Who should have the final say on vice-chancellors’ pay?

Amid fresh criticism of executive remuneration, perhaps universities need to rethink the issue of vice-chancellors’ salaries

July 27, 2017
Measuring salary
Source: Alamy

Are you paid enough? Too much? Too little? Your answer probably depends on the contents of your pay packet and your financial responsibilities, among other factors. 

But it may also depend on who you compare yourself against. It’s why the BBC found itself in such an indefensible position over last week’s salary revelations – far more damning than the actual sums were the examples of women being paid significantly less than men in identical roles. 

For those in higher education, the spectacle of the highest salaries being picked over will have felt familiar: Times Higher Education has published its annual pay survey for almost two decades and, as well as the gender pay gap, a perennial feature has been ever-increasing vice-chancellors’ salaries. 

It’s clear that scrutiny has done nothing to curtail executive pay in the UK; more likely, it has pushed it up, with governing bodies using v-c pay as a proxy for the quality of their operation, and individuals pointing to higher-paid peers to argue for a better deal.

These salaries have also attracted criticism for years. In recent weeks, this has been renewed by Lord Adonis, the former Labour education minister, who has accused the Higher Education Funding Council for England of being “spineless” and has claimed that the nascent Office for Students has been “captured” (following the appointment of former Universities UK head Nicola Dandridge as chief executive). 

“The government should take a power to cap top pay in universities to protect student fee payers and the taxpayer. Now”, Adonis said in one of his Twitter salvos.

This gets to the real crux of the matter: the funding council isn’t so much spineless as powerless when it comes to v-c pay, and the government is largely in the same boat. 

Ministers have been chastising universities over executive pay for years, and Jo Johnson returned to the topic in a speech last week, warning that any salary over £150,000 should be for “exceptional performance” and would have to be publicly justified.

The problem is that pretty much every v-c earns over this threshold (many by a multiple of two or even three), and the government has experience of asking universities to find what it would consider a sensible equilibrium in financial matters – just look at what happened with £9,000 tuition fees in England.

Furthermore, there’s every chance that trying to impose the will of government on the autonomous decision-making of remuneration committees (which if anything are even more corporate than they used to be) will simply result in heels being dug in.

So the question is, can Johnson or the OfS actually do anything about executive pay?

Dennis Farrington, one of the country’s leading experts on university governance, is clear that governing bodies should retain complete autonomy, but argues that “in the current climate, I think the entire governing body including staff and student representatives should take the final decision not only on the CEO’s pay but also…the ever-growing managerial cadre.”

David Palfreyman, director of the Oxford Centre for Higher Education Policy Studies, is equally clear that the government “has no direct power to control v-c pay – and the Higher Education and Research Act, in creating the OfS, provides no additional power”.

However, Palfreyman adds that the OfS “can impose ‘conditions’ – general to all and particular to some – in registering its higher education providers”, which could offer a route for compelling action from intransigent governing boards, while charity law could be used to force greater disclosure on exactly how a v-c’s salary has been arrived at.

He also suggests that, in extremis, the Charity Commission, via the OfS, “could ask whether v-c pay has become so egregiously high as to be a misuse of charitable assets”.

If such a move seems unlikely, are there any less dramatic steps that governing boards may want to consider to show that they are taking the concerns seriously?

Farrington suggests a fixed multiple of average professorial salary as one option for setting executive pay in a fair and defensible way (we analysed what this might look like in this year’s pay survey).

Of course, universities and vice-chancellors may simply do what they have done for years and gamble that this is another passing whirlwind that will blow itself out. 

They may be right – it has certainly proved to be the case in the past. But Johnson has shown himself to be a minister who means what he says and isn’t afraid to act. The abolition of Hefce and the introduction of the teaching excellence framework (to be piloted at the subject level, he confirmed last week, despite ongoing complaints) demonstrate that. 

Perhaps, then, universities would be advised to take the ministerial view a little more seriously this time around. If they do not? “The last thing we need is for the OfS or ministers to interfere in institutional autonomy,” Farrington says. “However, if the governing bodies do not take their respon-sibilities seriously, maybe some restrictions on public funding will be needed.”

john.gill@timeshighereducation.com

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