Guidance tells vice-chancellors to justify high pay ratios

Proposed governance code will require institutions to explain why leaders’ pay is above ‘acceptable’ range of average pay multiples

January 9, 2018

A new code on university executive pay is set to call on UK higher education institutions paying their vice-chancellor more than 8.5 times the average staff salary to publicly justify their leader’s remuneration.

Under new draft guidelines on remuneration published by the Committee for University Chairs, which represents heads of university governing bodies, institutions will be asked to publish a pay multiple showing how their vice-chancellor’s remuneration compares with the median earnings of the institution’s whole workforce.

The guidelines, unveiled on 9 January as part of a formal consultation, advise that “over 80 per cent of institutions currently sit within the [pay multiple] range [of] 4.5 to 8.5”, but add that those that “position themselves outside this range will need to be prepared to justify to stakeholders and their regulator why this is desirable”.

The guidelines, which are likely to be adopted in May, subject to consultation, are likely to affect several institutions that have been criticised for their leaders’ pay packages in recent months. The University of Bath’s vice-chancellor, Dame Glynis Breakwell, was paid nearly 12 times the mean average salary at her university in 2015-16, a Times Higher Education analysis revealed in November. The head of institution to average salary multiple at the University of Sheffield was nearly 11 to 1 (10.91) that year, followed by the University of Birmingham (10.78) and the University of Exeter (9.75), figures showed.

The draft CUC guidelines also recommend that vice-chancellors should no longer sit as members of remuneration committees – a practice at Bath criticised by the Higher Education Funding Council for England in a report published in November.

Remuneration committees should also seek to “reflect the collegial nature of institutions and the fact that institutions’ success is the product of collective effort by staff”, the guidelines state, adding that executive pay “would normally be expected to increase no faster than the average of all higher education institution staff”.

Where data from comparator institutions are used to help set executive pay, the institutions selected – such as international universities – should be disclosed, the guidance says. It adds that, where pay is performance-related, the relevant objectives and metrics should be published, alongside an assessment of the post holder’s performance.

John Rushforth, executive secretary of the CUC, said that the guidelines would “support and promote transparency and give a better understanding of the decisions that [boards] make”.

“If we are to keep universities in the high regard that they are held, we need to demonstrate that the resources we have are being used to best effect, so we need to keep pay under review and explain what decisions we have made, and why,” he added.

The guidelines, which will be voluntary but require universities to explain any opt-outs from minimum expectations, would also “support the long-term autonomy of the sector”, Mr Rushforth said.

The Office for Students will be forced to intervene on vice-chancellor pay if English institutions "do not exercise restraint", said Nicola Dandridge, the organisation's chief executive.

"There is a need for change in the process around setting remuneration, and the proposed code makes significant proposals in this area. In particular, the references in the draft code to the need to justify pay in a public and transparent way are important, as is the role of benchmarking," she said. "One needs only to look to other leadership positions in public life to see that senior pay in higher education is out of kilter with comparable roles. Appropriate benchmarking will help remuneration committees to set pay levels that reward performance in a fair and justifiable way.

“The code is necessary, but in itself insufficient. We also need to see leadership from institutions in setting fair remuneration – people are rightly concerned by the level of pay, not just the process. Exceptional performance, clearly tied to exceptional outcomes, absolutely deserves exceptional pay. But, by definition, not every vice-chancellor can perform exceptionally. Where the level of pay cannot be justified, it should be reviewed."

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