University vice-chancellor salaries are 'ridiculous'

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University vice-chancellors' pay is "ridiculous" compared to their overseas counterparts and COVID-19 has exposed the inability of most of them to deliver the performance that would be expected if they were earning the same money in the private sector, say two leading business academics.

"Dr Spence is going to get half of what he does now, in a far more prestigious university," says Tom Smith.  Attila Csaszar

Professors Tom Smith and James Guthrie from Macquarie University Business School said the average pay of Australia's 39 vice-chancellors – the university equivalent of a chief executive – is $985,000, compared to just $670,000 in the US and $635,000 in the UK.

"Chief executives are paid for their business acumen. That is their vital ingredient and they have training to get it. They generate strategic direction and that equals value creation," said Professor Smith who is the head of the Department of Applied Finance at Macquarie University.

"But university vice-chancellors don't do that. They don't have the training. It's not their job.

"What strategic options have they been generating during COVID, apart from just laying people off? A private sector CEO would be looking for new revenue right now."

Professor Smith said vice-chancellor pay got out of line after universities were amalgamated in the early 1990s, creating institutions with up to 60,000 students.

University Councils then aligned VC pay with private sector companies with similar numbers of staff.

But the comparison is wrong because vice-chancellors run public institutions, students are different to employees and there is little evidence any VCs have created new strategic directions in the face of the hit to their income during COVID-19.

"A CEO offers strategic direction. Alan Joyce at Qantas ruthlessly comes up with strategic options and his is the only successful airline in the world right now.

"If Alan Joyce comes up with $10 billion in strategic options he's worth the $5 million they pay him."

It was wrong to say Australia had to pay more to lure top talent.

"Australia is not the colonies any more. People overseas are scrambling to come and run a university here. They are attracted by the fantastic health system and fantastic services. If anything it's more attractive to come to Australia," Professor Smith said.

He said when Sydney University vice-chancellor Michael Spence leaves Australia next month for UCL university in London, he will be taking a salary cut of more than 50 per cent.

That's after adjusting for a COVID-related reduction to his current pay and despite UCL rating higher than Sydney University on global rankings.

Dr Spence's estimated salary is $1.6 million but the UCL president earned $736,000 in 2018-19.

"Dr Spence is going to get half of what he does now, in a far more prestigious university, and the UCL salary is actually worldwide competitive," he said.

Professor Smith added most Australian universities lacked transparency, stating salaries in a range rather than exact amounts, which included a sleight of hand given they sometimes included bonuses and rent arrangements.

Universities in the US disclose salaries for leading staff by name in exact amounts. As does the Australian National University.

Period16 Nov 2020

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Media contributions

  • TitleUniversity vice-chancellor salaries are 'ridiculous'
    Degree of recognitionInternational
    Media name/outletFinancial Review
    Media typeWeb
    CountryAustralia
    Date16/11/20
    DescriptionUniversity vice-chancellors' pay is "ridiculous" compared to their overseas counterparts and COVID-19 has exposed the inability of most of them to deliver the performance that would be expected if they were earning the same money in the private sector, say two leading business academics.

    "Dr Spence is going to get half of what he does now, in a far more prestigious university," says Tom Smith. Attila Csaszar

    Professors Tom Smith and James Guthrie from Macquarie University Business School said the average pay of Australia's 39 vice-chancellors – the university equivalent of a chief executive – is $985,000, compared to just $670,000 in the US and $635,000 in the UK.

    "Chief executives are paid for their business acumen. That is their vital ingredient and they have training to get it. They generate strategic direction and that equals value creation," said Professor Smith who is the head of the Department of Applied Finance at Macquarie University.

    "But university vice-chancellors don't do that. They don't have the training. It's not their job.

    "What strategic options have they been generating during COVID, apart from just laying people off? A private sector CEO would be looking for new revenue right now."

    Professor Smith said vice-chancellor pay got out of line after universities were amalgamated in the early 1990s, creating institutions with up to 60,000 students.

    University Councils then aligned VC pay with private sector companies with similar numbers of staff.

    But the comparison is wrong because vice-chancellors run public institutions, students are different to employees and there is little evidence any VCs have created new strategic directions in the face of the hit to their income during COVID-19.

    "A CEO offers strategic direction. Alan Joyce at Qantas ruthlessly comes up with strategic options and his is the only successful airline in the world right now.

    "If Alan Joyce comes up with $10 billion in strategic options he's worth the $5 million they pay him."

    It was wrong to say Australia had to pay more to lure top talent.

    "Australia is not the colonies any more. People overseas are scrambling to come and run a university here. They are attracted by the fantastic health system and fantastic services. If anything it's more attractive to come to Australia," Professor Smith said.

    He said when Sydney University vice-chancellor Michael Spence leaves Australia next month for UCL university in London, he will be taking a salary cut of more than 50 per cent.

    That's after adjusting for a COVID-related reduction to his current pay and despite UCL rating higher than Sydney University on global rankings.

    Dr Spence's estimated salary is $1.6 million but the UCL president earned $736,000 in 2018-19.

    "Dr Spence is going to get half of what he does now, in a far more prestigious university, and the UCL salary is actually worldwide competitive," he said.
    Professor Smith added most Australian universities lacked transparency, stating salaries in a range rather than exact amounts, which included a sleight of hand given they sometimes included bonuses and rent arrangements.

    Universities in the US disclose salaries for leading staff by name in exact amounts. As does the Australian National University.
    Producer/AuthorRobert Bolton
    URLhttps://www.afr.com/work-and-careers/education/university-vice-chancellor-salaries-are-ridiculous-20201115-p56ep8
    PersonsTom Smith