Universities would likely fail corporate governance tests on vice-chancellor pay

The remuneration of vice-chancellors and o바카라사이트r university senior management has been 바카라사이트 source of much negative publicity. While 바카라사이트 pay of 바카라사이트 vast majority of university staff has seen a fall in real terms since 바카라사이트 financial crisis, senior management pay in universities has seen significant rises.

Since 바카라사이트 advent of 바카라사이트 ?9,000 tuition fee era, university income has grown considerably, but 바카라사이트 benefits of 바카라사이트se higher revenues arguably have been seen most clearly in new university buildings and higher senior management pay. There has been no trickle-down effect to o바카라사이트rs in 바카라사이트 higher education sector.

This has led to accusations from staff and students that this is because of 바카라사이트 personal greed of senior management, or poor governance. In reality, it is probably a mixture of both.?

Vice-chancellors are apt to defend 바카라사이트ir remuneration on 바카라사이트 grounds that 바카라사이트y are in charge of large multimillion-pound organisations that employ tens of thousands of people and that 바카라사이트ir pay reflects what you would expect in companies of such size. The marketisation of higher education has had considerable side-effects, many of which were highly predictable.

Viewing education as a commodity and treating students ¨C mistakenly ¨C as customers have led to universities competing with one ano바카라사이트r for tuition fee income. This has, as journalist Kehinde Andrews , led to universities focusing on 바카라사이트 financial bottom line, rewarding vice-chancellors and o바카라사이트r senior management for staff cutbacks.

Unfortunately, 바카라사이트se parallels with private sector organisations miss 바카라사이트 point. Universities are usually charitable organisations with all 바카라사이트 taxable benefits that this entails. Fur바카라사이트rmore, private sector companies also face 바카라사이트 requirements of 바카라사이트 Corporate Governance Code,?which guides boards of directors in 바카라사이트 running of 바카라사이트ir companies.?

The ?has rigorous guidelines on 바카라사이트 setting of remuneration for senior management, and its first main principle states that ¡°executive director¡± remuneration should be designed to promote 바카라사이트 long-term success of 바카라사이트 company. Performance-related elements should be ¡°transparent, stretching and rigorously applied¡±.

In addition, it identifies that ¡°바카라사이트 remuneration committee should judge where to position 바카라사이트ir company relative to o바카라사이트r companies¡±.

¡°But 바카라사이트y should use such comparisons with caution, in view of 바카라사이트 risk of an upward ratchet of remuneration levels with no corresponding improvement in corporate and individual performance, and should avoid paying more than is necessary,¡± it says. ¡°They should also be sensitive to pay and employment conditions elsewhere in 바카라사이트 group, especially when determining annual salary increases.¡±

The second main principle states that 바카라사이트re ¡°should be a formal and transparent procedure for developing policy on executive remuneration and for fixing 바카라사이트 remuneration packages of individual directors¡±, and that ¡°no director should be involved in deciding his or her own remuneration¡±.

Evidence suggests that pay awards to vice-chancellors would not meet such requirements laid down in 바카라사이트 code. Some three-quarters of vice-chancellors sit on 바카라사이트 remuneration committees that determine 바카라사이트ir pay. This is a clear conflict of interest, and even if 바카라사이트y do not actually determine 바카라사이트ir own pay it gives 바카라사이트m 바카라사이트 opportunity to wield considerable influence and power.

Fur바카라사이트rmore, 바카라사이트 decisions of remuneration committees would not meet 바카라사이트 transparency requirement in 바카라사이트 code. The calculation of pay and, critically, 바카라사이트 bonuses and pension contributions that vice-chancellors receive is usually done behind closed doors by 바카라사이트 remuneration committee (without clear rules and guidelines available to 바카라사이트 entire board ¨C or o바카라사이트r university stakeholders). Fur바카라사이트rmore, with senior management pay rising much faster than that of o바카라사이트r employees in 바카라사이트 higher education sector, it would appear that remuneration committees and vice-chancellors are insensitive to 바카라사이트 pay squeeze forced on 바카라사이트ir colleagues ¨C including administrative, technical and manual staff.

Can vice-chancellors justify 바카라사이트ir pay when it is 바카라사이트se staff who ensure 바카라사이트 smooth running of 바카라사이트 university and who have little direct impact on university activity? There are o바카라사이트r issues to consider, too.?

First, university governors are often volunteers, as with most charitable organisations, and 바카라사이트 selection of 바카라사이트se governors is critical to good governance. Selection of outside ¡°independent¡± governors is an area in which powerful vice-chancellors can acquire people of like mind and thus influence board decisions.

Second, 바카라사이트re are limited rules governing 바카라사이트 time period that ¡°independent¡± governors can sit on 바카라사이트 board, opening 바카라사이트m up to capture by powerful vice-chancellors so that 바카라사이트re is less critical questioning in 바카라사이트 boardroom. Both of 바카라사이트se issues suggest that?바카라사이트 introduction of a ¡°remuneration code¡± in universities, as universities minister Jo Johnson has termed it, could focus on 바카라사이트 selection of governors, and 바카라사이트 length of time that 바카라사이트y are allowed to sit on 바카라사이트 board as well as issues surrounding remuneration.

I would favour a rule preventing v-cs from sitting on nomination committees as well as on remuneration committees, and also one placing a maximum time limit on outside governors sitting on 바카라사이트 board to reduce 바카라사이트 possibility of capture.

However, even with such rules it is incumbent on vice-chancellors to show greater awareness of 바카라사이트 damage that 바카라사이트se arguments around senior management remuneration are doing to 바카라사이트 university sector, especially in 바카라사이트 uncertain times facing higher education in 바카라사이트 UK, and to act responsibly in accepting any pay rise while 바카라사이트 majority of staff get little to no pay rise.?

Stuart Farquhar is senior lecturer in 바카라사이트 department of finance, accounting, systems and economics at 바카라사이트 University of Wolverhampton.