Comparing vice chancellor pay to FTSE listed company CEOs
David Kernohan is Deputy Editor of Wonkhe
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I’m a huge fan of the Financial Times’ Alphaville blog, and of analysing the impact of policies from outside the political mainstream.
As such, I’ve taken this weeks slightly sideways look at Zak Polanski’s Green Party policy that the ratio between the salary of a chief executive and the lowest paid member of staff should not be allowed to be larger than 10:1 and applied it to higher education. The data on high pay more generally is from the High Pay Centre, while the higher education figures come from HESA – and while neither of these sources allow me to look at the ratio between the CEO and the lowest paid employee, there are comparisons with median pay in both datasets that I can use as a proxy.
First up, here’s the two datasets plotted together, which rather counterintuitively makes the case that heads of higher education institutions have a long way to go to match the efforts of private industry CEOs in extracting surplus value from the labour of others.
The ratio between the median employee salary and the chief executive salary in industry is, for the most part, substantially beyond 10:1. A part of this can be attributed to lower salaries overall – but it is also clear that chief executives are paid far more than your average vice chancellor, even for the kind of FTSE250-index operations that have similar income, expenditure, and exposure to market (and even, in some cases, to the specific problems caused by performing services on behalf of the government) as medium-to-large sized universities.
So let’s enforce a 10:1 ration between basic CEO pay and median pay. This isn’t quite the Green Party proposal, as above, but we could perhaps imagine it as a compromise hammered out during difficult coalition negotiations. In most cases, higher education employees would lose out – while in comparison the median Tesco employee would be looking at an impressive £970,000 pay rise. I guess every little helps. The inferred median pay here is calculated – I have the ratio and some indication of CEO salary – but is unlikely to be anything better than indicative, so this should be understood accordingly.
You struggle to find good news for university employees: staff at Loughborough would be £5,000 better off (about £2,500 at Cambridge, £500 at LSE) which is probably why we don’t tend to see this kind of ratio used in sector pay negotiations.
Pay in higher education could perhaps be compared fairly to pharmaceutical or healthcare companies – both require staff with significant academic training, and both require support functions that are likely to be less well paid in order to run the enterprise. And while median pay looks similar, the fact remains that CEO pay is an order of magnitude higher.
What it would need to take account of is all of the roles that institutions have outsourced or put into separate companies, which are usually the lower paid staff and who are now on contracts worse than the ones they had when they were direct employees of the institution
Increasingly we are seeing post-92s do this with all staff – it’s also creating a governance gap but that’d a story for another time.
“Pay in higher education could perhaps be compared fairly to pharmaceutical or healthcare companies – both require staff with significant academic training, and both require support functions that are likely to be less well paid in order to run the enterprise. ”
Maybe, but the big difference is the total packages – Bonuses, long-term incentive plans, share awards, options, and other performance-related elements come into play.
Public-sector pay scales, like those we see in Universities, are fine for many people, but if you are a really high performer, you can quickly taper off. There is a particular problem in the middle-management space where more and more roles seem to be compressed down to have salaries not much higher than the top of the SL payscale – a lot of very good people simply don’t want the hassle.
Similar – the IP sharing arrangements are so poor in most universities, the best thing to do for most people is to keep good ideas to yourself.
Does Mark Leach (the CEO of Wonkhe) earn 10 times what you earn David? Should he perhaps lower your pay if he earns less than 10 times what you earn?
Thank you for reminding me that Mark Leach is the CEO of Wonkhe. I have absolutely no idea what point you are making here.
So if you are running a company with a lot of low skilled workers or entry level positions, the Greens prohibit you from earning as much as a company that outsources all of this work. And this is regardless of the size and profitability of the company. What will the next WONKHE article be inspired by – Alice in Wonderland!?