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Analysis of the different levels of executive responsibility convinces us that the interval between the top and bottom of the executive pay scale traditionally has been too small to reflect the substantial differences in the several levels. Consequently, in the executive pay scales which we recommend, a ratio of 100:80:70 is established for the three most commonly used departmental titles of Secretary, Under Secretary, and' Assistant Secretary, respectively.

The second principle which we recommend for fixing executive salary level is to restore a substantial differential between congressional and Cabinet salaries. Since the 1955 and 1956 Salary Acts, the salary of a Member of Congress has been 90 percent of the salary of a Cabinet officer, and greater than that if the tax deduction of $3,000 for living expenses of Members of Congress is taken into account. Prior to that time, in fact for 88 of the last 100 years, congressional salaries were from 63 to 67 percent of the Cabinet salary. The differential reflected in part the nature of the executive responsibilities of the department heads. Further, tradition and statute have required that they have no other gainful employment during their tenure of office-a restriction not applicable to members of the National Legislature. Historically important, also, is the fact that when the differentials were established, and for many years thereafter, the Congress was not in session for as many months a year as national needs now require. In recognition of the greater length of the congressional year and the greater demands upon the Members, we do not recommend restoration of as great a differential as formerly prevailed.

In the light of the principles just discussed, and our conclusions concerning the infeasibility of adopting comparability with private enterprise as a basis for executive pay, we turned next to comparisons between salary for top offices in the Federal Government and salaries in other forms of public service. It seemed to us that we should examine particularly the relationships between Federal salaries and salaries paid to the chief officers in State and local governments, colleges and universities, and nonprofit institutions such as the philanthropic foundations. We were not surprised to find that the Federal Government had not kept pace in some instances, but we were not prepared for quite such startling and significant differences as we have discovered.

The Federal Government will always be able to command the services of persons who recognize their obligation to give of their time and talents to the Nation. It should not, however, be at a competitive disadvantage with other forms of public service in attracting the best talent. We are convinced that our top salary structure no longer provides positive encouragement to men and women of the highest ability, dedication, and conviction about the American way of life to accept Federal appointments in either the executive branch or the judiciary, or to seek Federal elective office with assurance that the financial demands upon them can, in most instances, be met from their salaries.

The main body of the figures supplied to us concerning salaries paid at the higher levels of responsibility in other forms of public service is too bulky to include as a part of this report. We wish, however, to illustrate the dramatic impact of the figures. First, in the case of

State and local governments, the following summary table is significant:

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1 Includes salaries, official mansion (valued at $5,000 unless government specifically states another value), and allowances when specified.

To give 3 concrete illustrations, 28 positions in the city government of Los Angeles are paid salaries above those of our Cabinet officers. Mayors and city managers in the 24 cities examined in 13 States all are paid more than $24,000. The city of San Francisco (with 18,000 employees) has 24 positions which are paid over $20,000, whereas the U.S. Department of Commerce (with 29,000 employees) has only 4 positions paid more than $20,000.

Similarly, in the field of education, we find that 511 principal administrative officers of colleges and universities are paid $20,000 per annum or more; and 157 of these, including 81 college presidents, are paid in excess of $25,000. In our public school systems with enrollments of 6,000 or more students, 143 school administrators have salaries ranging from $20,000 per annum to almost $50,000.

The major foundations and other nonprofit institutions have pay scales quite similar to those of our major universities, with a range from $20,000 to more than $50,000. The average salary paid to the highest principal full-time officer by 17 large foundations was $35,353. The median figure was only slightly less.

We also thought that it would be pertinent to examine the salary structure in certain activities closely allied to the Federal Government. A sample study of 14 nonprofit contractors of Federal research and development work revealed that 186 officers, technical directors, and other staff received salaries ranging from $23,000 to $45,000. Similarly, 79 of some 600 officers of the Federal Reserve banks are paid in excess of $20,000 per annum.

The annual salaries of the presidents of the 12 Federal Reserve banks range from $32,500 to $70,000, a sharp contrast with the members of the Federal Reserve System's Board of Governors. The Chairman now is paid $20,500 and the members $20,000.

