Because you're worth it? Determinants of Vice Chancellor pay in the UK

• Author: Geoff Wood,Peder Greve,James Walker,Peter Miskell
• Date: 01 November 2019
• DOI: http://doi.org/10.1111/irj.12265
• Published date: 01 November 2019

Because you’re worth it? Determinants of

Vice Chancellor pay in the UK

James Walker, Peder Greve, Geoff Wood and

Peter Miskell

ABSTRACT

Wage inequality has increased across most developed nations; this has been mani-

fested in a wide range of organisations and sectors, with implications for well-being

and sustainability; within UK universities, this has become increasingly visible. There

is increasing pressure on universities to deliver social and economic impact in an in-

creasingly market-driven and metric-driven environment. In the UK context, increas-

ing financial pressure has led to both an escalation of student fees and constrained

wage growth for faculty. In contrast, most Vice Chancellors have secured substantive

pay packages raising concerns that regulatory failures may be contributing to the rise.

We show that Vice Chancellors use their internal power within organisations to ex-

tract a disproportionate amount of the value created by the institution. However,

we encountered much diversity according to the quality of governance, highlighting

the extent to which not only contextual but also internal dynamics drive wage

inequality.

Keywords: Pay, Governance, Metrics, Performance, Vice-Chancellors

1 INTRODUCTION

A key theme within the current literature on industrial relations is of rising wage in-

equality both within and between contexts (Ackers, 2016; Stockhammer, 2017). Al-

though this trend is encountered within most developing economies, it is a very

uneven one, reflecting both contextual and sub-contextual dynamics (Stockhammer,

2017). In the UK Higher Education context, the gap between senior managers—

above all, Vice Chancellors (V-Cs)—and the rank and file has become increasingly

visible. This raises issues of staff well-being, sustainability and whether, indeed, there

is any justification for a divergence in the relative allocation of value (Edwards, 2015;

Ackers, 2016). As Guest (2011) notes, one of the core dilemmas of Human Resource

Management (HRM) remains the elusiveness of tracing links between HRM systems

and performance (cf. Boselie et al., 2005). Yet the 2008 financial crisis highlighted the

risks posed by inappropriate reward systems and the need to find better ways of

❒James Walker, Peder Greve and Peter Miskell, International Business and Strategy, Henley Business

School, University of Reading, Reading, UK, and Geoff Wood, DAN Management, Western

University, Ontario, Canada and Trinity College, Dublin, Ireland. Correspondence should be addressed

to James Walker, International Business and Strategy, Henley Business School, University of Reading,

Reading, UK; email: j.t.walker@henley.ac.uk

Industrial Relations Journal

ISSN 0019-8692

© 2019 Brian Towers (BRITOW) and John Wiley & Sons Ltd

50:5

–6, 450

–467

incentivising senior managers. Within the UK, universities have come under increas-

ing attack both in the popular media and by politicians inter alia for a failure to be

relevant to the needs of the ‘real world’, a perceived liberal bias, and because they al-

legedly provide poor value for money for taxpayers and students (Daily Mail, 2017a,

2017b). As these claims have escalated, so have threats by the UK government both

to place universities under closer regulatory scrutiny and provide more opportunities

for private competitors as a countervailing pressure (ITV, 2017; THES, 2017b).

Within the UK, the issue of V-Cs’salaries has been added to the mix: critics have

charged that they are pseudo-public servants with few opportunities to really change

the institutions they run and they are inattentive to the needs of students as customers

and yet are able to extract large pay packages relative to their colleagues on the

‘coalface’(Guardian, 2017; ITV, 2017). It has been argued that this represents a reg-

ulatory failure, making a strong case for external corporate governance reform (cf.

ITV, 2017). There is a considerable literature exploring the pay and performance of

organisational heads (Shaw & Gupta, 2015) and a growing body of work exploring

the remuneration of university heads worldwide (e.g. Cornell, 2004; Tarbert et al.,

2008; Essaji & Horton, 2010; Bachan & Reilly, 2017; Ross, 2019). This study departs

from this literature in exploring the extent to which V-C pay is affected by internal

corporate governance mechanisms drawing upon a variety of data sources covering

the 2013/14 to 2016/17 period where information on governance can be obtained.

Our results show that V-C pay is at least partially determined by internal gover-

nance mechanisms, performance metrics and individual V-C characteristics. In

other words, rather than a systemic failing, some universities seem much better

at managing V-C pay than others. We explore the implications of these findings

for theory and practice.

2 THE ROLE OF THE UNIVERSITY AND THE UK CONTEXT

There are two broad ways in which the university may be theorised. The first is that

effective research operates in a ‘republic of science’, which should be removed from

commercial and social pressures that dominate in other parts of society (Polanyi,

2000). According to this view, it can be argued that an independent intellectual class

having the institutional space and support to generate well-crafted scholarly ideas is

good in its own right, enriching public and social life and, indeed, forming an integral

part of being civilised (Oakeshott, 2004). The second is one that ties academic re-

search—and, indeed, university teaching—to immediate and directly visible economic

and social development. This view often equates research and universities as

potential ‘engines of growth’and posits that universities should concentrate on

unlocking such economic potential (Perkmann et al., 2013).

Despite some inroads by private-for-profits (and a small number of private non-

profits), the UK university system remains dominated by institutions that historically

enjoyed both statutory recognition and ‘self-governing autonomy’. The latter, while

not-for-profit and providing a broad public service, are neither purely charitable

nor purely statist (Moodie & Eustace, 2011). In terms of charters and statutes issued

by the Privy Council, internal governance structures centring on Courts, Councils and

Senates were set up; in 1946, the bulk of university financing was taken over by the

state, when previously their role was somewhat akin to charities. The 1946 changes

opened the way for affordable mass education but diminished the relative influence

of lay Courts and Councils, supplanting their historic role in raising funding. It also

Determinants of Vice Chancellor pay in the UK 451

© 2019 Brian Towers (BRITOW) and John Wiley & Sons Ltd