Leader: Could it be that v-cs deserve their pay rise?

February 23, 2007

Can an annual rise of 7.9 per cent in vice-chancellors' salaries be justified when academics had to settle for an increase of 3 per cent in the same year? In most cases, and with a couple of important caveats, yes.

There are three issues here. Is there a market in vice-chancellor pay? If there is, to what should it be compared? And is a large rise a wise use of funds that are still to a large extent drawn from the public purse? The classic argument, crudely put, is that to attract and keep top people in a competitive environment, organisations must be prepared to pay top dollar.

Universities are old hands at this game and deploy extra rewards to tempt and keep the people they want: academic stars, senior managers - even vice-chancellors. Exceptional individuals command exceptional, not average, salaries.

How competitive is the market in vice-chancellors? More than many would allow but less than crude comparisons with the private sector suggest.

Universities are unique places: their core concerns are strictly academic yet their contexts are increasingly commercial. Few individuals can navigate both worlds successfully. It isn't coincidental that institutions no longer confine themselves to this country when searching for suitable candidates. And it's foolish to pretend, as some critics do, that the typical vice-chancellor is an overpromoted bureaucrat whose salary is more a reflection of institutional pretension than individual talent.

Conversely, comparisons with private sector salaries are disingenuous. The average vice-chancellor's pay of £165,000 looks modest next to the Pounds 786,000 average earned by their counterparts in business. But they do not do similar jobs. The business of business executives is to maximise profit. The business of university heads is to ensure that their institutions provide excellent teaching and research - a noble but not an inherently risky financial proposition. And there is no "single market"

between the two: with a couple of notable exceptions, there isn't a transfer market between the boardroom and Senate House. Comparisons with top pay in the public sector may be more apt. While the news that 41 universities pay their heads more than the Prime Minister may cause a few readers to choke on their cornflakes, vice-chancellor pay doesn't look out of kilter with the 12 top National Health Service executives, who earned an average of £186,000 in 2006, or local authority chief executives (average pay £166,000, not including benefits).

That argument will not impress the lecturer on an average salary of Pounds 36,600 a year. Why should it? The question is, are vice-chancellor pay rises justifiable? They are never going to be popular. If benchmarking allows some justification, there is the issue of spending public monies wisely. How wise is it to bung the vice-chancellor an extra few thousand pounds when it could be spent elsewhere? Universities receive large amounts of public cash, but they are not centrally directed. They are autonomous entities with responsibility for the management and direction of their own affairs. They have the right to decide what to teach and research, whom they should recruit and what they should be paid.

There are, however, two crucial caveats. The first is that significant pay rises above market wage inflation should be based solely on enhanced performance - a point made by the funding councils. Yet there is a complete lack of meaningful debate as to what constitutes "enhanced performance". If remuneration committees have a case for increasing pay, why not make it? The second fly in the ointment is the deplorable practice of fattening final salaries to lard pension benefits. There is no good argument for this. Universities can justify rewarding individuals they believe are crucial to their success, but it is hard to do if they shackle themselves with peculiar practices and a lack of openness.

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