Putting Australian v-c pay into perspective

When you do the maths on vice-chancellors’ remuneration, the multiplying factors can be sobering. For the price of one Australian v-c, you could get seven or eight senior lecturers, 15 reasonably experienced journalists or 20 childcare workers.

On the other hand, you’d need eight or nine v-cs to buy a banker.

The Commonwealth Bank’s new chief executive officer Matt Comyn recently waived his A$2.2 million (£1.2 million) annual short-term bonus, after his organisation had allowed its automatic depositing machines to be used as potential money laundering vehicles by terrorists. The bank’s staff have also misplaced details of almost 20 million accounts, extracted fees from long-dead clients and tampered with children’s accounts to procure sales bonuses.

Comyn’s gesture left him with a base salary of just A$2.2 million and up to A$4 million in long-term bonuses. The remuneration package of Australia’s highest-paid v-c, the A$1.5 million or so going to the University of Sydney’s Michael Spence, looks like slim pickings next to the amount that a bank executive didn’t get after his company had kicked about 10 own goals.

Outrage over v-cs’ stratospheric pay is justified, but we should keep it in perspective. Salary comparisons rarely make sense and certainly don’t reflect value to society.

Comyn is by no means Australia’s highest paid CEO. That honour goes to Macquarie Group’s Nicholas Moore, who pockets around A$20 million. The bosses of public entities also command eye-glazing salaries. Australia Post’s former CEO Ahmed Fahour was hounded out of office last year after his A$5.6 million package became public knowledge.

Prime ministers’ pay is typically cited as the yardstick for CEO remuneration. But the reality is that PMs in Australia, like the UK, earn far less than the senior civil servants who report to them. The rationale for exorbitant salaries – pay peanuts and you get monkeys – somehow doesn’t apply to national leaders.

It’s a suspicious-sounding rationale; the sort of self-evident economics that gets cited with precious little empirical support. The average Australian v-c earns almost twice as much as his or her British counterpart, so the peanuts-monkeys logic would suggest that Australian universities should be well ahead in the rankings.

Then again, Australian packages may be overstated because they include not only performance bonuses but also benefits such as superannuation, long service leave and tax on vehicles and on-campus residences.

Almost one-third of the published remuneration of A$1.157 million (£654,000) paid last year to the University of Queensland’s Peter Høj, for example, went towards these sorts of non-salary benefits. By contrast, less than 2 per cent of the £471,000 bestowed on the University of Bath’s famously overpaid Dame Glynis Breakwell was for benefits in kind, with salary in lieu of pension contributions accounting for another 13 per cent.

There is at least some empirical evidence that inordinate v-c pay delivers results. A 2012 British study linked v-c remuneration increases with higher student admissions from disadvantaged backgrounds.

One argument in favour of excessive v-c pay is that the theoretical spin-offs are in laudable areas such as inclusion, completion, graduate employment and research performance. For bankers, it’s all about the mammoth dividends paid to shareholders.

Like it or not, the governing councils who set v-c pay seem to have bought the peanuts-monkeys argument. No doubt they see the size of the CEO’s salary as a direct reflection of university prestige – much as entry cut-off scores reflect course desirability.

Critics bemoan this as further evidence of the corporatisation of the university, with the pursuit of truth and knowledge playing second fiddle to spreadsheets and key performance indicators. University leaders should be in it for the love of academia, not money.

But with the average Australian university now hosting about 33,000 students – about 13 times as many people as the average urban area – a degree of corporatisation is inevitable.

Some v-cs – Australian National University’s Brian Schmidt, Victoria University’s Peter Dawkins and Central Queensland University’s Scott Bowman – have argued down their salaries, relinquished bonuses or rejected raises. All power to them, particularly when it involves taking a stand against insistent councils.

But you can understand why others might not pick a fight to put themselves out of pocket. They’ve got plenty of other things on their plates. Some v-cs probably figure that the best way to avoid sullying their hands is to steer entirely clear of the issue. “Only a mug tries to defend their own salary,” one high-profile university leader told me.

While fat v-c salaries may dent institutional budgets, arguably a bigger problem for universities is that they make an easy target for ministers highlighting profligate spending to justify funding cuts – as demonstrated by the UK’s Jo Johnson and Australia’s Simon Birmingham (the latter somewhat to his cost, after someone pointed out that Birmo earned about 39 per cent more than his UK equivalent).

But the horse has probably bolted on the salaries of v-cs and other public entity bosses. We should have taken a leaf from our cousins across the Tasman, where a hefty pay rise for the New Zealand Super Fund’s CEO drew the ire of the country’s State Services Commission.

The agency now names and shames the boards of public entities that ignore its advice to keep pay rises modest. “This information can inform ministers’ decisions about tenure,” commissioner Peter Hughes warned them.

john.ross@timeshighereducation.com