Chief Executive’s pay: a provocation

Lord Adonis has provoked a discussion on Vice-Chancellors’ pay.  Follow his tweets and you’ll see that he moves from the issue of tuition fees to the twin issues of the length of degree courses (which unwisely he linked to long summer holidays for academic staff) and VC’s pay.  There have been comprehensive rebuttals of the holidays issue – (see the Plashing Vole here) but not so obviously on VC’s pay.

This is not a defence of Vice-Chancellor’s pay.  This is not even an attempt to explain all the different facets that make up the reason why Vice-Chancellors pay has increased (one issue – the transfer market for ‘successful’ VCs  – I’ve touched on before).  I just want to touch on an aspect of the change:  that universities are now in a complex ‘market’ situation, and you can start to understand why remuneration committees are getting excitable about recruiting or retaining good Vice-Chancellors.

Universities have always competed for students, staff and resources.  Oxford and Cambridge Colleges built new accommodation blocks in the 18th Century to attract the sons of nobility.  Our central clearing house for admissions is a testament to the competition for the best applicants, even when demand severely outstripped supply.  The rhetoric around these markets has increased however.   Universities have struggled in the past, and the history of mergers hints at those past difficulties.  Starting with the talk of avalanches, we now see market forces at play – the VC at Huddersfield has launched a voluntary severance scheme citing:

“Once again the higher education sector faces many challenges – private providers are being encouraged to enter the marketplace, there is uncertainty about fees and our competitors are being increasingly aggressive in their student recruitment tactics. All this must influence how we shape our strategy for the next few years.

“To ensure that we maintain and develop our place within the market we have begun a process of closely analysing the provision we offer and this will continue into the future.

Different generations will no doubt understand aggressive student recruitment tactics differently; the first prospectus was probably seen as being a bit pushy, certainly De Montfort’s first TV ad was.  The point is that universities’ position as a safe public sector organisation is now under threat, even to the point of ‘market exit’.

One core argument why private sector pay is higher than in the public sector is risk.  In the private sector staff are hired and fired more easily, companies close or are taken over.  As a company can be more volatile, senior managers take greater risks, and should be rewarded.   Universities are not businesses, and comparisons are invidious, but, just for fun, here’s a quick comparison.

RM Plc

Let’s look at RM plc; a ‘major provider of resources, software and services to the education sector’.  RM has had some difficult years as they’ve transitioned out of providing hardware for schools into other services.  RM is heavily dependent on education spending, the bulk of which comes from public sources.  It employs 1800 people of whom 600 are based in India.    Its revenue for the year to November 2016 was £167.6m.

RM

RM’s remuneration policy is set out in its annual report.

The Policy is designed to attract, retain and motivate Directors and senior employees, both to achieve the Group’s business objectives and to deliver outstanding shareholder returns. To achieve this, RM’s Remuneration Policy aims to provide ‘median’ reward compared to comparator groups when acceptable levels of performance have been delivered. For the achievement of outstanding performance, it aims to deliver ‘upper quartile’ remuneration compared to comparator groups.

Helpfully the policy also says it avoids excessive risk taking by executives just to try and maximise their own personal returns.  The chief executive received total remuneration of £655k in the year to Nov 2016 (this includes shares – which accounts for why the sum is significantly down on the total of £1246k in 2015 when he got £749k worth of shares).

University of Bath

The University of Bath employed 2800 staff in the year ending July 2016, and had an income of £263 million.  Clearly it is also dependent on direct and indirect public funding for education and research, but its income has been going up each year, and it is exceeding its targets for surplus generation.

bath

We’ve all seen that the Vice-Chancellor got paid £451k in the year to July 2016, and Lord Adonis pointed out that benefits in kind and external income probably carried that to over £500k.  Although Bath is a successful university, no doubt the attention the news got is because it is not one of ‘leading’ universities (©Russell Group).

The University of Bath isn’t a company, and there’s no suggestion that you could interchange its chief executive with that of RM Plc.  But the chap at RM got paid £200k more in 2016 for running a company with 1000 fewer staff and £100m less revenue/income than Bath.

Greed

Lord Adonis rounded on the University of Bath in the House of Lords.  He noted that Bath was a ‘mid-ranking university’ and as the bulk of its funds came directly or indirectly from Government, they should have a say in the pay levels.

… the highly paid should set an example, particularly at a time of pay restraint. The only example the vice-chancellor of the University of Bath is setting to her staff is one of greed.

