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A new recipe for higher education governance

by Susie Hills | Jun 18, 2018 | Governance & Policy

A dash of ‘business’ and a dollop of ‘charity’ – the recipe for Vice-Chancellor pay?

The governance of our universities has focused inwards and concentrated on compliance rather than focusing outwards and on culture. This lack of focus on culture is very risky.

It has become clear that compliant organisations can fail through catastrophic cultural shortcomings. If you focus on targets rather than compassion in a hospital or deliberately advocate a “hostile” immigration environment then don’t be surprised if you get Mid Staffs and Windrush.

In higher education there have been two (sometimes seemingly irreconcilable) positions as to what the culture of governance (and remuneration) should be. One might label them as the “business” view and the “charity” view.

The “business” view holds that universities are complex, global corporations, in a highly competitive market, which need to be run as businesses, albeit for a public purpose.

The “charity” view emphasises universities as part of their communities, as charitable endeavours which should be run in a participatory, transparent manner.

What has this meant for VC pay?

The “business’ view has been dominant in past remuneration practice. Remuneration Committees have been populated by independent, external non-executive governors who have drawn pay comparisons with the private sector, North America and Australia, in addition the transparent publication of VC pay has had the unintended consequence of causing an inflationary spiral – which self -respecting chair of council wants her or his VC to be bottom of the pile?

However increasingly staff, students, stakeholders (and politicians) tend towards the ‘charity’ view – looking to other locally provided services for comparators such as health and local government (or even the Prime Minister!) as comparators for VC pay. There is a hunger for transparency and participation in decision making and a belief that the remuneration of senior staff should not be excessively out of kilter with the ‘rank and file’.

There must be a way for governing bodies to bring together the best of ‘business’ and ‘charity’ and establish a new culture of governance and remuneration practice.

A small number of universities have made the important step of including staff and student members on their Remuneration Committees. It’s not a straightforward thing to do since neither staff nor students are independent in the sense that external governors are and may be conflicted by the expectations of their peers. However, with training and support there is no reason to believe that they will not behave responsibly and sensibly. They have the advantage of bringing the ‘charity’ view to the table and ensuring it is considered alongside the ‘business’ view. Unhelpful caricatures of plutocratic governors drawn from business or politically motivated staff and students need to be avoided since, when they sit down together, they are very likely to find there is much more that unites than divides them. They are all passionate about HE.

This feels like a smart direction of travel.

The creation of the Office for Students (whose clue is in its title) and the increasing exploration of employees’ interests being represented on boards eg from the Financial Reporting Council (FRC) mean that the governance model of universities with a lay majority but strong staff and student representation may increasingly be regarded as an exemplar.

The CUC has now made welcome steps to reform the remuneration section of its code for governors. Chairs of governing bodies will no longer Chair remuneration committees and vice-chancellors will not be members, although the CUC code does not go as far as the equivalent Scottish Code in envisaging staff and students being part of the solution.

It’s clear that Universities are being expected to reform their governance (and remuneration) and the recipe for success should marry the best of practice from all sectors.

After all Universities are private corporations with a public purpose and have charitable status. The public and the private should be mutually reinforcing, never mutually exclusive. Compliance should be seen as an entry ticket to the much more interesting world of corporate culture – a world in which success lies in greater transparency and greater participation.