Australian pay code seeks to ‘dampen’ executive salaries

Australian chancellors are pressing universities to report how much they pay their executives, in a move to bring vice-chancellors’ salaries in line with “society’s expectations and norms”.

A new code unveiled by the University Chancellors Council (UCC) urges universities to reveal senior staff’s base earnings, along with additional incentive payments and the “clear, measurable targets” governing bonuses.

The reporting obligations should cover each university’s senior team “or a defined number of highest paid staff”, the code says. Universities should also outline the governance arrangements for setting and reviewing executives’ pay and monitoring their performance.

These things should be published every year in institutional annual reports, with universities embracing the “increased levels of disclosure” adopted by the Australian government and the UK and US university sectors.

The UCC has promised “best practice templates” for reporting pay, although these templates are yet to be developed. The council has also flagged an “annual benchmarking review” to help universities determine appropriate remuneration, along with an annual report on the code’s adoption and a biennial review of its effectiveness, although it has not decided whether it will release this information publicly.

University of the Sunshine Coast chancellor Sir Angus Houston, who chaired the UCC working group that developed the code, said the main change was that details of vice-chancellors’ salaries would now be consistently reported.

Sir Angus stressed that the code was voluntary. But with its contents approved by all chancellors, who typically sit on the remuneration committees that determine executive pay, opposition seems unlikely. “I’ll be [asking] the council to adopt it for our university, and I don’t anticipate any problems with that,” he said.

Australian vice-chancellors’ average salaries moved above A$1 million (£530,000) in 2019, netting them considerably more than their UK and New Zealand counterparts. Sir Angus would not be drawn on whether the country’s university leaders were overpaid, but said they earned comparable amounts to the heads of government departments and utilities.

While most vice-chancellors have taken pay cuts during the pandemic, he said remuneration levels had started “levelling out” before Covid. “The median for vice-chancellors at the moment is A$960,000. That’s less than it was a couple of years ago.”

The UCC’s convenor, Flinders University chancellor Stephen Gerlach, said executive remuneration needed to be considered in a national context. “You have to address the marketplace. Comparisons with other countries don’t necessarily assist much because they’ve got their own marketplace pressures,” he said.

He said that while the code would not include pay recommendations, the transparency it fostered would “probably…have a dampening effect” to prevent pay levels “getting out of line”.

One factor thought to have exerted upward pressure on vice-chancellors’ salaries is Australia’s international education industry, with universities prepared to pay top dollar for leaders capable of boosting overseas enrolments – a motivation possibly tempered by the pandemic’s handbrake on international recruitment.

But Mr Gerlach said the “competitive environment” rather than export ambitions had fuelled salary growth. “Whether it’s issues of risk management, financial management or other management requirements, [universities are] big organisations and they need to be very well run. You need the best people to do it,” he said.

The UCC has been advocating moderation and transparency in executive salaries for more than two years. In May 2019, it drafted a statement expressing “concern at the increase in the level of vice‐chancellors’ base salaries”.

john.ross@timeshighereducation.com