Why Vice Chancellor Pay is Right on the Money
Pay is always an emotive topic. And the bigger the sums involved, the stronger the emotions, leaving little room for sensible discussion. This has proved to be true in the case of the Vice Chancellor of the University of Bath whose pay packet of £450k resulted in forced early retirement. In this blog, I use my knowledge as an ex-compensation and benefits specialist to get behind the headlines and examine the fiasco with a cool head.
What’s All the Fuss About?
The leaders of UK Universities, known as Vice Chancellors (VCs), have come under fire for excessive remuneration packages. Various VCs have been grilled on The Today Programme, roasted in the press and rounded on by MPs and students.
As the highest paid UK VC, Dame Glynis Breakwell was always going to be a target. But amidst the clamour, have the right questions been asked about VC pay? Here, I explore the background to setting rates of pay and reveal why a £450k pay packet is not as much as it seems.
How Much Was Dame Glynis Actually Being Paid?
The press have made much of the headline figure of £450k in pay. However, this isn’t her base salary but includes pension contribution.
Which means Dame Breakwell wasn’t taking home £450k minus tax but £450k less pension contribution. In the public sector this is often a hefty chunk of money due to the final salary pension schemes in operation.
That’s not to say that the remaining salary would have been small. It’s still a huge pay packet. It’s just that it’s less than £450k.
Size of Role and Extent of Responsibility
When setting pay, one of the main considerations is the level of control and scope of the role.
In the case of VCs it’s easy to misunderstand what they do. We aren’t talking glorified lecturers here. These are world-class academics with a head for leadership and business who are in charge of large organisations employing thousands of people.
At the University of Bath, Dame Breakwell was responsible for 17,000 students and 3,000 staff. She would have been in charge of significant infrastructure and budgets.
And the future of the university would depend in large part on the amount of research funding and overseas students being secured to plug the funding gap. Last year, the university received £123m in research grants and had an annual income of £260m. Which means an additional £130m in additional revenue was bought in.
On top of all this, the VC is responsible for educating future generations and helping to fill UK’s skills gap, shoring up the country’s economy.
It’s clear: these are not small challenges and this is not a small role. Therefore, it should attract a competitive salary. What does that mean?
Market Comparisons of Total Package
Consider the 4,000 City bankers, most of who have significantly less responsibility but were paid more than £1m in 2015. Or compare Dame Glynis package to the average pay of FTSE 250 CEOs who earn an average salary of £1.8m (not including pension).
Suddenly, £450k doesn’t seem quite so bad.
The reason for this difference in compensation? Markets.
Different sectors can afford to pay different levels of remuneration - industries like banking pay more while the public sector tends to pay less.
A quick and dirty analysis of the Times Higher Education’s VC pay figures show most are paid around the £300k mark. Which puts Dame Breakwell’s £450k package well above this midpoint.
That said, VC pay spans a fairly broad range with those being paid at the lower end receiving massive hikes in pay, some of almost 20%. This indicates that the University sector is a competitive environment where remuneration must be set appropriately to attract and retain the right calibre of people.
Ease of Recruitment
Finding quality candidates for VC roles isn’t always easy. People who are experts in their field may have found little time to develop the business-savviness required to run a University. Which often means candidates are few and far between.
And when resource is scarce, salaries tend to inflate. One way to avoid further strain on the public purse is to initiate long-term talent planning and leadership development. By generating more leaders, pay wars can be avoided and Universities will reduce the risks associated with a leadership gap.
Another factor that should be considered when setting VC pay is the potential for leaders to work overseas where salaries could be higher.
Take the US: university presidents make significantly more. For example the highest-paid president at a private university made over $5m (£3.8m) in 2016. Lower-paid presidents still secure much higher packages than UK VCs:
Lee Bollinger - University of Columbia - $2.5m
Amy Gutmann - University of Pennsylvania - $3m
Robert Zimmer - University of Chicago - $2m
Are we at risk of nurturing leadership talent and losing it to overseas competitors? Possibly. Only time will tell, particularly if VC compensation remains at current levels.
There’s a whole heap of questions to be unravelled around the topic but my view is that rates of pay are unlikely to change significantly.
While outliers at the top, like Dame Glynis, may be forced to retire or have their compensation cut - and those at the bottom may get pay hikes - most VCs will continue to secure good packages.
And so they should.
The alternative is to risk losing our university sector leaders to other professions or countries where they can make much more money.