Restrained pay rises for chiefs could drain vice-chancellor talent pool

Study shows v-cs' salaries have fallen behind those of the private sector, writes Melanie Newman

August 28, 2008

There is no evidence that pay rises for university heads are related to the overall performance of their institutions, according to new research.

But the study of pay, based on data published in Times Higher Education's annual update, also concluded that fears over the "legitimacy" of large rises meant that vice-chancellors' salaries have fallen behind those of their private-sector counterparts. This could reduce numbers of applicants for the posts, the researchers said.

The team, led by Heather Tarbet, senior lecturer in accounting at Glasgow Caledonian University, tested the hypothesis that university chiefs were rewarded for "observable improvements in university performance". They analysed the relationship between vice-chancellors' pay, research income and postgraduate student numbers in pre-1992 universities and between pay and undergraduate numbers in post-1992 institutions. The data did not support the hypothesis.

However, the study, "The legitimacy of pay and performance comparisons: an analysis of UK university vice-chancellors' pay awards", published in the British Journal of Industrial Relations, did find that vice-chancellors' salaries were affected by external comparisons with private-sector pay. Remuneration committees only partially adjusted pay increases towards private-sector benchmarks, however, because of concerns that academics would not view a full adjustment as legitimate.

Vice-chancellors' pay increased by 39 per cent (£40,000) between 1997 and 2002, while university income rose by 30 per cent in the same period. If their pay had kept pace with that of the average UK CEO, they would have received a rise of about £140,000 during that period.

"The extra £40,000 typically paid to vice-chancellors will clearly not have had any discernible impact on university finances or the ability or willingness of an institution to award pay increases to other employees," the paper says, noting that the percentage increase in average pay for university leaders is "significantly higher" than that awarded to academics below the grade of professor in the same period.

The paper, co-authored by Durham University's Robert Watson and the University of Aberdeen's Kaihong Tee, reproduced annual news articles on vice-chancellors' pay in Times Higher Education between 1995 and 2003.

"It is apparent from the (articles) that vice-chancellors' pay awards, typically averaging 6-7 per cent per annum, invariably produce highly critical comments (eg, 'outrageous', 'shameless') from academic union officials unable to negotiate similar percentage pay awards for their members," say the researchers.

The team concludes that pay rises for university chiefs have been constrained, and that "legitimation, rather than financial constraints" is the likely cause.

"These results, we believe, reflect the desire of remuneration committees to avoid public criticism that vice-chancellors ought not be paid as highly as corporate-sector CEOs and/or that vice-chancellors' pay rises that greatly exceed (in percentage terms) the rises typically negotiated in respect of other (HE) employees are unfair and lacking in legitimacy."

The researchers warn remuneration committees to take research on privatised water companies into consideration. A 2004 study found that holding down senior executives' pay led to recruitment and retention problems.

"Universities need and deserve the same high-quality leadership and governance skills as any other organisation. It would be very unfortunate if (a) lack of consensus regarding the appropriate level of pay for vice-chancellors also resulted in significantly reducing the pool of talented individuals willing to take on the job," the paper warns.

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