2018 Discussion papers
School of Economics Discussion Paper 18/07
University vice-chancellor pay, performance and
Adelina Gschwandtner, University of Kent
Richard McManus, Canterbury Christ Church University
We study the pay of UK universities chief executives (‘vice-chancellors’) over a ten year period. Although there is a correlation between pay and performance, with better performing institutions paying higher salaries, we find limited evidence that this relationship is causal; that is, we find no statistically significant link that a change in pay leads to a change in performance, or vice-versa. Instead, we find strong support for an asymmetric benchmarking behaviour, where those institutions with below average pay increase their vice-chancellor’s salaries quicker than those with above average pay. We simulate a model whereby different institutions target different places of the distribution of salaries and demonstrate that inflation of pay can be explained by this behaviour.
JEL Classification: G3; J33; Z13
Keywords: Executive Compensation; Performance Pay; Efficiency Wages; Benchmark
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