The publication in April of the first ‘Illustrative Practice Note’ from the CUC (Committee of University Chairs) is to be welcomed, at two levels.
The first thing to welcome is the very concept and character of the practice note. The first note is clear and digestible; it is measured and proportionate in tone; and, above all, it avoids rigid prescription.
Instead of prescription, it simply poses some questions and offers some illustrations of good practice in the sector. Admittedly, these questions and illustrations might appear benign, even anodyne, on first reading. But they actually have a sharp edge. Together, they challenge our thinking, encouraging us to reflect on ways in which we might improve our own governance arrangements. There is obvious value in this thoughtful approach, and, so far at least, the omens therefore look good for the series.
The other reason why the first practice note is to be welcomed is that it tackles a topic which has not featured as much as it should have done in discussions about governance in HE. That topic is senior staff remuneration.
Now I have my own prejudices about pay levels (as well as a personal interest to declare). One of my prejudices is a deep-rooted antipathy to the use of the Prime Minister’s salary as a point of reference by which to judge top salaries in the public sector. Comparisons which pretend that a salary of £142,500 is the totality of David Cameron’s official remuneration are absurd, and seem deliberately designed to devalue the notion of public service.
But, leaving my own prejudices aside, there is no doubt that senior staff remuneration is an issue for us, one which has the potential to be toxic for individual universities and, indeed, for the sector as a whole. We are damaged by perceptions that pay rises for senior staff in recent years have been excessive and disproportionate. We are damaged too, as the CUC note observes, by perceptions that we are too secretive about senior pay levels and about the basis by which senior pay is determined.
All of this puts an unforgiving spotlight on the remuneration committees which typically set the salaries of vice-chancellors and other senior executives. Especially in the current climate, every remuneration committee has to be able to satisfy its governing body – and potentially the public – that salaries are set through a proper process which;
- is based on evidence
- is informed by rigorous appraisal of performance against set criteria
- does not reward underperformance
- is ultimately both fair and defensible.
This is where the questions and illustrations in the CUC note can help us.
I will not attempt to summarise the whole of the CUC note, but I would like to pick out a few questions which seem to me to require some careful thought.
- Who should chair the remuneration committee? It has been traditional within the sector for the chair of the governing body also to chair the remuneration committee. That practice is now being called into question, and an alternative model is gaining ground under which the remuneration committee is chaired by someone who is not directly involved in the annual appraisal of the vice-chancellor and other senior staff.
- Should the remuneration committee include at least one member who is completely external to the institution? Such an arrangement might help secure expertise which is not available within the governing body – though it would obviously be desirable for any external members to have some knowledge of the sector and its recruitment market.
- Should the remuneration committee have a common member with the audit committee? The CUC noted implies that this might ‘provide extra assurance’. On the other hand, an audit committee might find itself scrutinising the process by which senior pay is set, and an overlap of membership might appear to some to compromise the independence of the audit committee.
Aside from the underlying policy and criteria for determining pay, it seems to me that some of the most interesting questions relate to the scope of the remuneration committee’s report to its parent body. There is a difficult balance to strike between commercial and personal confidentiality on the one hand, and, on the other, principles of transparency and openness. I am inclined to think that some public benchmarking is the least that should be provided for the senior cadre as a group. First, we might be transparent about how any movement in senior staff salaries compares with the average for the institution as a whole. Secondly, as the 2011 Hutton review of fair pay suggested, we might be transparent in showing top to median pay multiples year by year.
Reporting protocols will no doubt evolve, but achieving this benchmarking would be a significant step change for the sector.