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Executive Compensation Review Preliminary Report

July 13, 2015

Prepared by:Mark Reilly, Principal, Head of Executive Compensation PracticeBen Allen, Senior AssociateErin Beth Garvin, AssociateContentsExecutive SummaryProject ObjectiveProject StepsUniversity of Louisville Compensation SummarySummary of Base Salary FindingsSummary of Total Cash Findings (Base + Annual Incentives)Summary of Total Compensation Findings (Total Cash + Deferred Compensation and Benefits)Findings and Preliminary RecommendationsNext Steps

University of Louisville2Executive Summary - Findings and Preliminary Recommendations

University of Louisville executives are generally at or above the market.Matching executives to the market is not an exact science. We used three data sources to mitigate this weakness: peer group 990s and survey data available from The Chronical of Higher Education and CUPA.Dr. Ramsey has been President since November 2002 and due to his long tenure and high performance, is at the high end of the market.The current compensation philosophy is (appears) to pay market salaries, incentives and provide deferred compensation arrangements to retain key executives. We recommend the University develop a formal executive compensation philosophy document which would be used as a guide for future compensation decisions.Deferred compensation plans are used by many Universities and are considered common practice. A more detailed analysis should be conducted to determine if these plans are structured to meet the Universitys objectives.The peer group 990 data may be understated, as many report income from multiple sources. Although we did review foundation 990s, its impossible to know if we captured the complete picture from the 990s. A custom survey should be considered.

University of Louisville3Project Objective

The University of Louisville has retained Verisight to conduct a competitive market review for six Executive Officer positions:PresidentEVP ProvostSVP Finance and Administration/COOEVP Health AffairsEVP ResearchVP Strategy and General Counsel

University of Louisville4Project Steps

Obtained and reviewed University of Louisvilles current compensation arrangements

Gathered competitive market data from three sources:A peer group of 26 academic institutions, representing universities within the Atlantic Coast Conference, as well as universities identified as peers due to size, geography, and other characteristics.The Chronical of Higher EducationCollege and University Professional Association (CUPA)

Compared current compensation levels to the market

Provided a summary of findings and recommendations

University of Louisville5University of Louisville6University of Louisvilles Current Executive Compensation Data

University of Louisville Compensation Summary

President: Dr. Ramseys base salary is a combination of base salaries paid by the University of Louisville and the University of Louisville Foundation. He is eligible for an annual performance bonus in an amount up to 25% of his combined salary. He is a participant in the Key Employee Deferred Compensation Plan and will receive annual deferred compensation in the amount of $250,000 through 2020.

EVP Provost: Dr. Willihnganzs base salary is a combination of base salaries paid by the University of Louisville and the University of Louisville Foundation. Her base salary paid by the University of Louisville is comprised of a 10-month academic component and an administrative supplement. She is eligible for an annual performance bonus in an amount up to 20% of her non-Foundation salary. She is a participant in the Key Employee Deferred Compensation Plan and receives annual deferred compensation in the amount of $50,000. She has also received additional contributions of $150,000 for the last three years.

SVP Finance and Administration/COO: Mr. Sands is a FY 2015 hire whose base salary is paid by the University of Louisville. He is eligible for an annual performance bonus in an amount up to 20% of his base salary. He is a participant in the Key Employee Deferred Compensation Plan and receives annual deferred compensation in the amount of $100,000.

University of Louisville7University of Louisville Compensation Summary (continued)

EVP Health Affairs: Dr. Dunns base salary is paid by the University of Louisville, with the academic component accounting for 75% and the remaining 25% administrative supplement being at risk and payable upon successful completion of goals agreed to at the beginning of the fiscal year. He is eligible for an extraordinary performance bonus in an amount up to 10% of his combined salary.

EVP Research: Dr. Pierces base salary is paid by the University of Louisville, with the academic component accounting for 90% and the remaining 10% administrative supplement being at risk and payable upon successful completion of goals agreed to at the beginning of the fiscal year. He is a participant in the Key Employee Deferred Compensation Plan and receives annual deferred compensation in the amount of $40,000.

VP Strategy and General Counsel: Ms. Strohm is a FY 2015 hire whose base salary is paid by the University of Louisville. She is eligible for an annual performance bonus in an amount up to $40,000.

The value of perquisites (car allowance, bridge loans, club memberships, etc.) received in the past year was not provided and is not included in determining Total Compensation.University of Louisville8University of Louisville Compensation Summary

University of Louisville9

University of Louisville10Data Sources

Selected Peer Group

The University of Louisville selected a peer group of 26 academic institutions, representing universities within the Atlantic Coast Conference, as well as universities identified as peers due to size, geography, and other characteristics.