In the farm credit banks, 50 officers are paid more than $20,000, with 26 of the 35 presidents authorized to be paid up to $25,000. The salary and post allowance authorized for the 29 Under Secretaries of the United Nations brings their compensation to more than $30,000 a year, and the 91 senior officers immediately below the Under Secretaries have a compensation range from almost $19,000 to over $25,000.

Additional summary data are attached as an appendix to this report.

In none of these positions do we find responsibilities greater than those prevailing in the top echelons of the Federal Government.

Members of your Cabinet, their principal associates, and agency heads, and their predecessors in other administrations have seldom been attracted to serve their country solely by the amount of compensation attached to their offices. But no President, in our opinion, should be limited to selecting only those who can afford to make substantial sacrifices for the privilege of public service, nor should those who are willing to serve be required to make substantial sacrifices for the privilege. The same principle holds for the Congress and the judiciary.

Giving up a high income to accept a lesser income in a Federal office has been a common experience in the history of our country. We believe, however, that such action should not require the individual to draw down his personal resources in large amounts in order to support himself and his family while in office. The sacrifice must be of an order which many, not just a few, are prepared to make, and it should be no greater in a Federal position than in any other form of public service. Furthermore, there are many able young men who have accumulated no reserves to help them maintain themselves in public office. It is particularly important that inadequate pay scales neither deny our country their services nor create the kind of economic pressure of family responsibility which cuts their service short when they do accept public office.

Our country cannot afford to depend only upon rich men to run its affairs. Neither should we place excessive reliance on business executives on leave of absence who are both expected to, and want to, return to their companies after short periods of public service. Both may render valuable, unselfish service, but, as we stated in our report to you in February 1962, "it seems to us bad public policy to make it difficult for others of comparable ability to serve the Government.” The United States cannot argue that independent means and the honor of office are appropriate substitutes for proper compensation for the positions in which its officers are serving.

We support fully the principle that appointive officers, as well as the judiciary, should not have other gainful pursuits, and that their earned income should be limited to their Government compensation. We add, parenthetically, our belief that appointive officers should not be denied the right to retain resources which their own prudence and success have made it possible for them to accumulate. Appropriate investments and the income from such investments, under adequate safeguards and proper ethical standards, do not, of themselves, create a conflict of interest.

With the top of the career pay systems as a point of departure, with reasonable differentials between executive salary ranks, and with a baseline comparison of executive salaries in several kinds of public service, we have developed an executive pay scale. We believe that this pay scale is conservative but adequate; that it bears a sensible relationship with salaries paid in other kinds of public service, and that it will have a high degree of public acceptance as a positive force for encouraging the ablest of our people to accept public office.

SETTING THE EXECUTIVE SALARY SCALE

We recommend that top salaries in the executive branch of the Government be fixed in accordance with a six-level scale, as follows: Level I. Cabinet Secretary

$50, 000 Level II. Deputy Secretary of Defense, Under Secretary of State, heads of the most important agencies.-

45, 000 Level III. Cabinet Under Secretary, regulatory commission chairman, heads of large agencies

40, 000 Level IV. Assistant Secretaries, regulatory commission members, deputy

heads of large agencies, and heads of certain agencies and outstanding bureau chiefs--

35, 000 Level V. Administrative Assistant Secretaries, chiefs of major bureaus, and highest level staff..

33, 000 Level VI. Heads and board members of smaller agencies, deputy heads of other agencies.-

30, 000 Note.-In the above scale, level V would constitute the ceiling which top career salaries may approach but not equal or surpass. Should private enterprise rates continue to rise 3 percent annually, the recommended GS-18 rate of $25,500 could undergo several annual upward adjustments before encountering the ceiling.

We believe that some 400 positions in the executive branch would be included in the universe to which the foregoing six-level structure applies, but we have not attempted to designate all of the positions which might be included at each level. The Panel believes that it does not have the competence to differentiate among all of the positions below that of the Cabinet Secretary, with the exception of the positions of Deputy Secretary of Defense and Under Secretary of State, both of whom, because of the unique nature of their responsibilities, we believe should be paid at the level we suggest.

