University Vice Chancellors are often accused of being overpaid and of under-performing. For example, Jacqui Lambie has posited that university Vice Chancellors (VCs) should be paid less than the Treasurer. Newspapers often talk of ‘million dollar’ salaries. The government has launched an inquiry into higher education governance. But, this begs the question of whether Vice Chancellors are actually overpaid.
To consider whether Vice Chancellors are overpaid we need to consider the market rate for a professional with a VC’s skill set. The Vice Chancellor is the CEO of a large, complex organisation. The job is not a pleasant one. In addition to running a large complex organisation, they must also manage high-ego academics, who often vehemently disagree with each other and express themselves vociferously and aggressively. They must also manage the public relations disasters that arise from universities allowing free speech and academics expressing themselves indelicately.
Global counterparts
Australian universities are often compared on a global scale, with performance being measured against major US counterparts. This is because Australians demand international-level education, research, and commercialisation. Thus, Australian universities usually strive to be in the top 50 of all world universities, which implies that VC pay should be at least commensurate with those of the 50 highest-paid university presidents. But, as I will discuss, we can even look at the 200 highest-paid university presidents and get the same pay implications.
The salaries of US university presidents give us a benchmark. The US is important because it sets the baseline. Think of it this way: if we recruit an international-standard academic, they will consider their best available pay option. It’s irrelevant if the UK or Europe pay less: an international calibre Vice Chancellor will not consider them for employment. In the US, at least 225 University presidents earn more than AUD 1 million. I say at least because the latest database in the Higher Education Chronicle, dated 2024, reports pay from 2022. Thus, on an inflation-adjusted basis, we can reasonably assume that the number of US presidents earning more than AUD 1 million is higher. Many of these presidents earn more than AUD 2 million.
This means that if Australian universities reduce Vice Chancellor pay precipitously, then the are myriad other universities for qualified candidates. Or phrased differently: why would you do the same work for half the pay as you can get in the US?
The Vice Chancellor as CEO
The salaries of Australian companies also provide a benchmark. After all, if the Vice Chancellor is a qualified CEO, he/she could also look at myriad Australian companies. These are large complex organisations. To put this in perspective: For example, one Australian generates at least $2.7 billion in revenue and has $6.4 billion in assets. If we want qualified CEOs to work at universities in order to support their governance and management, we must pay them similarly. In Australia, at least 400 CEOs of listed Australian companies earn AUD 1 million. I say at least because data is reported with a lag, meaning that the number is now likely higher with inflation adjustments.
The figures are even more striking if we look at similarly sized ASX listed companies. After all, by size and revenue, Australian universities would fit in the top 50 ASX listed companies. The 50th highest-paid CEO is paid over $5 million. This means that Australian Vice Chancellors could plausibly argue for higher pay.
Beware unintended consequences
We can also consider the impact of cutting Vice Chancellor pay. As indicated, if Vice Chancellor pay is cut, they have myriad opportunities in the US and the ‘private sector’. But, it also impacts other academics via wage compression. Consider it this way, suppose Vice Chancellors are paid only $430,000, as Jacqui Lambie suggests. Well, a Vice Chancellor job is a high-pressure, high-stress, time-consuming job. It must pay more than a standard job due to the pressures. After all, no one would undertake such pressures if the money is not sufficiently better. Thus, if Vice Chancellor pay falls, then so must academic pay to maintain a gap so as to maintain an incentive to strive to become a Vice Chancellor.
The irony of crunching Vice Chancellor pay and academic pay, is that universities will bleed talent to ‘industry’. After all, the wider the gap between ‘industry’ and academia, the fewer people will stay in academia. Not only that, universities would lose academics who are interested in practical matters and can deploy those skills. The great irony, is that this would render university education less relevant and less useful. Thus, it is in all our interests that Vice Chancellors and academics are paid competitively.
The net result is that Vice Chancellors are not overpaid. Indeed, one could argue that they are underpaid. If anything, greater incentive compensation would be beneficial.
