You get what you pay for? The OfS on senior staff pay

There’s a vox pop contributor to this video from De Montfort’s student TV station Demon Media that sums up one view in the debate over vice chancellor pay particularly well.

To get the best, you’ve got to pay well for it.

We round on De Montfort University (DMU) because in new Office for Student (OfS) figures on senior pay, the now departed vice chancellor takes the dubious crown as the institutional head in receipt of the largest annual pay rise during 2017/18 – a tidy £64,000 increase. Page 55 of DMU’s accounts sets out the remuneration committee’s justification for the increase, in a package which also includes “membership of the club at The Ivy, cost £1,250 and associated top up costs of £1,435”.

Time was that we had to wait for UCU or the Times Higher to wade through university accounts to produce tables and eye-watering averages, but so important has this issue become that our English regulator has compiled and published the numbers itself this time around. So the pay and perks of England’s vice chancellors have even been designated “official statistics”. What a time to be alive.

A walk down memory lane

It would be easy to assume that the rapidly increasingly salaries of university executives is a new issue, caused by the cutthroat competition of the 2010s and the lifting of the student numbers cap. But angst about vice chancellor pay goes back much further. In fact ever since figures started to be compiled into tables in the mid 1990s, the press has carried a version of the same story every year.

In the early days, this would consist of an eye-watering average, a few case studies, and the old higher education unions AUT and NATFHE comparing vice chancellor pay increases with those of “rank and file” members, quaintly calling vice chancellors “fat cats”. The article would also always use a quote from Universities UK that has come to be hauntingly familiar: “Vice chancellors do a demanding job as chief executives of complex, multimillion pound organisations… Their remuneration packages reflect what it takes to attract and reward individuals of sufficient calibre, experience and talent in a highly competitive international market”. That’s the version from 2004, but it could easily have been yesterday.

This carried on for fifteen years or so, but in 2010 something changed. New Labour’s ministers had tended to sit on their hands as vice chancellor pay crept up, but when the coalition swept to power Vince Cable was having none of it. In his first interview on higher education, the Business Secretary responded to an average 11 per cent increase in 08/09 by saying that vice chancellors had little sense of the “realism and self-sacrifice” needed to make “serious savings” in the recession. His policy lever was to use his annual grant letter to the funding council to “urge restraint”.

Holding back the pay

The problem was that not much restraint then occurred. Every year averages crept up, and every year the language in the grant letter lever (and the associated press notice) got slightly more desperate. Labour’s shadow Education Minister Angela Rayner last year calculated that for all the urging, vice chancellor pay and perks had increased by 227 per cent since Cable’s broadside in 2010. Rayner jumped on the bandwagon partly thanks to the efforts of her Lords colleague Andrew Adonis, who had spent the autumn of 2017 slowly reading the financial statements of almost every UK university and tweeting what he found on vice chancellor pay.

Adonis was particularly outraged by what he found in both universities in Bath, and his relentless focus on the subject eventually claimed a high profile scalp in the resignation of the University of Bath’s vice chancellor Glynis Breakwell when questions were raised about the process of pay setting. Yet even at the height of the hysteria, the quote from the minister was eerily familiar: “The universities minister, Jo Johnson, has called on universities to restrain the pay of senior management”. For whatever reason, the consistent policy of urging restraint had not delivered.

The one difference this time around was that Jo Johnson had successfully stewarded legislation through Parliament to create a tough new regulator, the Office for Students. Chief executive Nicola Dandridge used an early interview to set out an approach on senior pay. Universities were still autonomous, of course, and pay levels were theirs to determine. But to demonstrate good governance universities were urged to follow the standards set out in a hastily revised Committee of University Chairs code on pay. To increase transparency, OfS promised an annual report detailing basic salary, performance-related pay, pension contributions and other taxable and non-taxable benefits. And we now have the first one.

The £350,000 question

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OfS’s own analysis points the finger at De Montfort for percentage increase year on year. But though egregious pay rises are hardly welcome, it is the overall level of remuneration that has exercised ministers and commentators, and it is arguably there that the sector – rather than individual institutions – has a case to answer.

We have plotted remuneration by category, total package value, and base salary ranked by institutions. You can select the year you are interested in via the slider, and filter as usual by provider group and region.

Viewing basic salary (which ignores the value of payoffs and non-salary emoluments) we can still see Glynis Breakwell’s impact on the University of Bath. Other than the very professionally-focused London Business School, we see a range of Russell Group and pre-92 providers at the top of the graph. Cambridge, Southampton, Birmingham, Imperial, UCL, Surrey, the Open University, and Oxford all pay more than £350,000 as basic salary, though DMU do top the post-92 table.

Looking at the category splits shows three large vice chancellor payoffs, at the Open University, East London, and London Met.

London Business School, Imperial, and the London School of Economics offer their institutional leaders significant non-taxable benefits.

Play your cards right

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We also get data on the percentage of senior staff paid £100,000 or more in each year. This graph is dominated by Russell Group institutions and other pre-92s. Though newer universities make an impressive showing on vice chancellor pay measures, clearly this generosity has yet to trickle down to other staff. A number of small and specialist institutions have high percentages of staff on high salaries, but this is likely to be due to the small size of the institution – we show the FTE of staff in this pay-band as a way of illustrating this. You can filter out institutions with smaller numbers of highly-paid staff via the filter

More misery to come?

In the long term the question is whether transparency will make any difference. There is, in fact, plenty of research out there that suggests that executive pay transparency actually serves to accelerate increases, as remuneration committees race to match (and outdo) competitors. It would rightly be seen as outrageous if gender pay gap reporting resulted in a levelling down of executive pay, for example, but it’s the same effect. And our Demon TV contributor is not that far from the thinking in those remuneration committees.

There is also research that suggests that it makes staff miserable. A CIPD study in 2015 found that while three-quarters of staff wanted to see greater pay transparency within their organisations, almost two thirds disagreed that CEO pay levels in the UK inspire employees to work hard, more than half agreed that they were bad for an organisation’s reputation and 60 per cent agreed that CEO pay levels were demotivating.

What we don’t have is any detail on OfS’ assessment on the justification part of the picture. Regulatory requirement E3 makes clear that providers must set out why they have decided to pay what they have, both for the head of institution and other senior staff. Providers’ compliance (or otherwise) with the Committee of University Chairs code on the process of pay setting also remains a mystery. Without these components out in the open, even with the data we have, it’s doubtful that the debate will move any further on than it has over the past 25 years.

4 responses to “You get what you pay for? The OfS on senior staff pay

  1. Good point about E3 – can we assume that OfS are satisfied that every set of Governors ahs ensured that the provider has met the accounts direction? The reports from remuneration committees are quite varied in format.

  2. Geography also plays a part, as house prices differ significantly across the country. For non-academic senior staff, let’s not forget that real non-HE employment markets exist for things like IT, Finance, HR, Legal and the like.

  3. Fair point from Alex. Is there also a factor of clinical salaries for those who have medical/dental schools?

  4. It was, I believe, Chris Kaufman as TGWU official for HE that coined the term fat cats for the VCs using his previous Daily Mirror journalese experience. Another of his coinage on the unification of pay scales and job evaluation was ‘from porters to professors’ and whether you hold a broom or a seminar…However, VC pay is related to the serious point about the governance of the HEIs and that the CEO is also de facto the Chair of the Board too. The make up of the governance determines to a large extent the set of attitudes and beliefs that allows the executive control and abdicates the deeper questions of purpose, strategy et al. Thus ‘autonomy’ lies in the hands of the CEO and not those in the position of accountability.

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