Has university governance lost touch with academic reality?

Soaring vice-chancellors’ salaries have attracted all the wrong headlines in the UK, where a decade of austerity has kept the pay packets of rank-and-file academics – and most other workers – in firm check. Yet all the opprobrium heaped upon the University of Bath for paying its vice-chancellor, Dame Glynis Breakwell, a total of £468,000 in 2016-17 is cast into some relief by the situation on the other side of the world.

In Australia, overall wage growth has languished at about 2 per cent in recent years, barely enough to keep pace with inflation, while academics’ pay has increased by little more: about 2.4 per cent. But university leaders’ earnings, by contrast, are coasting towards an uncomfortable milestone – in public relations terms, at least.

If the recent 5.1 per cent average annual hike in vice-chancellors’ salaries is maintained, the average antipodean university leader will pocket more than A$1 million (£550,000) this year. By 2017, 13 of Australia’s 38 public university chiefs were already earning that much, amassing four or five times the incomes of their professors, and rising. All this in a sector supposedly all about collegiality, where contributing to knowledge matters more than mundane matters like self-aggrandisement.

So how did vice-chancellors come to join the million-dollar club, a clique traditionally reserved for the likes of investment bankers, corporate lawyers and self-employed gastroenterologists? Many point the finger not at vice-chancellors themselves but at the people who set their salaries – typically, remuneration committees drafted from universities’ governing councils.

John Simpson, a member of Monash University’s council, says that university leaders’ pay levels befit their job description. “The appointment of vice-chancellors is not a national undertaking – it’s an international undertaking,” says Simpson, a former oil and gas executive who has sat on the boards of numerous Australian non-profit organisations. “There’s barely a sector that is more global now than [higher] education. It is incumbent on the sector to ensure that they’re appealing to a global market, and remuneration is part of that. It is really important that you offer remuneration and employment arrangements that appeal to the very best in the world.”

Stephen Gerlach, convenor of the University Chancellors Council, also stresses that university leaders have “a very significant job” since they are “24/7, day-to-day, in charge of the management of the organisation, and they’re the principal academics as well”.

But Gerlach, who is chancellor of Flinders University in Adelaide, notes that historical perks like supplied housing are disappearing from remuneration packages. And he insists that governance boards work hard to ensure that the money awarded to vice-chancellors is fair and appropriate, and that salary decisions are “not taken lightly”. Fair remuneration is “something people have well and truly up on the radar screens”, he adds.

But it is noteworthy that not all universities around the world feel the need to reward their leaders so handsomely. Eight of the top 50 universities in Times Higher Education’s latest World University Rankings are from continental Europe, but their leaders typically enjoy considerably lower salaries than their cross-channel cousins do – never mind their peers Down Under.

That is no doubt one reason why, according to Thomas Estermann, director for governance, funding and public policy development with the European University Association, there is little questioning of their compensation packages – even though they have increased as the traditional academic leadership role has evolved into responsibilities more akin to those of heads of large corporations.

“If you compare [universities to corporations] in terms of turnover or impact, [universities] are big machineries,” he says. “You wouldn’t question the salary [of the leader of] a similarly big private global player.”

But Melbourne-based economist Jamie Doughney scoffs at suggestions that the “ridiculously high” packages on offer in Australia are justified. “The idea that million-dollar salaries for vice-chancellors somehow represent the productivity contribution of those individuals is laughable, frankly,” he says.

Doughney, a former member of Victoria University’s council, says “a certain pack mentality” drives remuneration committees to ensure that their chief executives’ salaries are at least keeping pace with those at comparable Australian institutions. The phenomenon is not unlike “pattern bargaining”, a union tactic to manipulate workers’ salaries ever upwards by extracting a superior offer from one targeted employer and then using it to leverage the same offer from others.

“To be seen to be paying lower salaries to your CEOs – that somehow puts you further down the pecking order in the status game,” Doughney says. “The unfortunate consequence is that we see the growing divide, in terms of incomes across society, replicated in the university.” But universities would do well to pay more heed to public dislike of this salary divergence, Doughney continues: “They’re public institutions. They should be exhibiting greater sensitivity to the wealth inequality that people object to across society.”

