McMaster University President’s Contract Disclosure Case

1. McMaster University President’s Contract Disclosure Case A Submission to the 2009 A.W. Page Case Study Competition

2. Introduction • Multi-faceted case • Public sector example from Canada • Opportunity to explore reputation management during a controversy • Deepen understanding of university operations

3. Overview of McMaster University • Founded in 1887 • 23,000 current graduate and undergraduate students • In Top 100 universities in the world (one of 4 Canadian schools) • Most research intensive university in Canada • “McMaster model”

4. President Peter George • McMaster’s longest serving president (15 years) • 40 years on faculty at McMaster • Doubled operating budget • Tripled research budget • Grew endowment from $100M to $500M

5. Public Sector Salary Disclosure Act • Became law in 1996 as an accountability measure • Public sector organizations must release names, titles, salaries and taxable benefit information of all employees who make more than $100,000 per year • 2007/08 McMaster reported 734 employees, 30 of whom made > $200k • President George topped the list as highest paid university president with $504,792

6. Freedom of Information and Protection of Privacy Act • Changes came into effect June 10, 2006 so universities no longer exempted • Transparency measure • Province largest revenue source of Ontario universities • McMaster received 27.7% in 2006/07

7. University Funding in Ontario • Limited to 5% tuition increase • Strong growth in endowments – 55% increase nationally from 2002-2007 (although many now compromised due to crisis in the financial markets) • Population growth in the Greater Toronto Area • Private sector partnerships, ancillary operations = “corporate agenda”

8. McMaster’s Financial Performance Good News • Debt per full-time equivalent down 34% • Endowment per full-time equivalent up 40% • Raised $258M of $400M fundraising campaign • Diversified, stable funding base Bad News • Post-retirement benefits liability total $223.3M • Unfunded pension liability of $98.8M • Credit rating downgraded to negative • Total debt to grow by $100M to $257M

9. Operational Tightrope • increased inflationary costs out pace new revenues • increased provincial funding uncertainty • increased dependence on onetime funding • reduced operating net assets available to re-invest • increases in debt financing to meet space needs • increased student faculty ratios and class sizes • increasing cost of future employee benefits

10. The Battle Begins • Initial request in August 2006 • McMaster refused on the grounds it was a privacy issue • The Spectator appealed to the Information and Privacy Commissioner • Information and Privacy Commissioner decision of Jan. 31/08 ordered McMaster to release info by Feb. 29/08 • McMaster refused again; requested judicial review of the entire case • McMaster relented and on June 26, 2008, released President George’s contract

11. Public Outcry Erupts • Charges of greed, misuse of public funds, serious lack of transparency, betrayal • $99,999 post-retirement benefit given as an “academic leave” • Statement from McMaster University Faculty Association condemning senior administration of concealment and misrepresentation

12. Fallout for the University Sector • Maclean’s website set up to compare president’s salaries • Globe & Mail delves into exorbitant salaries and perks, questions value for money • McMaster student leader supports President George • University of Guelph’s president – the exception to the rule

13. Current Dilemma • Faculty contract renegotiation year • Reputational damage • Serious financial challenges • Maintaining fundraising momentum • Re-establish credibility, trust with key stakeholders

14. Applying Page Principles • Tell the truth • Failure to do so raised suspicions • Lost opportunity to promote President George’s value • Prove it with action • Proactively disclose financial plans • Listen to the customer • Meet directly with representatives from media and faculty/staff to discuss best way to move forward

15. Applying the Page Principles, cont’d • Manage for tomorrow • Don’t go to court • Universities must see themselves as part of larger society • Conduct public relations as if the whole company depended on it • Issues management can help foster a culture where all employees learn to recognize reputational risks and opportunities

16. Applying the Page Principles, cont’d • Realize a company’s true character is expressed by its people • Communicating a strong, high-integrity leader is essential for universities • Compare McMaster to Guelph University • Remain calm, patient and good-humoured • Increase visibility of President George so he can use his good nature to discuss situation with engaged publics

17. Reputation Management Principles • Visibility: “The more familiar you are to the public, the better the public rates you” • Authenticity: “To earn the benefit of the doubt, organizations have to convey absolute honesty in all their interactions with stakeholders – otherwise, any discredit by one stakeholder will instantly be communicated to all of them, reducing the degree of support they feel for the organization”

18. Reputation Management Principles • Consistency: “An organization’s reputation platform has to be consistently enacted across all stakeholder groups and through all of the organization’s communications and initiatives” • Distinctiveness: “Distinctiveness builds strength of association and comes from a company’s success at building a reputation platform (its customized slogans, unique trademarks and logos, and personalized corporate stories) that is strategically aligned and emotionally appealing” • Transparency: “Research has shown that the more transparent an organization is, the more likely stakeholders are to rely on their disclosures and to have faith in the organization’s prospects”

19. Discussion Questions: Contract Disclosure • How could McMaster have pre-empted or reduced the negative impact of the contract disclosure issue? • If you were in charge of McMaster’s public relations function, how would you have advised the president when the initial request for his employment contract came in from the Hamilton Spectator? • What other approaches could McMaster have taken in handling this issue? • How could McMaster have better communicated its justification of the contract terms offered to President George when they released this information?

20. Discussion Questions: Next Steps for McMaster • How would you evaluate and prioritize the risks to McMaster’s reputation in the wake of the contract’s release? • What opportunities exist for McMaster to improve its reputation following the disclosure? • Based on Fombrum and Van Riel’s reputation management framework, what strategies should McMaster and President George use to re-establish the conditions of trust in its relationships with faculty, potential donors and the general public? • How should McMaster address its relationship with the Hamilton Spectator now that the president’s contract has been disclosed?