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The Wall Street Journal makes a big fuss in a front-pager today about the possibility that Vanderbilt University president Gordon Gee is paid too much. Never mind that at $1.3 million his compensation is chump change in today's CEO league, and the leading an institution like Vanderbilt is easily as complex and demanding as running a Fortune 500 company. What frosts me most about this article is the scandal mongering over a supposed conflict of interest with one particular trustee of the university, whom I happen to know personally.

The trustees' effort to improve oversight [of Gee's compensation] has also renewed questions about one of their own -- Monroe J. Carell Jr., a key Gee supporter on the executive committee and head of the university's $1.75 billion capital campaign. He and his family have given Vanderbilt more than $40 million.

Mr. Carell is founder and executive chairman of Central Parking Corp., the world's largest operator of parking facilities. He and his family own about 48% of the shares, according to Jeffrey Heavrin, chief financial officer. Central Parking manages Vanderbilt's parking lots and related services under a 1974 contract. It currently earns between $100,000 and $120,000 annually in management fees there, according to Mark Manner, a lawyer for Mr. Carell.

Vanderbilt never put those parking services out to competitive bid, says Mr. Schoenfeld, the university spokesman.

Just what is the implication here? That the $40 million was some kind of bribe, so that the family could milk the university out of $120,000 a year in some sweetheart deal? Okay, let's do the math. If Carell and family earn 48% of $120,000 every year from this deal, that's $57,600 a year. That's the family's corrupt "payoff" for their donation of $40 million (which has resulted in a state of the art children's hospital on campus bearing the family's name). Assuming a zero discount rate, the family breaks even on its $40 million contribution only after the corrupt arrangement has been in place for 695 years. If the discount rate is set at 5.25% (the current Fed funds rate), by my calculations the family never breaks even. If this deal is corrupt, then so be it -- the university should welcome such corruption.

Update... my DC lawyer/lobbyist friend writes, anonymously,

Read a little further in the Journal story and up pops a populist politician pushing himself in front of the story, threatening new federal legislation to regulate compensation in the not-for-profit world.

Sen. Charles Grassley, a Republican from Iowa, intends to introduce a bill next year to strengthen a federal prohibition on "excessive" compensation for leaders of universities and other charitable groups. Good governance "can make the difference between universities where presidents live high on the hog and where students come first," says Mr. Grassley, chairman of the Senate Finance Committee.

How about an altogether different idea? What if the Chairman of the Senate Finance Committee spent his time and energy doing his own job – reforming all federal taxes – and let the board at Vanderbilt do theirs? The ugly truth is that power is often distributed in Washington by accident. Chuck Grassley has little expertise in the matters under his control – finance, tax, trade policy, health care, etc. – but because he stands long enough in office as his name comes up in the seniority rotation, he gets a plum job. As Winston Churchill said, democracy is the worst form of government except for all the others.

The trouble with populists such as Senator Grassley is that they do not believe some individuals are extraordinary. They do not realize that the greater good is best served by signing the extraordinary players to your team. If the government tries to limit incomes in either the public or the not-for-profit center by using the tax code as a blunt instrument, it will kill innovation and growth. If taking risks can’t earn a bigger reward, then our society will become mediocre, like the government itself.

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