Should outside directors sit on pay panels?

December 21, 2017

The Committee of University Chairs is now apparently to publish draft guidance on university pay ( “No say on pay panel for you, revised code to tell 
leaders” , News, 14 December). That is not a new venture for the CUC. Its 2015 publication, Governing Body and Remuneration Committee Practice on Senior Staff Remuneration, is online as Illustrative Practice Note 1. That frankly admits that “the reputation of Higher Education (HE) can be significantly damaged by pay packages for senior staff that are perceived as out of kilter with pay and conditions elsewhere”.

Unlike Universities UK, the CUC is rarely in the headlines, but like Universities UK, it is a voluntary association. One body is composed of the chairs of governing bodies of higher education providers, and the other of their chief executives (the vice-chancellors). The business-style relationship of board and chief executive took its present form in the wake of the Cadbury report of 1992, which dictated the expectation – embedded in the Further and Higher Education Act 1992 section 124C – that the governing body of a higher education corporation would have “at least half” independent members. The Lambert Review of Business-University Collaboration in 2003 tried unsuccessfully to insist that the universities of Oxford and Cambridge would comply with this requirement.

Cadbury also recommended that a remuneration committee would have a majority of independent non-executive directors, who, it seems, have thought big when it comes to justifying vice-chancellors’ salary increases. There are murmurings that the influence of such a high proportion of persons on a university council who are required to be external to higher education has been encouraging this lavish thinking in the inflation of “chief executive” salaries.

The Higher Education Funding Council for England has consistently referred providers to the CUC’s Higher Education Code 
of Governance (revised in 2014). It is not yet clear whether the Office for Students will do the same. But if there are going to be governance reforms, it is to be hoped that they will dig deep enough to ask whether the Cadbury principles are really right for higher education providers.

G. R. Evans

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