University of Louisville11

Peer Group 990s and Published Survey Compensation Data

Verisight used public filings to collect compensation data for similar executive positions at peer universities as reported. The data sources used in this study were:IRS Form 990sThe Executive Compensation at Public and Private Colleges database published by The Chronicle of Higher Education (reported for Presidents only)The Administrators in Higher Education Salary Survey published by the College and University Professional Association (CUPA)

Data from all public filings was aged to July 1, 2015 at an annual rate of 3.0% a year.

Verisight drafted a custom compensation survey that could be used to gather specific compensation data, at peer universities willing to participate, for similar executive positions. Verisight and The University of Louisville could partner to identify contact information for prospective participants, which The University of Louisville indicated they would be able to acquire, in an effort to maximize participation levels.

University of Louisville12Data Sources - Form 990s

Form 990s are filed by non-profit institutions, with key executive compensation typically disclosed in the Schedule J. The components of compensation provided in the Schedule J include:Base: Base compensation means nondiscretionary payments to a person (such as salary or fees)Bonus: Examples include signing bonuses and payments based on satisfaction of a performance target (other than mere longevity of service).Other: Examples include, but are not limited to, current-year payments of amounts earned in a prior year, payments under a severance plan, deferred amounts, and earnings or losses in a nonqualified defined contribution plan subject to section 457(f) when they become substantially vested.Deferred: All current-year deferrals of compensation for the listed person under any retirement or other deferred compensation plan, whether qualified or nonqualified.Nontaxable: Nontaxable benefits are benefits specifically excluded from taxation under the Internal Revenue Code.

Compensation paid to university leadership positions often comes from multiple sources, the university and the university foundation for example. These amounts are often reported in separate Form 990s. In order to capture the complete compensation picture, Verisight aggregated compensation amounts when reported in separate Form 990s.

University of Louisville13Data Sources Chronicle of Higher Education

The Chronicle of Higher Education compiles compensation data from surveyed public and private institutions. The data is based on each institution's fiscal year, the most recent of which being 2013/2014. The components of compensation provided include:Base pay: Total base salary provided, including compensation from private university-related foundations.Bonus pay: The value of all bonuses and incentive compensation paid out.Deferred compensation, paid out: Compensation that was set aside in previous years and paid out during the fiscal year covered.Severance pay: Payments made to the chief executive upon his or her resignation or firing, as determined by his or her contract, separation agreement, or a legal settlement. This can include severance pay, unused vacation pay, or other agreed-upon separation pay.Retirement pay: Payments made by the university to a retirement plan that is available to any university employee during the fiscal year. This can include 401(k) plans, state pension plans, and other retirement plans that are broadly available. (As this is not paid out during the reporting year, it is not included in "Total Compensation.")Deferred compensation, set aside: This is to be paid out in future years, and can include contributions to supplemental executive retirement plans. (As this is not paid out during the reporting year, it is not included in "Total Compensation.")University of Louisville14Data Sources - CUPA

The Administrators in Higher Education Salary Survey (AHESS), published by the College and University Professional Association (CUPA), collects base salary data for 191 positions with primary assignments requiring the management of an institution or of a customarily recognized division within it.

CUPA allows users to create a custom peer group to collect base salary data. All but one of the university peers identified (Virginia Commonwealth University) participated in the 2014/2015 survey. Verisight created a custom peer group based on the remaining 25 academic institutions selected by the University of Louisville as peers.

Verisight was able to download individual participant base salary data for similar positions, which are shown in the appendices; however, the individual institutions are not identified by name so as to protect their confidentiality.

The AHESS survey only reports base salary data.University of Louisville15University of Louisville16Summary of Base Salary, Total Cash, and Total Compensation Findings

