On Tuesday 19 September, Brendan Edgeworth presented the Annual Social Justice lecture at James Cook University on the topic of “Poverty, Inequality and the Law in Australia”. Prof Edgeworth told us that on a range of indicators Australia is a much less equal place today in 2017 than it was in 1970.
How this has come about is explained in the recently released book “Game of Mates: How favours bleed the nation” by Cameron Murray and Paul Frijters.
The first paragraph of the book reads “This is the story of how Australia became one of the most unequal societies in the Western world, while merely a generation ago it was one of the most equal. It is the story of how groups of “Mates” have come to dominate our corporate and political sectors, and managed to rob us, the Australian majority, of over half our wealth.”
The “Game of Mates” has worked very well for the leaders of Australia’s universities. Back in 1970 everything was pretty well regulated. The Vice-Chancellor’s salary was at the high end of the professorial scale so the Vice-Chancellor would earn around three times the wage of the average worker. It is a bit different today. According to a recent article in The Australian Higher Ed section the average salary package of Australian Vice-Chancellors is now $890,000. Top of the list is Professor Michael Spence of Sydney University who receives a cool $1.4 million. The figures quoted in the article suggest that at most universities the package of the Vice-Chancellor is more than ten times the wage received by the average worker.
And the winner is … Professor Michael Spence on $1.4million! (Photo: The Australian)
Why is this so? Is it because the Michael Spences, Peter Hojs and Sandra Hardings of the current crop of VCs are much smarter and work much harder than their counterparts back in 1970? Possibly – but probably not. It has much more to do with the way remuneration packages are now determined for those fortunate enough to be at the top of tertiary institutions.
Down where most work, salaries are set by enterprise agreements that take months of wrangling over small increase to salaries and changes to conditions. At the top, the bargaining take place in a much more civilised way.
To show how it works, let’s look at the fictitious university –Neo Liberal University or NLU for short. NLU is governed by a council of 14 members headed by Chancellor Bob and the current Vice-Chancellor Susannah. The council meets every month, and once a year there is a council retreat held at a five star resort at some exotic location – they are all quite chummy. Susannah is appointed for a term of five years and her remuneration package is regularly reviewed. A committee of the Council consisting of Chancellor Bob, and members John, David and Gloria has the task of reviewing Susannah’s salary package.
A management consultant is appointed to carry out the review and to bring back a recommendation to the committee. The consultant reviews the financial position of the university and other relevant information, such as the remuneration packages paid to VCs of other universities and the packages paid to CEOs in government and the private sector. The consultant meets with Bob, John, David and Gloria and discusses her findings. A key exhibit is the the table of packages paid to the VCs of other universities, similar to the table in the article in “The Australian” above. The consultant asks where they see NLU based on its current performance.
Bob, John, David and Gloria look at each other and Bob nods wisely.
Bob says “Well on some indicators we are not doing well – but we are aspiring to be in the top 20% of universities in Australia so the remuneration paid to our chief executive certainly needs to reflect this”. The consultant suggests that this means the package needs to be set around the 80th percentile. She explains that this is the salary level below which 80% of the current VC salary packages fall. “This would be around $1.1 million”, she says.
“That amounts to an increase of around 35% on the $800k that Susannah is currently paid” remarks John. “We spent most of our last Council meeting being told by the NLU Chief Financial Officer why the increase in salaries for NLU workers should not be any more than 8.2% over the next five years.”
Photo: Meanwhile the workers struggle for wage increases through industrial action
They four of them and the consultant sit thinking for several moments. Bob says “Look we have been appointed to make the hard decisions – and you know the old saying if you pay peanuts, you get monkeys. I move that Susannah’s remuneration for the next five years be set at $1.1million.” The consultant suggests that for public consumption, the motion could be that Susannah’s salary be maintained at 800k and that the extra 300k could be made up of benefits to be determined. A this suggestion they all brighten up and agree to Bob’s motion.
At the next Council meeting, the recommendation of the remuneration committee is accepted. Several days later Susannah is quizzed by the media about the increase in her package. She tells them that her salary is determined by an independent process.
This process works very well for the beneficiaries because all universities aspire to be in that top 20% and in recent years we have seen the salaries of Vice-Chancellors rise much more quickly than the workers at their universities. And it does not stop there because the levels of remuneration paid to the Deputy Vice-Chancellors, Pro Vice-Chancellors, and numerous others are based on the salary package paid to the Vice-Chancellor.
The “Game of Mates” rewards the senior managers of our universities very well. Too bad this mateship only extends to the top few rungs of the institution.