If the VC at Bath getting £451k is ‘greed’, then why isn’t the same tag applied to the CEO at RM?  Maybe Lord Adonis would think it is, but I think that’s unlikely.  Lord Adonis is a board member at RM and sits on the remuneration committee.  You’d have to assume that he’s signed up to their remuneration policy, and doesn’t think that the CEO getting £655k – a large part coming from school budgets – is setting a bad example.

CEO pay is a general problem.  It cannot be justifiable that their work is valued so much more highly than the work of others in their organisations.  That’s not to say that  there shouldn’t be something of a differential as greater responsibilities are taken on, but not at so steep a gradient.  Universities should push back against the corporate model, no doubt advocated by governors with experience of company boards, against the inflated wages for the CEO/VC.

 

 

 

 

 

 

 

The Vice-Chancellors who came to tea

Records reveal the arrangements for vice-chancellors to have private dinners with the Prime Minister in the late 1960s and early 1970s.  Viewed as an opportunity for an exchange of views, papers show the careful preparation by civil servants for these encounters.

Occasioned by student unrest, Harold Wilson met with vice-chancellors.  In March 1970 the prospects of further student trouble led to another dinner invitation.  Vice-chancellors would be invited to take a more robust attitude towards their responsibilities although the government might offer to shoulder some responsibility.  The cabinet secretary (Sir Burke Trend) suggested that it could be contrived that the vice-chancellors would ask for the meeting, which would then focus on education policy but also include briefings by the Security Service and the Home Office (Trend 1970)

The student situation had settled down in 1973 when Edward Heath arranged to meet with a wider group of higher education leaders including vice-chancellors, polytechnic directors and heads of colleges of education.

The file shows the careful arrangements made, the sharing of agenda items and choice of participants.  There are even notes between civil servants agreeing that the cost of the dinner should be met by the government.  The briefing for the PM includes the key issues for each group.  For the universities, he is told:

More generally, the Vice-Chancellors are concerned about the role and standing of the universities. They suspect that the Government underprize them and do not consider them “relevant” enough. (Anon, 1973)

Whereas, on the other side of the binary line:

The polytechnics are generally in good heart. They have their preoccupations. Chief among these is the need for greater clarification of their role (particularly their place in the LEA higher education sector and their relationship to the universities) and the massive expansion (trebling) of their student numbers following the White Paper.

The briefing also contains the following biographical notes with character assessments. For example, Bullock is ‘very much the Oxford Yorkshireman, plain-spoken, witty and humane’, Armitage a ‘very resourceful man with excellent judgement which he chooses to conceal under a bumbling manner’.

The record of the meeting, circulated to key ministers, records the informal discussion after dinner.  They had discussed links with industry, the impact of Europe on higher education and the following discussion, which must have been uncomfortable for some.

Thinkers versus Doers

Some representatives of the polytechnics argued that a major mistake made by the universities was to value knowledge for the sake of knowledge. The great majority of graduates would pursue their careers in the world of action, not of reflection: and this basic fact should be reflected in university entrance requirements and in final examinations. At present, however, the universities’ approach was too scholastic, and as evidence of this one could point to the low status of engineers, the academic approach to the training of lawyers and the low standards of linguistic ability in this country. As a society we tended to place a lower value on doing than on thinking, whereas those responsible for higher education should always remember that the vast majority of young people would be actors, not thinkers.  (Roberts 1973)

Heath’s thanks to his visitors were noted, but he continued the theme

Universities too often failed to teach their students to think straight and to recognise quality: and without a thorough training in these basic intellectual processes the next generation would find themselves unable to compete effectively with their contemporaries in other countries. To argue the British case successfully in, for example Paris or Brussels would call for the highest standards of intellect and ability. At the same time the educational system had a major part in creating a more flexible social structure in this country, so that ability, wherever it might be found, could be developed and exploited to the full. (Roberts 1973)

Heath only had another year as Prime Minister, but his Education Secretary, Margaret Thatcher, was also at that dinner and would take up these issues as Prime Minister.

 

Refs

Trend, 1970, Minute to Prime Minister 12 March 1970 National Archives PREM 13/3426

Anon, 1973, Briefing Note Prime Minister’s meeting with representatives of universities, polytechnics and colleges of education National Archives PREM 15/1477

Roberts C, 1973, Record of a discussion held after Dinner at 10 Downing Street on Tuesday 6 March 1973 National Archives PREM 15/1477

 

 

 

Serial Vice-Chancellors

Who’d be a Vice-Chancellor?  Today Graham Upton starts on his fourth VC’s job.  This is his third interim role, taking over at Birmingham City.  He’s not the first experienced VC to take on the task as acting as an interim leader: Sir William Taylor took on two interim roles having been director of the Institute of Education, Principal of the University of London and Vice-Chancellor at Hull.

