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

35 Pages Posted: 5 Nov 2008

See all articles by Heather Tarbert

Heather Tarbert

Glasgow Caledonian University - Division of Accounting & Finance

Kaihong Tee

Loughborough University

Robert Watson

Instituto de Empresa

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

Tarbert, Heather and Tee, Kaihong and Watson, Robert, The Legitimacy of Pay and Performance Comparisons: An Analysis of UK University Vice Chancellors Pay Awards. British Journal of Industrial Relations, Vol. 46, Issue 4, pp. 771-805, December 2008, Available at SSRN: https://ssrn.com/abstract=1295628 or http://dx.doi.org/10.1111/j.1467-8543.2008.00689.x

Heather Tarbert (Contact Author)

Glasgow Caledonian University - Division of Accounting & Finance ( email )

Scotland
United Kingdom
0141 331 3796 (Phone)

HOME PAGE: http://www.gcal.ac.uk/cbs/about/aaf/staff/tarbert.html

Kaihong Tee

Loughborough University ( email )

Ashby Road
Nottingham NG1 4BU
Great Britain

Robert Watson

Instituto de Empresa ( email )

Serrano 99
Madrid, 28006
Spain

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