Who’s got the sweetest deal?
Inside Housing’s annual chief executive salary survey reveals which housing association heads are unwrapping the tastiest pay packets - and compares them to council and arm’s-length housing heads for the first time. Lydia Stockdale reports.
‘If you pay peanuts you get monkeys.’ So goes the famous quote by the late financier Sir James Goldsmith. It seems the board members who set the salaries of the chief executives of the UK’s top 100 housing associations were fans.
Inside Housing’s exclusive annual survey of chief executive salaries reveals the bosses of the nation’s biggest associations - owning between 6,834 and 62,200 properties - are certainly not paid in bar snacks but indulge in something altogether more luxurious. Their pay packets average £153,353, with the total compensation of 41 association chiefs topping £150,000. More than half - 52 - take home at least £142,500, the salary of prime minister David Cameron.
Heading the list is Jane Ashcroft, chief executive of Anchor Trust. Like her predecessor John Belcher last year, she was the sector’s highest earner in the financial year 2009/10 with a total package of £290,000 - more than twice as much as Mr Cameron. David Bennett, chief executive of Sanctuary Group, takes the second spot on £285,446, swapping places with last year’s number two, David Cowans. The Places for People chief takes a not-too-distant third place this year with £279,095.
This disparity between the PM’s remuneration and that of some housing association chief executives revealed in last year’s salary survey was pounced upon by then shadow housing minister Grant Shapps. He told delegates at the National Housing Federation conference 12 months ago that it was ‘time we as a nation need to get things back in proportion’.
Mr Shapps raised the subject again after he became the coalition government’s housing minister in May, calling for chief executives to be ‘subject to the same scrutiny as other public figures whose salaries come out of the public purse’.
It remains a controversial topic: just last week in the House of Commons, Liberal Democrat MP Bob Russell asked if the Communitities and Local Government department holds information on housing association chief executive pay. Mr Shapps replied: ‘Housing associations are obliged by law to publish the salary of their highest paid director in their annual report. We expect housing associations to show restraint when setting or renegotiating remuneration packages for their senior staff. As a department we will seek to proactively highlight the pay of housing association directors and will invite the National Housing Federation to help to highlight excessive housing association executive pay to drive down costs.’
Under the spotlight
Inside Housing has been shining a light on chief executives’ salaries since 2002 and has found that housing associations are more than willing to share chief executive salary information with our readers - just four organisations refused to participate in this year’s survey.
The 2009/10 survey adopts a new methodology for gathering information. It uses the Tenant Services Authority’s list of the top 200 organisations by stock owned and managed, which was published last month, to find the largest 100 housing associations. As a result 36 new landlords appear in this year’s survey. For the first time we’ve also gathered the salaries of the chief executive’s of the 10 arm’s-length management organisations responsible for the largest number of homes, along with details of the pay packages of the heads of housing at six of the largest stock-owning local authorities.
A jaw-dropping £391,000 was the highest salary to appear in last year’s survey, paid to Anchor’s Mr Belcher, who has since retired. His successor, Ms Ashcroft, is paid 26 per cent less, but she’s still the highest paid housing head.
Older people specialist Anchor justified Mr Belcher’s salary in the past by saying it competed with private sector retirement housing providers, which paid their executives larger sums. As James Goldsmith inferred, it’s understandable that organisations need to pay a competitive salary if they are to attract the best. But at a time when housing professionals are bracing themselves for savage public sector cuts, can organisations really justify paying their chief executives mammoth salaries? After all, housing associations are largely funded by the government, receiving billions of pounds of taxpayers’ money a year in housing benefit and grant to provide social housing for some of the country’s poorest people.
Because they’re worth it
David Orr, NHF chief executive, thinks they’re worth it. ‘Running a housing association is a complex task - there are so many components to the job,’ he argues. ‘There are lots of organisations in the private sector which are much smaller and less complex and the chief executive is paid a lot more.’
Generally, housing association chief executives find their jobs attractive because their organisations have a ‘social purpose’, he continues, and this is often why they choose not to go elsewhere to earn more money. The Office of National Statistics’ annual survey of hours and earnings, last published in November, shows that the average annual earnings of directors and chief executives of major UK organisations was £172,716 - around £19,363 more than the average salary of the housing association chief executives included in our survey.
Mr Orr points out that housing associations’ boards set their chief executives’ salaries. Aman Dalvi, chair of Anchor Trust, explains the thinking behind Ms Ashcroft’s six-figure package. ‘Anchor is a large and growing organisation,’ he says. ‘Despite unprecedented change and uncertainty in the sector and the wider economy turnover has risen to £287 million [from £267 million last year]. Anchor operates from 1,000 locations across the country, employs more than 10,000 people and competes with private and public organisations to provide services to more than 50,000 people every week.’
He adds that public funding accounts for just half of Anchor’s income. ‘Increasingly, our income is from individuals who choose to purchase our value-for-money services. The chief executive’s pay is set by the remuneration committee following independent advice from two specialist consultancies and the Tenant Services Authority was informed,’ he says. ‘Remuneration as a proportion of turnover remains significantly less than many housing associations pay to their chief executives.’
According to information Anchor provided Inside Housing, Ms Ashcroft’s salary equates to 0.1 per cent of its £286 million turnover.
Places for People’s chair Chris Phillips makes a similar argument. ‘If the property sector is going to attract and retain chief executives of a high calibre then we need to ensure that their salaries are attractive, reflect previous experience, and reward performance,’ he says.
