Timothy Devinney on Overpaid Vice-Chancellors

In an excellent recent piece on his own website, Timothy Devinney looks at how the compensation of Australian Vice Chancellors compares to those of the UK and the US. He gave me permission to re-use his calculations. Below I give you the guts of his story which, if one uses updated figures from the ones he uses, gets you to the realisation that Vice-Chancellors at the GO8 and ‘Technology’ universities get 300% in total compensation of what Vice-Chancellors at comparable US and UK institutions get.

Timothy’s first and main empirical finding is that “Overall, the average compensation of a top 100 US public university president is A$480,409; that of a UK vice chancellor A$456,867; and that of an Australian vice chancellor A$721,607. ”

Now, that sounds like Australian Vice-Chancellors are ‘only’ paid some 155% of the compensation of equivalent US and UK Vice-Chancellors, doesn’t it? Not 300% by a long way. But this is where one should dig deeper into the data (explained in his Footnote 3).

Timothy’s data on the US is on total compensation, so includes bonuses and pensions and side-benefits. His data on the UK includes salaries and pensions. Yet his data on Australia is just salary.

In Australia, the salaries that you find in the annual reports do not capture all the elements in the total compensation package of the Vice Chancellors. It misses bonuses, superannuation and side-benefits. And these are large chunks of the total compensation package.

To start with bonuses, my recent post on the goings-on at QUT already mentioned that the average bonus for the Vice Chancellor plus Deputy Vice-Chancellors there was A$270,000 in 2011. That reflects an average bonus of around 40-50% for that layer of administrators.

Employer contributions to superannuation are not normally reported in Australian salary scales, but usually lie in the range of 14-17%.

If we add these probable bonuses and superannuation contributions to the stated salaries of all Australian VC’s (40% and 17% compounded), we get an average monetary compensation of A$1,118,000 per Vice Chancellor in Australia. And that does not yet include the chauffeur-driven car, the business-class travel, or other forms of additional compensation, but let’s be generous and pretend those don’t exist.

So if you just look at monetary compensations for the average Vice Chancellors, then the Australian ones get paid around 250% of that of the top 100 American universities and UK counterparts.

But of course we are then comparing the average Australian VC with the average VC of the better universities in America and the UK. This is not the proper comparison because Australian universities are not in the same league as the top 10 American ones where the salaries are of course higher. If you compare with the more appropriate level of American and UK universities (the bottom of the top 100), you find that you are looking at average total compensations of around A$400,000 in the US and the UK. Using that as a comparison gets you the stunning number that an Australian VC gets paid around 300% of equivalent VCs in the UK and the US.

If one then reflects on Timothy’s finding that the VCs at the GO8 and SJT/ATN universities in Australia get paid at least 20% more than the VCs of other universities in Australia, one should realise that one is looking at an approximate total compensation package of around 1.3 million for VCs at the GO8/ATN/SJT universities in Australia, bringing their compensation well above 300% of VCs at equivalent universities in the UK and the US.

Nice jobs if you can get them! And, as Timothy argues, we are clearly not looking at pay-for-performance, but rather at the compensation levels agreed between different layers of the same entity, i.e. between chancelleries and chancellery-appointed Senates!

As I argued in an earlier piece, one possible solution to the massive governance problem at Australian universities is to have a compensation ceiling wherein no-one in the universities administration can earn more than the Prime-Minister of the day. That would restrict Vice Chancellors to compensations considered normal in top universities in the US.

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Andrew Norton
Andrew Norton
11 years ago

I don’t really know how VC salaries are set (though at least at U of M they did include things like imputed rent on the VC’s house). But whether or not there is a massive governance failure, I suspect governance changes have had a major impact. Since the 1990s internal interests such as staff and students have had their representatives reduced or removed, while external representatives, especially those with business experience, have been increased. The former would have tended to share in the general status anxiety of academia plus the ritual loathing of the central administration, which would have created downward pressure on VC salaries. The latter would have had corporate CEO salaries as their mental norm of what pay levels should be, which would have created upward pressure.

James Rice
11 years ago

These posts (and the earlier one) make for some very interesting reading. Timothy Devinney’s post, though, does compare compensation packages using exchange rates in 2010 rather than purchasing power parities and, in Australia, exchange rates and purchasing power parities have diverged significantly in recent years. Using exchange rates rather than purchasing power parities (for private consumption) understates the US figures by around 43 per cent and the UK figures by around 31 per cent. That goes some way towards closing the gap between Timothy Devinney’s original figures for Australia and for the US and UK, although the gap isn’t closed completely. And after taking into account the factors mentioned in Paul’s post, Australian Vice-Chancellors don’t get paid 300 per cent of what equivalent Vice-Chancellors in the US and UK get paid…only 200 per cent!