Corporate governance advocate Stephen Mayne agrees that the pressure to “keep up with the Joneses” is pushing university leaders’ salaries into unreasonable territory. “Once you’re north of a million [dollars], it’s getting excessive,” says Mayne, a journalist turned shareholder activist. “The last thing you want is to be a vice-chancellor who everyone thinks is overpaid and overrated. If I was a director at a university, I would probably make the argument that ‘this is a great institution: surely you can get by on A$990,000. Do you really need to clock over to a million? Why don’t you set a standard and not be the highest paid [vice-chancellor]?’”

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There was no need for any such argument when the current vice-chancellor of the Australian National University, Brian Schmidt, was negotiating his salary before accepting the role in 2015.

According to the ANU’s chancellor, Gareth Evans, the institution had been prepared to offer the Nobel-prizewinning astronomer a salary at the median level of the Group of Eight universities, whose other leaders now attract million dollar-plus salaries.

“He said it was absolutely unnecessary,” Evans says.

Schmidt, who was previously a professor at the ANU, accepted a package that ranks among the five lowest of Australian vice-chancellors, recorded as between A$610,000 and A$624,999 in the university’s annual report for his first year of service – compared with $970,000 and $984,999 for his predecessor, Ian Young.

“He said it was considerably more than he’d been earning as a professor and he would much prefer that the money was spent around the university,” Evans says. “Unhappily, that mindset seems to be a minority one.”

The Australian newspaper reported that Schmidt argued for an even lower salary, but “it was felt this would undermine the prestige of his position as chief of one of Australia’s most important universities, as well as apply downward pressure on salaries at other levels within the university”.

Evans says that the University Chancellors Council has started developing benchmarks for vice-chancellors’ pay. The objective is not to impose some tight regulatory framework but to offer future guidance for remuneration committees – “and possibly reverse the trend towards forever higher…salaries”.

Governing bodies recognise that pay rates have been “careering upwards at an unacceptable rate, in a way that simply hasn’t been necessary to get the best people”, Evans says. “What’s good enough for Oxford and Cambridge is really good enough for the best of the Australians. There’s nothing so different in the water here to justify more than that. Any reference to the competitiveness of the market needs to be taken with a very large grain of salt.”

Australian vice-chancellors’ earnings are, in reality, “a reflection of corporate-think rather than the reality of university culture”, Evans says, as people with commercial backgrounds comprise an increasingly prominent slice of university council membership.

“People who choose the life of a university academic don’t do it for the money,” he notes. “If the university is a prestigious institution, the attractions will speak for themselves. Money, for most people, will be a second-, third- or fourth-order consideration.”

Council members, chancellors and members of university governing councils

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Public Australian university websites as at 26 April 2019 and 2009 annual reports.

Some governance experts say that the salary “scandal” reflects a broader issue of university councils that have lost touch with their constituency.

“The original concept of governing bodies was that they represented a kind of public interest. The one thing that’s evident in regard to vice-chancellors’ salaries is that they’re not representing a public interest,” says Michael Shattock, a former registrar of Warwick University and a visiting professor at UCL’s Institute of Education.

The austerity that has been applied for the past decade throughout British society, right up to the prime minister – whose salary has been frozen at about £150,000 since 2010 – seems to have bypassed university councils. He says remuneration committees have routinely awarded vice-chancellors 10 per cent salary increases on the basis that “our chap is doing rather well”, while the rest of the academic community has received rises of 1 or 2 per cent.

“In the old days, you appointed a vice-chancellor because you were looking for academic leadership. Nowadays, the vice-chancellor is seen as the chief executive, which is a different concept altogether. I think we’ve essentially got our priorities wrong,” Shattock concludes.

Back in Australia, higher education consultant and governance expert Hilary Winchester says the shrinking of university councils over the past decade has diluted staff and student representation and left them looking more like corporate boards. “The composition of those councils has predominantly been people from business and industry rather than higher education,” says Winchester, a former pro vice-chancellor of the University of South Australia.