University of Louisville17Summary of Base Salary Findings - MedianPositionIncumbentIncumbent Base SalaryThe Chronicle of Higher Education (President Only)Form 990sCUPAMedian Base SalaryCompa-RatioMedian Base SalaryCompa-RatioMedian Base SalaryCompa-RatioPresidentDr. James Ramsey$648,961$518,250125.2%$459,550141.2%$479,354135.4%EVP ProvostDr. Shirley Willihnganz$394,533N/AN/A$353,816111.5%$404,50097.5%SVP Finance and Administration/COOHarlan Sands$350,000N/AN/A$345,077101.4%$263,196133.0%EVP Health AffairsDr. David Dunn$1,047,280N/AN/A$875,172119.7%$811,446129.1%EVP ResearchDr. William Pierce$316,050N/AN/A$284,203111.2%$336,83493.8%VP Strategy and General CounselLeslie Strohm$350,000N/AN/A$478,01173.2%$254,975137.3%17University of Louisville18Summary of Total Cash Compensation (Base Salary + Annual Incentives) Findings - MedianPositionIncumbentIncumbent Total CashThe Chronicle of Higher Education (President Only)Form 990sMedian Total CashCompa-RatioMedian Total CashCompa-RatioPresidentDr. James Ramsey$804,961$535,600150.3%$511,336157.4%EVP ProvostDr. Shirley Willihnganz$460,436N/AN/A$353,816130.1%SVP Finance and Administration/COOHarlan Sands$420,000N/AN/A$354,066118.6%EVP Health AffairsDr. David Dunn$1,047,280N/AN/A$875,172119.7%EVP ResearchDr. William Pierce$316,050N/AN/A$284,203111.2%VP Strategy and General CounselLeslie Strohm$390,000N/AN/A$499,22978.1%18University of Louisville19Summary of Total Compensation (Total Cash + Deferred Compensation and Benefits) Findings - MedianPositionIncumbentIncumbent Total CompThe Chronicle of Higher Education (President Only)Form 990sMedian Total CompCompa-RatioMedian Total CompCompa-RatioPresidentDr. James Ramsey$1,103,633$690,718159.8%$615,221179.4%EVP ProvostDr. Shirley Willihnganz$690,026N/AN/A$421,480163.7%SVP Finance and Administration/COOHarlan Sands$546,250N/AN/A$410,657133.0%EVP Health AffairsDr. David Dunn$1,125,826N/AN/A$1,236,56891.0%EVP ResearchDr. William Pierce$379,754N/AN/A$346,374109.6%VP Strategy and General CounselLeslie Strohm$416,250N/AN/A$600,80169.3%19University of Louisville20Deferred Compensation and Executive Benefit PrevelanceCUPA Survey - Benefit Prevalence The table on the following page summarizes how many Universities offer deferred compensation and incentive compensation plans.Approximately 53% offer deferred compensation.Approximately 30% offer incentive compensation.CUPA is only one data source. Our experience working with other Universities is that deferred compensation is common and incentive compensation usage is growing.University of Louisville21Deferred Compensation Projected PayoutDr. Ramseys contract calls for an annual University payment of $250,000 to his deferred compensation account until 2020. Ignoring past contributions, his projected retirement is estimated in the table below. Further analysis may be needed to confirm these projections. University of Louisville

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CUPA Survey - Benefit Prevalence University of Louisville

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University of Louisville24Findings and Preliminary RecommendationsFindings and Preliminary Recommendations

University of Louisville executives are generally at or above the market.Matching executives to the market is not an exact science. We used three data sources to mitigate this weakness: peer group 990s and survey data available from The Chronical of Higher Education and CUPA.Dr. Ramsey has been President since November 2002 and due to his long tenure and high performance, is at the high end of the market.The current compensation philosophy is (appears) to pay market salaries, incentives and provide deferred compensation arrangements to retain key executives. We recommend the University develop a formal executive compensation philosophy document which would be used as a guide for future compensation decisions.Deferred compensation plans are used by many Universities and are considered common practice. A more detailed analysis should be conducted to determine if these plans are structured to meet the Universitys objectives.The peer group 990 data may be understated, as many report income from multiple sources. Although we did review foundation 990s, its impossible to know if we captured the complete picture from the 990s. A custom survey should be considered.

University of Louisville25Next StepsReview compensation data from preliminary report with the University of Louisville Compensation Committee.Decide on whether to conduct a custom compensation survey that could be used to gather specific compensation data, at peer universities willing to participate, for similar executive positions.University of Louisville26University of Louisville27Appendix A PresidentUniversity of Louisville28Summary of Compensation Data Sources - PresidentThe Chronicle of Higher EducationForm 990sCUPABase Salary25th Percentile$455,391$424,173$445,946Median$518,250$460,808$479,354Average$516,081$496,760$460,42675th Percentile$549,351$563,518$530,349Total Cash Compensation (Base Salary + Annual Incentives)25th Percentile$468,019$424,173N/AMedian$535,600$511,336N/AAverage$543,544$518,100N/A75th Percentile$628,047$585,903N/ATotal Compensation (Total Cash + Deferred Compensation and Benefits)25th Percentile$568,094$479,407N/AMedian$690,718$615,221N/AAverage$662,393$674,834N/A75th Percentile$749,013$887,521N/AUniversity of Louisville29The Chronicle of Higher Education Compensation Data

