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Barry Reilly

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Ray Bachan and Barry Reilly

The pay of university heads (vice chancellors, rectors, provosts, principals, directors and presidents) has attracted international interest over the last decade particularly in some large developed economies. The pay awards granted to university heads has, in some cases, attracted adverse public comment in a landscape characterised by rising tuition fees and cuts in public funding. This chapter considers the extent to which such pay awards are associated with university performance measures based around institution mission and financial probity using an individual fixed effects strategy based on UK data covering academic years 1998/99 to 20014/15. This yields a sample containing 1,583 observations on 254 VCs over 17 years. No study to date has availed of such rich data and the period reviewed covers some important changes within UK higher education. Our empirical findings suggest that VCs are paid in accordance with the size of the institution they manage and there is some evidence of tournaments influencing VC pay. These results resonate with the existing international empirical literature on this topic. Moreover, we find that, in the UK VCs are rewarded for observable mission-based performance measures. Specifically, our results suggest that success in widening participation for students from the lower social classes and areas with low university participation exerts a positive effect on VCs’ pay. Securing income flows from university funding council grants also impacts positively on their remuneration. However, these results are found to differ according to university type. Further, even after controlling for a rich array of observable and unobservable factors, there have been sizeable increases in real pay in recent years that cannot be readily explained.