We have certainly seen the rise of the serial Vice-Chancellor.  The role is more fraught than in previous times, and it is clear that governing bodies are looking out for people who can demonstrate that they’ve got the skills and experience to do the job.  With an existing VC there’s a track record to check, and so there’s a growing number of people who are onto their second job.  This isn’t an exhaustive list, but it gives some indication of some of those who have done this.

5 Sir William Taylor Institute of Education, London, Hull, Huddersfield, TVU
4 Professor Graham Upton Oxford Brookes, Cumbria, Glyndwr, Birmingham City
3 Sir Graham Davies* Liverpool, Glasgow, London
Sir Hector Hetherington Exeter, Liverpool, Glasgow
Sir Howard Newby* Southampton, UWE, Liverpool
2 Professor Cara Aitchison St Mark & St John, Cardiff Metropolitan
Professor Michael Arthur Leeds, UCL
Dr Robin Baker Chichester, Canterbury Christ Church
Professor Janet Beer Oxford Brookes, Liverpool
Sir Drummond Bone Royal Holloway, Liverpool
Professor Brian Cantor York, Bradford
Sir Paul Curran Bournemouth, City
Sir David Eastwood* UEA, Birmingham
Professor Malcolm Gilles City, London Metropolitan
Sir Peter Gregson Queens, Cranfield
Sir Martin Harris Essex, Manchester
Sir Alan Langlands* Dundee, Leeds
Sir David Melville* Middlesex, Kent
Anton Muscatelli Herriot Watt, Glasgow
Sir Edward Parkes* City, Leeds
Professor Louise Richardson St Andrews, Oxford
Professor Colin Riordan Essex, Cardiff
Sir Christopher Snowdon Surrey, Southampton
Professor David Tidmarsh Anglia, Birmingham City
Sir Rick Trainor Greenwich, Kings
Professor David VandeLinde Bath, Warwick

I have not included people who were heads of institutions and vice-chancellors of federal universities (London, Wales or Victoria) under rotational systems where the VC was a part-time role.  Four of these (marked*) intercalated a term at UGC, HEFCE or FEFC into their career; requiring them to leave a VC role, but being snapped up when they left the funding body.  It doesn’t include the international transfer market, where both Oxford and Cambridge have recruited VCs who have led universities elsewhere in the Commonwealth.

This isn’t a foolproof scheme, however.  Robin Baker followed his short stay at Chichester with a short stay at Canterbury.   Bowen & McPherson (2016) point to potential problems when it’s clear that a leader will be looking to move on after a few years; that they won’t make necessary changes, preferring to manage the day-to-day business and then move on.  Part of that process is they might also focus on quick wins, the things that might achieve a league table boost, and again not make long-term difficult decisions.    It must also be a feature in the rise in VC salaries – tempting an established leader to move may involve a pay rise. Keeping an established leader  (who may or may not be getting offers) may also involve a pay rise.

Cursiter, Stanley, 1887-1976; Sir Hector Hetherington (1888-1965)

But, it’s still probably a good bet.  Among the many good leaders who’ve lead more than one university is Sir Hector Hetherington.  A professor at 27, he became Principal of the University College of the South West aged 32.  He subsequently led Liverpool and Glasgow. Twice chair of CVCP, this is the account of his last meeting there:

 He made his last appearance at the Vice-Chancellor’s Committee shortly before he retired… in 1961.  As he was about to leave to keep another engagement, the Chairman gave a short valedictory speech.  Then as Hetherington rose and walked slowly towards the door the whole Committee rose spontaneously and stood in silence until he had gone. No other Vice Chancellor had ever received from his peers such a tribute of affectionate regard. He had been the executive head of a College or University almost continuously for over forty years and attained unprecedented supremacy of respect.   (Illingworth 1971 p105)

I’m sure this will continue, although it’s important to note that every serial Vice-Chancellor has to have a first appointment somewhere.  Maybe governors somewhere will advertise for a training vice-chancellorship, one that’s good for a first role…

[updated after being reminded of more distinguished names – but there may be more…]