University of Louisville30The Chronicle of Higher Education Compensation Data (continued)

University of Louisville31Form 990 Compensation Data

University of Louisville32CUPA Compensation Data

University of Louisville33Appendix B EVP ProvostUniversity of Louisville34Summary of Compensation Data Sources EVP ProvostForm 990sCUPABase Salary25th Percentile$265,208$373,109Median$353,816$404,500Average$323,092$399,88975th Percentile$382,700$425,744Total Cash Compensation (Base Salary + Annual Incentives)25th Percentile$267,197N/AMedian$353,816N/AAverage$328,330N/A75th Percentile$382,700N/ATotal Compensation (Total Cash + Deferred Compensation and Benefits)25th Percentile$305,034N/AMedian$421,480N/AAverage$404,591N/A75th Percentile$485,302N/AUniversity of Louisville35Form 990 Compensation Data

University of Louisville36CUPA Compensation Data

University of Louisville37Appendix C SVP Finance and Administration/COO

University of Louisville38Summary of Compensation Data Sources SVP Finance and Administration/COOForm 990sCUPABase Salary25th Percentile$303,025$248,658Median$345,077$263,196Average$330,590$277,69675th Percentile$371,296$305,970Total Cash Compensation (Base Salary + Annual Incentives)25th Percentile$326,514N/AMedian$354,066N/AAverage$347,143N/A75th Percentile$383,918N/ATotal Compensation (Total Cash + Deferred Compensation and Benefits)25th Percentile$351,664N/AMedian$410,657N/AAverage$405,340N/A75th Percentile$473,556N/AUniversity of Louisville39Form 990 Compensation Data

University of Louisville40CUPA Compensation Data

University of Louisville41Appendix D EVP Health Affairs

University of Louisville42Summary of Compensation Data Sources EVP Health AffairsForm 990sCUPABase Salary25th Percentile$817,193$705,317Median$875,172$811,446Average$1,008,505$822,18775th Percentile$1,066,484$870,103Total Cash Compensation (Base Salary + Annual Incentives)25th Percentile$817,193N/AMedian$875,172N/AAverage$1,035,027N/A75th Percentile$1,093,006N/ATotal Compensation (Total Cash + Deferred Compensation and Benefits)25th Percentile$988,084N/AMedian$1,236,568N/AAverage$1,257,814N/A75th Percentile$1,506,298N/AUniversity of Louisville43Form 990 Compensation Data

University of Louisville44CUPA Compensation Data

University of Louisville45Appendix E EVP Research

University of Louisville46Summary of Compensation Data Sources EVP ResearchForm 990sCUPABase Salary25th Percentile$268,588$305,892Median$284,203$336,834Average$305,960$333,51475th Percentile$300,117$361,954Total Cash Compensation (Base Salary + Annual Incentives)25th Percentile$268,588N/AMedian$284,203N/AAverage$308,257N/A75th Percentile$300,369N/ATotal Compensation (Total Cash + Deferred Compensation and Benefits)25th Percentile$319,646N/AMedian$346,374N/AAverage$365,810N/A75th Percentile$357,099N/AUniversity of Louisville47Form 990 Compensation Data

University of Louisville48CUPA Compensation Data

University of Louisville49Appendix F VP Strategy and General Counsel

University of Louisville50Summary of Compensation Data Sources VP Strategy and General CounselForm 990sCUPABase Salary25th PercentileInsufficient data (2 data points)$210,865MedianInsufficient data (2 data points)$254,975AverageInsufficient data (2 data points)$253,36175th PercentileInsufficient data (2 data points)$295,628Total Cash Compensation (Base Salary + Annual Incentives)25th PercentileInsufficient data (2 data points)N/AMedianInsufficient data (2 data points)N/AAverageInsufficient data (2 data points)N/A75th PercentileInsufficient data (2 data points)N/ATotal Compensation (Total Cash + Deferred Compensation and Benefits)25th PercentileInsufficient data (2 data points)N/AMedianInsufficient data (2 data points)N/AAverageInsufficient data (2 data points)N/A75th PercentileInsufficient data (2 data points)N/AUniversity of Louisville51Form 990 Compensation Data

University of Louisville52CUPA Compensation Data