In response to our request, the Director of the Bureau of the Budget and the Chairman of the Civil Service Commission have prepared detailed schedules of all of the positions which might fall into levels III, IV, V, and VI. We do not recommend that the positions be given a statutory arrangement by title within each of the levels (possibly excepting those of sub-Cabinet rank in the departments), but that the President be authorized and directed to distribute and arrange such positions into such schedules as may from time to time appear to him appropriate; and that such schedules be published in the Federal Register. We believe that such an authorization is thoroughly consistent with the responsibilities of the President as Chief Executive and a far better and more equitable means of setting salaries than a statutory prescription such as that now set forth in the Executive Pay Act and many other individual pieces of legislation.

We point out that to accomplish this purpose there is need for: (1) a thoroughgoing review of all positions for which compensation now is set by position title in the Executive Pay Act and other special enactments; (2) selection for return to the Classification Act salary structure of certain career positions now compensated under special enactments; (3) assignment of positions to the respective levels of the new salary structure; and (4) amendment or repeal of all statutes affected.

We also point out that adoption of the levels recommended by the Panel call for appropriate adjustments in military pay proposals now pending before the Congress for the Chiefs of Staff and other officers holding four- or three-star rank in the uniformed services. In this

connection, our report on military pay systems, presented to you on December 20, 1962, included the following statement:

The increases proposed for service personnel of three and four-star rank (0-9, 0-10, and Chief of Staff) should be considered interim recommendations subject to review and revision when decisions are reached on changes in executive pay.

Similarly, adoption of the levels of executive pay recommended in this report would call for appropriate adjustment in the salaries of the career ambassadors and career ministers in the Foreign Service, and also in the salaries attached to the chiefs of missions in embassies of class 1, 2, 3, and 4. We believe that no chief of mission should receive a salary greater than the Secretary of State, as is now the case for ambassadors in class 1 embassies. We suggest that the Secretary of State be authorized to set the salaries of chiefs of mission of the four classes at levels I, II, III, and IV, respectively ($50,000, $45,000, $40,000, and $35,000).

We advance for consideration four other proposals which have a bearing upon the total compensation of appointive officers in the executive branch. Each has been suggested for inclusion in appropriate statutes, but we have no view as to their inclusion in salary legislation. We recommend for officers appointed by the President:

1. Reimbursement in full for the costs of removing their residences to the seat of government at the time of appointment and back to their homes at the expiration of their terms of service.

2. Per diem in lieu of subsistence and expenses while in official travel status up to $50 per day.

3. Under common standards and safeguards, and within limits appropriate to the purposes and functions of their departments and agencies, reimbursement for other legitimate expenses incurred in the line of official duty. In this connection, we point out that official entertainment and representation allowances have been provided in more nearly adequate amounts for some of the departments and agencies in recent years. We believe such allowances should be authorized throughout the executive branch.

4. Separation pay at the rate of 1 month's pay for each full year of service up to a maximum of 3 months' pay.

RELATIONSHIPS AMONG EXECUTIVE, LEGISLATIVE, AND JUDICIAL

SALARIES

With the establishment of a Cabinet salary at the level of $50,000, the weight of long tradition indicates that a higher figure should be set for the Supreme Court. We recommend that the salaries of the Associate Justices of the Supreme Court should be set at $60,000, and that of the Chief Justice at $60,500. We recommend that the salaries for the U.S. Court of Appeals, the Court of Military Appeals, the Court of Customs and Patent Appeals, and the Court of Claims be set at $45,000, and that the salaries for the U.S. district courts, the Tax Court, and the Customs Court be set at $35,000. A special problem in the judicial salary structure must be noted. The Commissioners of the Court of Claims perform essentially the same functions as judges of the U.S. district courts in nonjury cases, except that the Commissioners recommend rather than enter judgment. We recommend that the salaries of the Commissioners of the Court of Claims be set at $26,500.

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