Flash forward a year. Housing associations have failed to meet their targets, competition for the top jobs is intense, and Inside Housing’s salary survey shows chief executive pay has fallen.
That’s what ought to happen according to the arguments reeled out year after year for ever-rising salaries. But I won’t be taking any bets that it will.
Once the case is established, it means that even people who would not necessarily demand six-figure salaries for themselves feel under-valued if they don’t get them.
The 2008 salary survey published in Inside Housing today shows that the average pay of association chiefs rose by 7.3 per cent this year but that the 10 highest paid saw their salaries leap 15.8 per cent.
The justification for this is that they are in a ‘market’ for top talent and have to pay top salaries to compete. In fairness, the same argument is used by organisations across the public and voluntary sectors - and in society as a whole - to justify the ever-increasing gap between pay at the top and at the bottom.
Strangely, this argument never applies to their underlings, who are usually forced to get by on below-inflation pay rises. Once the case is established, it means that even people who would not necessarily demand six-figure salaries for themselves feel under-valued if they don’t get them.
Within large housing associations, an additional argument is that they are significant businesses responsible for delivering multi-million pound projects. ‘If the housing and regeneration sector is going to attract and retain employees of the highest calibre, then we need to ensure that salaries are attractive, reflect previous experience and reward meeting and exceeding targets,’ says the chair of one big association.
Let’s leave aside the fact that the customers of these ‘businesses’ have some of the lowest incomes in society. Let’s ignore the fact that their businesses are largely financed by the taxpayer through social housing grant and housing benefit. Let’s accept the market case for the sake of argument.
What will happen in the next 12 months? Housing associations will probably fail to meet their development targets unless significant amounts of public investment are brought forward and grant rates are increased. Some could even be vulnerable to badly timed development of homes for sale and shared ownership.
They will also be operating in a buyers’ market for talent thanks to the recession sweeping through the house building industry. Candidates with as much if not more development expertise will be eyeing the salaries (and pensions) on offer.
To my mind, chief executives earn their money more in bad times than good. But in market terms there will be no discernible reason to offer increased salaries and no justification for bonuses of any kind. As another association chair argues in Inside Housing today: ‘Salaries are higher in larger organisations because they chief executive carries much more responsibility and must be answerable if things go wrong.’ Perhaps there should even be pay cuts for existing chief executives who have failed to deliver on their targets?
Or do markets only work one way?