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The Legitimacy of Pay and Performance Comparisons: An Analysis of UK University Vice Chancellors Pay Awards

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  • Heather Tarbert
  • Kaihong Tee
  • Robert Watson

Abstract

This article examines UK University Vice Chancellors (VC) pay awards. The empirical analysis, covering the period 1997–2002, evaluates the impact upon VC pay awards of university performance measures, internal pay comparisons and two external pay comparisons, that is, the pay of other VCs and the pay of chief executive officers (CEOs) leading comparable‐sized UK firms. For the total sample, we find no evidence that VC pay awards are related to any of the performance measures, although for the pre‐ and post‐1992 subsamples there is some evidence that pay awards are related to some ‘mission‐relevant’ performance measures. All the analyses show a positive relationship between changes in the proportion of other highly paid employees and VC pay awards, which suggests that internal pay comparisons play an important role in remuneration committee decision making. As anticipated, the two external pay benchmarks have very different effects upon VC pay awards; the pay received by other VCs produces a marked ‘mean reversion’ in pay levels while the pay of CEOs running comparable‐sized UK firms had a highly significant positive impact upon VC pay awards. Following the insights of institutional theory, we interpret this conservatism by university remuneration committees as stemming primarily from legitimation concerns rather than financial constraints.

Suggested Citation

  • Heather Tarbert & Kaihong Tee & Robert Watson, 2008. "The Legitimacy of Pay and Performance Comparisons: An Analysis of UK University Vice Chancellors Pay Awards," British Journal of Industrial Relations, London School of Economics, vol. 46(4), pages 771-805, December.
    • Handle: RePEc:bla:brjirl:v:46:y:2008:i:4:p:771-805
    DOI: 10.1111/j.1467-8543.2008.00689.x
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    Cited by:

    1. Bachan, Ray & Bryson, Alex, 2022. "The Gender Wage Gap Among University Vice Chancellors in the UK," Labour Economics, Elsevier, vol. 78(C).
    2. Ian Gregory-Smith & Brian G. M. Main, 2016. "Testing the Participation Constraint in the Executive Labour Market," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(4), pages 399-426, September.
    3. Lucey, Brian & Urquhart, Andrew & Zhang, Hanxiong, 2022. "UK Vice Chancellor compensation: Do they get what they deserve?," The British Accounting Review, Elsevier, vol. 54(4).
    4. James Walker & Peder Greve & Geoff Wood & Peter Miskell, 2019. "Because you're worth it? Determinants of Vice Chancellor pay in the UK," Industrial Relations Journal, Wiley Blackwell, vol. 50(5-6), pages 450-467, November.
    5. Jill Johnes & Swati Virmani, 2020. "Chief executive pay in UK higher education: the role of university performance," Annals of Operations Research, Springer, vol. 288(2), pages 547-576, May.

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