says

    I have to say, this was an eye-popping document — not just for students to struggle through, but for faculty like myself. I had to re-read it twice so as to confirm that Martin Dorph was indeed claiming what it was claiming.

    Forget about the opening bit, on “providing University rental housing to faculty in the very desirable Greenwich Village neighborhood” … the selfsame Greenwich Village part of which the Sexton administration aims to change virtually beyond all recognition over the next two decades of on-and-off construction and pollution.

    Nor is the most alarming part of all even the gymnastics regarding terminology, which Mr. Dorph is so at pains to define. Does it really matter a great deal that Jack Lew’s exit compensation is termed an “employment agreement” rather than a “gift”? And although the word “severance” — at least in common usage — typically describes payouts to employees who are laid off or retire and yet the administration chooses to apply the term to the kind of compensation Mr. Lew received, well ok, so be it.

    What SHOULD concern everyone at NYU, however — and concern us greatly — is the picture that emerges of the negotiation process itself from the email’s clarifications. It seems unwise (at best) for NYU to sign any employment agreement involving such head-spinning figures without placing exacting restrictions on eligibility. The most logical of such restrictions would specify that the new hire, whatever his or her stature, is no longer eligible for the promised exit package (in this case, $685,000!) if he or she voluntarily leaves for a higher paying position. Though already making more than Pres. Sexton at the time of his departure, Mr. Lew, let’s not forget, left for an even higher paying position at Citicorp, to the tune of $1.1 million per year. Just imagine!

    And ALL of this is set against the disturbing background of a relatively modest $2.5 billion endowment … certainly modest by Harvard’s standards ($32 billion) or Yale’s ($19.3 billion) or, closer to home, Columbia’s (just below $8 billion); a planned 20-year, $4-6 billion dollar expansion (there is still no specific figure that the administration has revealed, even 5 yrs+ since the plan was first rolled out), with no more than 18% of the square footage in the first decade of construction intended for instructional academic use; and, worst of all by far, ever-climbing student tuition (increasing by an average of over 5% from 2003-10 alone) and student loan debt.

    Bottom line: Our university has now become, before our eyes, a non-profit institution run for profit. This profit assumes the form of massive salaries awarded to top-ranking administrators and a select number of faculty “stars,” as well as increasing NYU net-worth via real estate development. How much the trustees themselves benefit, no one quite knows (yet), but we, the faculty, and I’m sure our students no doubt would be very curious to find out.

  2. Harry Hamilton says

    I was in the midst of considering whether or not to borrow $60,000 and return to NYU next year when I heard about these ridiculous salaries. Although outrageous, these huge number on their own were not enough to make the decision for me. When I found out that yesterday that one of my professors has been teaching here for 20 years and still only makes $58,000 a year BEFORE taxes I nearly went to John Sexton’s house and slapped him. If my $59,000 year is not enough to allow my professors to live a decent middle class existence then I will not be borrowing any more money to return here next fall. I do no support this shit.

  3. says

    I hope to make lots of money someday so I can give it to an independent student financial aid fund or to the university where I do graduate work, and not a cent of it to finance this kind of bullshit. You want to know why alumni donations are low? This bullshit. This bullshit is why.

  4. Elizabeth Preza says

    NYU admins needs to do a lot of self-reflection. It’s clear their priorities are really fucked up.

  5. Valencia Reyes says

    this is a lot of text and i a m almist sure none of it about the Blood.

    sometimes we need to breath in. and

    out.

    let the oxygen flow through and make the blood clean.

    clean blood clean mind. clean blood clean mnind clean blood clean mind clean blood clean mind clean blood clean mind clean blood clean mind clean blood clean mind

    the shores ofa better tomorrow can be reached. today,

    -Valentua Reynes