“You get some university councils that have no one with higher education experience except for the vice-chancellor and the chair of the academic board, or where members have been on council for so long that their knowledge of higher education is out of date,” she says. “You’ve got people who understand finance, risk and infrastructure – all those big ticket items – but don’t necessarily understand the peculiarities of the higher education sector and higher education governance requirements.”

That lack of understanding – combined with a sidelining of academic senates, the third “axis” of university governance along with council and the executive – could come at a cost to institutions as stricter governance regulations start to bite, Winchester predicts.

Australia’s higher education standards framework, which came into effect in 2017, outlines what is required from academic governance structures and processes. “The academic board is inscribed in most university acts as well. It can’t just be pushed to one side or forgotten about,” Winchester says.

In addition, a number of Australian universities next year face mandatory re-registration assessments from the Tertiary Education Quality and Standards Agency, which was established in 2011 and typically requires universities to renew their registration every seven years. The quality assurance body begins the process by examining separate external reviews of each university’s corporate and academic governance arrangements, Winchester says: “They’re pretty serious items. Universities need to get them right.”

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Perhaps the most dramatic recent example of the fading influence of academic governance mechanisms has occurred at the University of Wollongong, where the senate had no role in approving a contentious new arts degree funded by the Ramsay Centre for Western Civilisation.

Vice-chancellor Paul Wellings avoided senate scrutiny of the course – opposed by many academics on the grounds that it curtails academic autonomy and champions a “Western supremacist” perspective – by using a “fast-track” procedure normally employed to make minor changes to existing programmes. When the senate formally objected, the university said the protest had “no direct impact” and that the partnership with the Ramsay Centre would proceed as planned.

The executive also second-guessed the view of its overarching governing body, saying the issue required “no further actions” from its council. At a subsequent meeting, the council sided with the executive. In a statement issued by the university, chancellor Jillian Broadbent said she was “comfortable that the decisions taken by the vice-chancellor have been in accordance with university policies and in the best interests of the institution”.

Speaking to THE earlier this month, Wellings denied bending the rules to approve the course, worth A$50 million (£27 million) to the institution, and described the fast-track procedure he used as “a bog-standard piece of machinery” that has existed at Wollongong for 20 years.

Wollongong’s approach to dealing with the Ramsay Centre differed starkly to that adopted by the ANU, whose governing body took a leading role in ultimately terminating negotiations on the grounds that the Ramsay Centre wanted to be too hands-on regarding the curriculum and recruitment – in turn prompting claims in the right-wing media that the university’s concerns were less about autonomy and more about appeasing left-wing elements in its staff and student body.

“The issues we got ourselves into with the Ramsay negotiations were entirely appropriately a matter for the council and me as chancellor to engage with,” Evans says. “The situation was becoming a major public relations problem. The university was being cast as a prisoner of the forces of anti-intellectual darkness.”

For his part, the University Chancellors Council’s Gerlach dismisses claims that academic senates’ clout is being diluted. “That’s really where most of the discussion is going on, with people who come out of that [academic] background and know what they’re talking about in detail,” he says. “Decisions that are material would be approved by the council, but you have to rely on the people with that intimate knowledge.”

That said, Gerlach adds, Australia has moved on from a time several decades ago when members of the academic senate “virtually dictated what happened in a university. Unless academics agreed to something or other, nothing could happen. You could not operate now under that sort of regime.”

But Shattock’s view is that the pendulum has swung too far the other way. Rather than reducing the power of senates, universities should give academics more power on their councils. “I’m perfectly confident that the kind of academics running big science departments or advising the government on economic policy are well able to take good management decisions about a university – and probably much better qualified to do that than many of the lay members,” he says.

Thirty-four per cent of Australian university governing council members – including most chancellors – have backgrounds in large corporations, with experience in banking, insurance, energy and retail particularly favoured. Current or former academics comprise just 32 per cent, and current students just 9 per cent.

