Why It Costs So Much To Take That GMAT Test

How do compensation levels for GMAC officials compare with the organization’s chief rival, the Educational Testing Service, administrator of the Graduate Record Exam? ETS President and CEO Kurt M. Landgraf made a total of $1.3 million in 2013, the latest year for which data is publicly on file. That’s $200,000 more than GMAC’s Chowfla for running a $1.1 billion revenue organization that has more than 12 times the annual revenue of GMAC and almost 150 times the number of employees, 20,502 ETS staffers versus GMAC’s 141 employees. And while 59% of GMAC’s most highly paid 17 officials listed in the filing were paid more than half a million dollars in 2014, only 20% of ETS’ 40 listed executives were paid more than $500,000.

If GMAC were to bring the price of the GMAT to equal that of the GRE, it would cost the organization an estimated $12 million in gross revenue–nearly three quarters of the payouts to its executive team in 2014.

Another way to look at it is to compare the $1.1 million in compensation for Chowfla’s first year with the compensation of Harvard Business School Dean Nitin Nohria. Dean Nohria pulled in a total of $696,803 in 2011–less than $404,000 paid to GMAC’s CEO–for heading up one of the best business schools in the world and managing more than $676 million in 2014 revenue–more than seven times the program revenues of GMAC in 2014.


GMAC officials suggest that the high payouts are less than typical. “It is important to note that 2014 was a year in transition for GMAC with a new CEO at the helm,” explains Jennifer Garfinkel, director of media relations. “Since his arrival, Sangeet Chowfla has been working to provide greater transparency and to reduce the organization’s overall payroll by building a much leaner and flatter organization. The 2014 Form 990 involves a number of severance-related activities as will our 2015 Form 990. The Board of Directors has also brought in an independent compensation consultant to help us take a much more measured and competitively benchmarked approach to employee compensation. The impact of these actions will be reflected in future Form 990s.”

Dina Dommett of London Business School led the GMAC board from mid-2013 to mid-2014

Dina Dommett of London Business School led the GMAC board from mid-2013 to mid-2014

Seven of the 17 listed executives in 2014 are no longer with GMAC, including Peg Jobst, who had been executive vice president for the assessment products division, who departed in August of 2015; Lawrence Rudder, chief psychometrician, who left in September of 2014 after nearly 11 years with GMAC; Julia Tyler, an executive vice president who set strategy for engaging with business schools, departed June of 2014 to become an associate dean at London Business School, and Jose Carreras, vice president of global strategy and market development, who bowed out in August of 2014 to become a vice president of The College Board.

Asked how it was possible that Wilson, who left as CEO at the end of 2013, could have made more than $1 million in 2014, Garfinkel noted that Wilson continued to be employed at GMAC as a special advisor for six months in 2014 to assist with the transition. “The 2014 Form 990 reflects this compensation and shows Mr. Wilson’s 2013 bonus for which he was recognized for his 18 years of exceptional work,” she says. “In addition, the Form 990 includes contract severance and related expenses such as unused PTO (paid time off) payout.”


Afons Saquet, dean of ESADE Business School, chaired the board from mid-2014 to mid-2015

Afons Saquet, dean of ESADE Business School, chaired the board from mid-2014 to mid-2015

Garfinkel says that CEO Chowfla “did not earn more than one million dollars in his first completed year at GMAC. His reported W-2 compensation was less than $500,000. The 2014 Form 990 reported more than $585,000 in deferred compensation, which was accrued for but was not paid out in 2014, thus inflating the overall appearance of his total 2014 compensation.” Most of Chowfla’s deferred compensation, she explains, is related to his long-term performance incentive plan. “Those monies may or may not be paid out in 2017 pending executive performance,” she adds. “Due to timing issues in IRS reporting regulations, this also included a $225,000 accrual in deferred bonus compensation for which he received payment in 2015.”

The board of directors is responsible for determining the compensation of the CEO and for overseeing the overall pay of the senior management team. The board’s compensation committee and the CEO review the payouts for all of GMAC’s officers. Dina Dommett, now director of student and program services at OxFord Said Business School, chaired the board from from mid-2013 to mid-2014, while Alfons Saquet, dean of ESADE Business School in Spain, led the board from mid-2014 to 2015.

The current chairperson of the 15-member board is Ellen J. Glazerman, executive director of the Ernst & Young Foundation. Among the more prominent outside members of the board are William Boulding, dean of Duke University’s Fuqua School of Business, and Kenneth Freeman, dean of Boston University’s Questrom School of Business, both of whom joined the GMAC board in mid-2014.

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