Why It Costs So Much To Take That GMAT Test

GMAC President and CEO Sangeet Chowfla

GMAC President and CEO Sangeet Chowfla

Ever wonder why the GMAT costs $250 a pop? You can find at least part of the answer in the financial report that the Graduate Management Admission Council files with the Internal Revenue Service. What the record shows is that the non-profit organization’s top officials are very handsomely paid–by any standards.

In his first full year as CEO of the non-profit organization, Sangeet Chowfla pulled down total compensation of more than $1.1 million. In fact, three current and former officers of GMAC, including former President and CEO David Wilson and Chief Information Officer Robert Rosecrans, made more than $1 million in 2014, the latest year for which data is publicly available.

The huge sums were disclosed in a public filing with the Internal Revenue Service. The annual disclosure form also showed that ten current or former officers at GMAC made more than half a million each in 2014 and 15 of them had payouts that totaled more than $400,000 each. Chowfla, who joined GMAC in September of 2013 but did not assume the CEO’s job until Jan. 1 of 2014, had total compensation of $1,101,605 in his first year. Some $425,000 was his base salary with an annual bonus of $60,000. The bulk of his reported income in the filing was $601,800 in “retirement and other deferred compensation,” including an accrued bonus of $225,000 paid in 2015, even though he had only been in the CEO job 12 months.


Perhaps even more surprising were the huge payouts given to Wilson and Rosecrans. Even though Wilson was not employed at GMAC at all in 2014, the organization paid him $1,198,438, including $582,980 for what it termed “severance.” In the past three years, from 2012 to 2014, Wilson was paid a total of $4,215,447. Rosecrans, meantime, got $1,064,539 in 2014, including a “severance” payment of $535,800 and additional cash “related to a 2013 CEO succession plan retention bonus.” Another sizable severance package was given to Lawrence Rudner, vice president of research and development. His $281,813 payout in severance lifted his total compensation in 2014 to $771,807.

Dave Wilson, CEO of GMAC, would encourage his son to go to China for an MBA

Dave Wilson, former CEO of GMAC

Many of the organization’s top officials shared in the big payouts. Margaret Jobst, then executive vice president of products and services, pulled down $797,625; Ramesh Thadani, executive vice president of market development, made $670,303; Shelli H. Arnold, chief operating officer, had total comp of $661,377, and Samuel Reimer, chief financial officer, made $635,431. Even the organization’s then head of public relations, Richard D’Amato, who recently left GMAC, made nearly $400,000 in 2014, including a $185,514 bonus for the year and another $55,870 bonus that was deferred.


Just the 17 most highly paid officers of GMAC made a whopping total of $10,838,297–a sum that would have required test takers to sit for 96,340 exams just to allow the organization to collect enough revenue to equal the payouts to the nonprofit’s senior management team. All told, GMAC said the total compensation paid to its staff of 141 persons totaled $28.3 million, or nearly 32% of the organization’s program revenues of only $88.8 million in 2014.

The sizable payouts occurred in a year when the number of exams taken by business school applicants was essentially flat–and after several years of declining marketshare due to increasing competition from the Graduate Record Examination which costs $205 versus the $250 price tag on the GMAT. The organization reported that 251,690 tests were taken during the calendar year of 2014, up slightly from 250,087 a year earlier. Revenue from the tests alone totaled $80.7 million, just a sliver above the $80.5 million in test revenue in 2013. GMAC said it spent $36.7 million to administer the tests that brought it $80.7 million in revenue in 2014, a gross profit margin of 55% on the exam. That’s a significant jump in profit from 2013 when gross margins were 49% and it cost the organization $41.5 million to administer the exams that brought in $80.5 million. Essentially, for every $250 test, GMAC reports that it makes $112.50.

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