Economist Doughney agrees that there has been a concerted “trimming” of elected staff and student representatives on university councils. “It goes with the corporate view that you need small boards so that they can function. Who do you peel off? The internal representatives.”

Margaret Sims, professor of early childhood education at the University of New England and a former council member at the institution, says that her institution used to have two elected academic staff positions. That allocation was cut to one, with a “push to have none”, while two slots reserved for university alumni have also been “disestablished”.

“My experience on council was that the staff voice was consistently silenced,” Sims says. “If I was allowed to speak, it was almost [greeted with] rolling eyes and a complete dismissal of anything I said. They’d just forge on ahead with other things.”

In 2016, Sims took the university to federal court – and won – after it denied her access to council meetings over conflict of interest concerns following her election as branch president of the National Tertiary Education Union.

“There was never a single skerrick of evidence that I had ever leaked anything, in all the years prior to that,” Sims says. “It’s part of that whole right-wing agenda that staff in general can’t be trusted – the idea of managerial privilege versus staff who just have to shut up and do as they’re told.”

Another trend is for council agenda items to be marked confidential. Sims says she often questioned such decisions and was invariably told that the topic could prompt discussions that members preferred to keep secret. If it didn’t, she asked for the item to be moved back on to the open agenda so that it could be reported in the minutes.

However, “it generally didn’t happen”, she says. “More and more councils are operating behind closed doors. I used to report to my academic colleagues after every meeting, but of course I could only report on the open agenda. Over the years, my reports got more and more pathetic because there was so very little I could say.”

Cathy Rytmeister, a quality assurance and professional development specialist at Macquarie University, says a typical tactic is to mark an item commercial-in-confidence “even though it’s clearly not”. She says staff members on council are even warned not to talk to each other outside meetings. “As if all the bankers aren’t getting together,” scoffs Rytmeister, a one-time governance researcher who has completed two stints on Macquarie’s academic senate.

“They keep talking about how the senate’s too big and the council’s too big and it would be much better if they were smaller. But the executives just keep growing,” she adds.

But governance expert Mayne says the progressive reduction in the size of university councils has “made sense from a practical governing point of view”. And elected academic representatives are “a little anachronistic”, with elected union or staff board members “long gone” in corporate Australia and government-owned enterprises.

“Universities have become very large institutions and they need to move to a modern governance structure of professional independent directors. The governing board has to decide things like academic funding and which disciplines to focus on. By definition, any incumbent academic would not be an independent director. You should have a clear majority of independent directors on any governing board.”

Mayne cites the University of Melbourne’s recent, controversial decision to refocus the activities of Melbourne University Publishing – which had developed a flourishing trade in highly regarded popular non-fiction books – as an example of the conflict of interest generated by having academics on boards.

“It was a bad decision to focus back on publishing academic research when MUP has been such a trailblazing general publisher. It’s generated a lot of political heat and backlash, which wouldn’t have happened but for the academic presence on the board,” he says.

An alternative view is that MUP is shifting back to its core business of publishing academic monographs, which have comprised barely 10 per cent of its output in recent years. And Evans dismisses the idea that staff representatives automatically have a conflict of interest.

“We have three elected staff representatives and two students on a council of 15 at ANU,” he says. “In my judgement – and I’ve been there nearly 10 years – this works extremely well. They’re certainly there to inform the council of the interests of the people they’re elected by and the issues that are concerning them, [but] having those voices…gives us a much better understanding of the dynamics and culture of the university than we would have if they were missing...It is well understood that the overwhelming fiduciary obligation is to the university as a whole.”

Evans says accountancy, investment and management oversight skills are things that “every council needs, but they’re not the dominant skill set required”. But nor, he believes, should academic experience take precedence on the boards of institutions charged with enacting a broad social purpose. The best boards, he says, incorporate a wide range of talents and outlooks from an array of sectors.

“People in the arts, the intellectual environment, scientific researchers, Indigenous representatives, former public servants, former politicians, thinktank leaders: there’s a wealth of talent not confined to corporate or academic Australia,” he says.