McMaster University President’s Contract Disclosure Case

A Submission to the 2009 A.W. Page Case Study Competition

Introduction

Multi-faceted case Public sector example from Canada Opportunity to explore reputation management

during a controversy Deepen understanding of university operations

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”

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

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

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

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”

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

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

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

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

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

Current Dilemma

Faculty contract renegotiation year Reputational damage Serious financial challenges Maintaining fundraising momentum Re-establish credibility, trust with key

stakeholders

Applying Page Principles

1. Tell the truth Failure to do so raised suspicions Lost opportunity to promote President George’s

value

2. Prove it with action Proactively disclose financial plans

3. Listen to the customer Meet directly with representatives from media

and faculty/staff to discuss best way to move forward

Applying the Page Principles, cont’d4. Manage for tomorrow

Don’t go to court Universities must see themselves as part of

larger society

5. 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

Applying the Page Principles, cont’d6. 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

7. Remain calm, patient and good-humoured Increase visibility of President George so he can

use his good nature to discuss situation with engaged publics

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”

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”

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?

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?