On v-c pay, clarity begins at home

Remuneration committees should pay less attention to other institutions when setting their leaders’ pay, says Nick Hillman

August 17, 2017
Free education protesters

Few issues get people who care about higher education as hot under the collar as the pay of university leaders. Indeed, it is about the only topic that the UK’s right-of-centre government and the left-wing National Union of Students see eye to eye on.

Earlier this year, a senior elected official of the NUS called v-cs’ pay packets “obscene”. Similarly, Jo Johnson, the minister for universities and science, has repeatedly complained about inflation-busting pay rises for senior staff. Now, he has threatened to get the new Office for Students to tackle the problem.

The argument has been driven by an unexpected source. As a political adviser in 10 Downing Street, Andrew Adonis helped drive Tony Blair’s government to the brink when introducing the current tuition fee system on a wafer-thin parliamentary majority at the turn of the century. Now he says that fees must go and it is v-cs’ pay packets that have sealed their fate. This has won him many headlines. But, given that Adonis has (so far) represented three different political parties, it was probably unwise to expect much consistency.

In one sense, the row over university leaders’ pay is a well-worn and rather threadbare debate. I run a policy-focused thinktank specialising in higher education and we have never found enough to say on the topic that is sufficiently interesting to justify a whole publication.

Yes, the pay of vice-chancellors is high. But it is a big job, which can entail leading organisations with tens of thousands of students, thousands of staff and turnovers approaching £1 billion. It is true that pay has gone up during a period of rising tuition fees, but even the best-paid university leader still only takes home a tiny proportion of their institution’s fee income. So that is a red herring, especially when fees are just one income stream.

There are counter-arguments, of course. Lower-ranking university staff have had to get by on lower salary increases. The changing composition of university boards has introduced some practices that are better suited to the corporate world, as argued by Roger Brown in a recent letter to Times Higher Education. No university has ever gone bust, so it is hard to argue that being a v-c is an excessively risky job. They tend to last in their posts for about seven years; it is more than 100 years since the most senior government minister with responsibility for education lasted a similar length of time.

Yet it is worth remembering that v-c pay remains miles behind top chief executives in the private sector. Those at the bottom of the FTSE 350 are on about £500,000 a year, whereas the latest THE survey found vice-chancellors’ average to be about half of that. Moreover, it could be false economy for any university to penalise a v-c who is delivering in terms of research income, philanthropic donations and student numbers.

Given the level of concern, what should be done? It seems clear that ministers are unlikely to achieve reductions on their own because they do not have any direct levers to pull that will make a difference in the short term. Universities are autonomous. So, in one sense, the government is merely virtue signalling.

But things could change if those with the power – university boards’ remuneration committees – change their modi operandi. It is widely believed that these committees spend too much time comparing their own v-cs’ terms to those of other institutions, when there is nearly always someone you can find who seems to be doing a similar job on a better package.

Perhaps the most important single thing that should happen is for renumeration committees to rebalance their decision-making so that it takes less notice of the world beyond their own campus and more notice of the extent to which their institutions are successfully following the optimal strategy for them. It seems an odd thing to say about such an outward-facing sector as higher education but just perhaps, on this issue alone, universities should act with less collegiality and more insularity. The average pay of vice-chancellors might not go down as a result, but the cash might well be distributed differently.

Nick Hillman is director of the Higher Education Policy Institute.

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Print headline: Stop looking at everyone else

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