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CEO Pay code required – true or false?

Posted by Sally Timmins on March 27, 2018

CEO Pay code required – true or false?

Whether your trust is in financial surplus or deficit, the question around CEO/head teacher pay is always a dilemma for trustees. With no official guidelines or pay scales in place for academies, it can be a very lonely place for the trustees who undertake the relevant performance management in the autumn term.

The spring term is the time when trustees are looking to firm up budgets and effective challenge on the finances is key as we know.  There are resources to help with the external validation of pay scales and other key financials, to give trustees some comparisons and allow the question of value for money to be addressed. Current positions advertised in publications such as TES, published academy CEO pay league tables and the like are market representative, and of course academy trusts are also required to publish the salary in the financial accounts. There are more matters to consider.

There is no harm in rewarding an effective CEO/head teacher, but when public money is spent the evidence of reasoning behind it needs to be carefully considered and reflected within the minutes of the finance committee meetings. As with any transaction that the Trust enters into it should have due regard to the principles in the AFH, including if the transaction could be considered novel, contentious, or repercussive. The AFH 3.3  describes contentious transactions as those which might give rise to criticism of the trust by Parliament, and/or the public, and/or the media, and repercussive as those which are likely to cause pressure on other trusts to take a similar approach and hence have wider financial implications.

There is no doubt, potentially challenging the level of paid full time education professionals is not for the faint hearted, but to reassure that what is being paid is reasonable, is good financial governance, and valued, indeed demanded, by the ESFA where paragraph 2.3.5. states that “the board of trustees must ensure that their decisions about levels of executive pay follow a robust evidence-based process and are reflective of the individual’s role and responsibilities”, yet does not define what that “evidence” is.

With salaries being paid to ever higher levels, and a reported 120 or more academy trusts paying someone more than £150,000, the amounts of money involved are significant. The CEO of Harris Federation is reportedly earning £500,000 and the DfE have now written to 29 trusts specifically about high pay. Also in February 2018 Lord Agnew has written to the Chairs of all Trusts and said that he believes not all boards are being rigorous enough on this issue. There has also recently been reported a CEO of a small 2 school trust with a remuneration package of more than £270,000. We have also seen further reporting in the national press about levels of CEO pay, so there could be an argument that high levels of pay are automatically contentious and should therefore have ESFA approval. If you have followed proper procedure and have supporting evidence then approval should not be an issue. Is there also an argument that the press stories are creating an environment where other trusts feel the need to pay higher levels of salaries to compete and retain the best performing CEOs, therefore they are repercussive transactions?

The responsibility is on trustees to evidence their CEO salary has been benchmarked and is reasonable within the scale and demands of the trust and others of a similar size, structure and location.  This can be a positive process in a large number of cases, and support the effective financial governance within trusts looking to do it well.

CEO Salary benchmarking, along with many other valuable statistics for trustees to use is also available in the Kreston Academies Benchmark report.

If you have any queries please do not hesitate to contact your usual Bishop Fleming representative.