The University Record, October 8, 1996

Regents, Neal issue statements on employment agreements

Editor's Note: For the full text of interim President Homer A. Neal's letter click here.


In two moves last week to begin an open dialogue on employment agreements for some executive officers made by former President James J. Duderstadt, the Board of Regents released a statement on Oct. 2 and interim President Homer A. Neal sent a letter to faculty and deans, directors and department heads.

In its statement, the Board noted that Duderstadt's action "has attracted considerable public interest and has raised significant issues of policy and process."

The Regents have forwarded the employment agreements for review to the law firm of Dickinson, Wright, Moon, Van Dusen & Freeman and to the firm of Barris, Sott, Denn & Driker, independent counsels for the Board.

"The Regents also are considering the policy framework within which a modern compensation structure can be crafted, in public," they stated.

"The objective is to continue to enable the University to attract, motivate and retain the best possible people to senior management positions, but at the same time to set in place a reasonable compensation program which is rigorous and formal and is not subject to unilateral interpretation and execution."

Noting that they "take their responsibilities very seriously," the Regents said they "intend to move forward promptly to resolve these issues and to report timely to the University community and the people of Michigan."

In his letter, Neal noted that the press reports on the employment agreements "have created concern on the part of our campus community and, indeed, the larger public, about integrity, trust and accountability at the University."

"I believe that our campus community deserves a fair accounting of this situation. We have many stakeholders, deeply concerned for the well-being of the University, who have placed their trust in our institution."

Neal noted that he and the other executive officers "entered in all good faith into these employment agreements, only to find ourselves now portrayed unfavorably, in significant measure as a result of misunderstanding and misinformation."

He said that more than the issue of compensation, concern is focused on "the impression of duplicity that the disclosure of these agreements has created. I am convinced that at least in part this impression derives from insufficient information or misinformation; at the same time, I believe we must meet head-on the substantive questions of policy and procedure that have been raised."

Noting that the agreements were issued by Duderstadt "during a period of exceptional uncertainty amongst the executive officers," he added that he has "no doubt that President Duderstadt took these actions believing them to be necessary to document various prior understandings and to keep the executive officer team intact during the delicate transition period. . . . It is important to note . . . that these agreements were not `midnight deals,' but were rather in many particulars the conclusion or reaffirmation of agreements reached earlier---in some cases, years earlier.

"Unfortunately, these actions have created the impression that those in the Fleming Building consider themselves above the rules."

Neal said it is "appropriate for the University as an institution to determine the facts, understand the context and establish policies for the future. Such policies must both 1) reaffirm the necessary trust and ensure the future accountability of our institution, and 2) maintain for future presidents of the University the freedom and flexibility they will need if they are to assemble administrative teams of the quality that the University requires and deserves."

In addition to the actions being taken by the Regents, Neal has asked Jackie McClain, executive director of Human Resources and Affirmative Action, "to coordinate the development and formulation of a formal and modern compensation policy for executive officers, in consultation with the University's General Counsel, the Regents and faculty representatives."

In closing, Neal noted that the University "faces several major challenges," including searches for a new president and for a successor to Farris W. Womack, executive vice president and chief financial officer; refining the definition of the newly-created position of executive vice president for health affairs and initiating a search to fill that post; and the launching of Value Centered Management.

"We are, in short, in a period of monumental change. No challenge, however, is more important than that of rebuilding trust within our institution; indeed, our ability to meet our other challenges effectively, in the manner of the great institution that we are and want to be, depends on it. I have every confidence that, with mutual openness and honesty, we can meet this challenge and move forward."