‘[Chief executive] David Cowans’ leadership has continued to steer Places for People through a challenging operating environment. He has taken tough decisions to minimise the impact of the global crisis on the day-to-day running of the group, and has positioned it for future growth. The group’s robust strategy and financial planning has meant that we have been able to manage the business well under difficult conditions and still been able to innovate.’
Of all the organisations surveyed, Places for People has the second largest turnover - £312 million. Mr Cowans’ total salary represents 0.09 per cent of this.
Outside the top three, there is some evidence the housing sector is paying attention to the current economic environment. Of the 75 chief executives for whom we have comparable salary figures for 2008/2009,
12 per cent took a pay cut during the last financial year. More than a quarter of housing heads’ salaries stayed the same, including those of Gordon Perry, chief executive of Accent Group, and Sinéad Butters, chief executive of Aspire. Home Group reveals its chief executive, Mark Henderson, declined a pay increase for 2009/10 and Wakefield & District Housing says its chief executive Kevin Dodd did not take his full salary entitlement.
In 2008/09 the average chief executive salary for the 75 organisations was £153,128; the average for 2009/10 was £158,026. This represents an average 0.4 per cent increase; the average salary increase was £2,204. Sixty per cent of housing heads for whom we received comparable figures for last year received pay increases of between 1 and 12 per cent.
Interestingly, newcomers to chief executive posts are being paid less than their predecessors. Martin Armstrong, chief executive of the Glasgow Housing Association’s total salary for 2009/10, for example, was 6 per cent lower than former chief executive Taroub Zahran’s 2008/09 package.
Just 16 chief executives surveyed received bonuses this year compared with 53 last year, though this figure included car allowances and ‘other considerations’. The largest of these was John Belcher’s £111,000 payout, while this year’s top bonus-earner was Affinity Sutton’s Keith Exford with £22,000. There was also an 11 per cent increase in those receiving no bonus or car allowance this year. The average bonus last year was £15,000, which included car allowance and other perks.
In the long term, housing association heads can relax in the knowledge they’re going to be well looked after in retirement. On average, their employers plough a contribution amounting to 15.6 per cent of their salaries into their pension pots. It’s a tidy sum, which ever way you cut it.
Compare and contrast
Pensions aside, while there has clearly been some restraint over salaries this year, our figures reveal association chiefs are better rewarded than their local authority and arm’s-length management organisation equivalents.
This year, Inside Housing contacted some of Britain’s largest stock-owning local authorities along with the Northern Ireland Housing Executive, to find out what their heads of housing are paid. Derek Muir, head of housing and neighbourhood services at Fife Council, for example, is paid around £85,000. Mr Muir is responsible for 31,000 homes and an £83.5 million turnover. His salary equates to 0.1 per cent of turnover and £2.74p per home.
Paddy McIntyre, chief executive the NIHE - which owns and manages a massive 90,182 homes and has an annual turnover of £751.65 million - is paid a relatively modest £125,584 - that’s 0.02 per cent of turnover and £1.39 per home.
The highest paid housing association chief executives are paid ‘almost £800 per day, every day of the week’, says an incredulous Michael Gelling, chair of the Tenants’ and Residents’ Organisation of England. He argues housing associations should be able to show how their bosses’ salaries are calculated, just as many local authorities calculate salaries based upon the scale of local populations. ‘Without recognisable criteria we do not have any idea of how these salaries are achieved,’ he says.
Mr Gelling points out that council housing heads and the chief executives of ALMOs are paid less than housing association leaders. ‘That can’t be fair and equitable,’ he states.
The average salary for chief executives of the largest ALMOs, meanwhile, is £123,286 - this equals an average of £4.04 per home managed. Reflecting upon these results, Gwyneth Taylor, policy officer at the National Federation of ALMOs, points out that the housing regimes in England, Ireland and Scotland are different. Therefore, she argues, salaries are not directly comparable. She also says that council heads of housing may ‘run the housing management service but they will be supported by other departments in the council such as finance, legal, HR, IT and corporate services while an ALMO chief exec has direct responsibility for all of those’.
The best comparison to make is ALMOs compared to large scale voluntary transfer housing associations, Ms Taylor says. ‘The ALMO structure is based on LSVT models and in other ways they are very similar.’ ‘There are some differences,’ she adds. ‘Housing associations have to access private sector lending but ALMOs usually have delegated to them other local authority functions that housing associations do not have to do.’
Brian Simpson, chief executive of stock transfer organisation Wirral Partnership Homes, agrees. ‘There is a difference between traditional registered social landlords and the likes of us,’ he says. Mr Simpson received a 5 per cent salary increase in 2009/10 along with all other employees in his organisation - this took his total salary up to £131,640. The formula that sets salaries was negotiated before Wirral Council’s housing stock was taken on by Wirral Partnership Homes in 2005. ‘Increases are set using the same formula as rent increases,’ he explains. ‘It means staff know what’s going on - they have certainty.’
James Magee, head of housing at human resources consultancy Hay Group, says his clients are increasingly considering setting chief executive salaries based upon a measurable criterion: performance.
‘They’re considering basing a larger proportion of individual’s salaries upon their performance rather than guaranteeing cash. In housing this would be based upon customer satisfaction scores and meeting regulatory requirements,’ he says. ‘The accusation that executive salaries are too high becomes invalid if organisations have a policy under which they want to pay for the best people as long as they see a return on their investment.’
Such a development would help settle which housing chiefs should be paid in pounds and which in peanuts. Until then, the cuts unveiled in next month’s comprehensive spending review may well cast chief executive pay in an altogether new light.