Vice-Chancellors’ remuneration, university financial performance, and global rankings

Jul 12, 2024
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The Sunday Age (The Age) reported on 30 June 2024 on the 2023 salary packages of the Vice-Chancellors of Victoria’s eight public universities in a story entitled “Rich List: University heads on million-dollar salaries” by Daniella White and Sherryn Groch. Such headlines can be attention seeking, especially if not set in a wider context. This commentary concerns the paying of these packages in the context of the published financial performance of these eight public universities for the year earning 31 December 2023.

This analysis also draws on the Victorian Auditor-General’s Office (VAGO) Report “Results of 2023 Audits: Universities”, which was issued on Friday, 28 June 2024. It also addresses the phenomenon of “global university rankings” (GURs), which seems to be over-concentrating the attention, if not obsessing, all or most of Australian public universities, especially senior executives, including Vice-Chancellors (VCs), and University Councils.

The Age story of 30 June states:

“The latest annual reports reveal that five of Victoria’s eight universities paid their vice-chancellors more than $1 million last year. Analysis by The Age has found about half of Australia’s vice-chancellors have cracked the million-dollar club, often outstripping the salaries of their counterparts as some of the world’s most prestigious institutions” (White and Croch, 2024, p. 4). The journalists also refer to an analysis undertaken by Joo-Cheong Tham of the University of Melbourne and of the Tertiary Education Union, and state this shows that the 2023 figures showed that “the highest vice chancellor salaries in Victoria were more than six times those of their university’s senior professors – and 20 to 30 times the wages of junior staff” (p. 4).

The writer declares that the magnitude of an executive salary package, high, modest or low, needs to be not only justifiable but adequately justified in the interests of reasonableness and for the effective discharge of accountability. This is not an argument against paying high or large salaries, where these ingredients exist. A key point, however, concerns the need for Australian public universities, expressly Victorian universities in this instance, to always serve, and act, in ‘the public interest’.

How does the VAGO Report inform the discussion and debate on this topic? Firstly, key and relevant financial results are outlined for setting the context. In Victoria, the sector essentially “broke even for 2023” (VAGO, 2024, p. 5) in financial terms. This occurred, however, “only because of fair value gains on investments recorded as income. The sector otherwise would have recorded an overall net deficit for the year, a continued declining trend from 2022” (2024, p. 5).

More specifically, Figure 5 of the VAGO report indicates that only La Trobe University of these eight public universities was able to break even before considering fair value gains or losses on investments. In addition, Swinburne University of Technology and Victoria University were the only two Victorian universities to record “an improvement in their net result before gains and losses on investments”. Overall, VC salaries in Victoria increased as reflected in the salary band range disclosed, as notes to the financial statements, for six of the eight public universities in Victoria.

In short, these results are not as the VCs involved would prefer. Alas, there is a general improvement on the 2022 results, with the VAGO Report stating there was “an improvement from the sector’s overall net deficit of $520 million in 2022” (2024, p. 5). In general terms, international student revenue is recovering, but revenue from domestic students remains stagnant. The latter is concerning, especially given the massification of higher education in Australia in recent decades by prime means of the active recruitment of on-campus international students.

Victorian Vice-Chancellors do not appear to be falling behind in the “salary stakes”, but this is not evidently driven by the reported, audited financial performance of public universities in recent years, albeit noting the adverse impacts caused by COVID-19 on Australian shores since early 2020. What is the key factor generating such stories in The Age among other media outlets?

White and Croch (2024) allude to an important factor. They refer to Simon Marginson, previously of the University of Melbourne, who provided input to their reporting as follows: “competition for prestige in the sector had inflated salaries, as VC pay packets become a sign of where each institution sat in the national pecking order” (p. 4).

This is otherwise known as public institutions engaged in strong competition with each other to come up with the highest ranking possible under any number of sets of competitive GURs readily available for choice by Australian public universities. The heavy, concentrated and even obsessive use of this key competition driver has many key disadvantages and pitfalls, with adverse implications, such as the following:

The GURs industry is becoming a classic case of “form without substance” in international higher education.

This commentary on Vice-Chancellors remuneration in Victoria and the drivers of remuneration, is argued to be an instance of apparent narrowness in the usage of GURs. Financial performance is where the resources are derived to remunerate VCs and so on, recognising that Australian public universities are not-for-profit organisations as well as charitable institutions. On the other hand, public universities are not meant to regularly record deficits.

This essence should not be lost, even under conditions of excessive concentration on GURs, otherwise known as “university management by micro-measurement”. University missions and visions are more broadly focussed, emphasising ‘the public interest” as opposed to global rankings premised, more particularly, on feeding ‘organisational self-interest’.

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