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A state-educated woman becomes a prize-winning scholar and rises, through intellect and ability, to run an institution with a £263m turnover. This should be a modern-day Cinderella story,

with academic achievement standing in for the glass slipper. Instead, Glynis Breakwell, who quit last week as vice-chancellor of Bath University following an outcry over her £468,000 pay

package, is this season's pantomime villain. Joining her in the stocks this week is Christopher Snowden, vice-chancellor of Southampton University - and the subject of an intensifying

row after it emerged that he sits on the salaries committee that awarded him a package worth £433,000. Why do we boo them? There are three reasons – they are seen as out of touch (the £2

claim for biscuits was Breakwell's Marie Antoinette moment), there is anger over inequality at a time when university pensions face a shortfall, and they are felt to have manipulated

the system. These are valid points. But no one has accused Breakwell or Snowden of doing their jobs badly. Indeed, Bath university has climbed league tables, its research grants have grown

from £17m to nearly £36m and its student population has doubled to more than 16,000 since Breakwell arrived in 2001 – these are all the signs of a flourishing institution. Snowden is a

fellow of the Royal Society, one of Britain's most eminent scientists. He combines academic strength with business experience gained as chief executive of Filtronic, the wireless

telecoms equipment maker. If we want public servants who are capable, we need to accept high pay and high inequality. It is understandable that students and their families feel disquiet

about vice-chancellors' pay when tuition fees in England have reached £9,250, with a top interest rate of 6.1%. Their education isn't cheap. But we need to remember that

Britain's university sector is the goose that laid a golden egg. They are admired around the world and their talent search is global – Oxford, Cambridge and Imperial all hired their

current leaders from overseas. In the US, dozens of college leaders earn more than $1m a year, though admittedly this is easier to swallow when such institutions are private. Universities

are a rare example of a service industry that is both concentrated and diffuse. Unlike the City, their benefits are spread around the country. Unlike law firms, they are frequently one of

the biggest employers in our cities. We need to pay their managers accordingly. Other countries take leadership seriously, and reward their leaders lavishly. Singapore prides itself on

paying civil servants "market competitive" salaries. The Asian country's prime minister is the highest-paid elected head of government in the world, earning S$2.2m (around

£1.2m) a year. It is worth having a debate about pay ratios. Breakwell's remuneration is around 30 times the salary of the university's most junior employees. This is a trifling

gap by comparison with the distance between the average bank teller and their chief executive. But it is far wider than the five to one ratio that was proposed by Plato – and adopted for a

while by Ben and Jerry's. Universities also need to reform their governance. Allowing members of the remuneration committee to vote down a motion expressing concerns about

Breakwell's pay is unacceptable. Similarly, Snowden should not be sitting on his own salaries committee - even if, as the university says, he was not present at meetings where his pay

was decided. This messy governance fuels the suspicion that those at the top of universities are acting as a cosy club.  Pay should be tied to performance. Civil servants' bonuses in

Singapore rise and fall with the performance of the economy – this year's payout will be an extra month's salary, the biggest bonus in four years. Conversely, Singapore's

prime minister took a 36% pay cut in 2012 at a time of public anger over rising housing costs and declining standards of service on public transport. A similar ethos runs through

Singapore's family businesses, where bosses will often set an example by taking deep pay cuts themselves at times when sales plummet. The crucial point is that the cuts are not a signal

of humility but a response to the crisis; and the money is restored when times are good. Andrew Adonis, the Labour peer and former education minister who has led the campaign against

vice-chancellors' pay, has offered to run the university of Bath himself for a month "to clean out the Augean stables". Lord Adonis added: "I would do it without

pay". This is noble – and would sow the seeds of disaster. A public service cannot be built on saints who work for little or nothing because there is a limited supply of them. Such a

policy would not be sustainable or scalable. Universities are strange hybrids: charities that receive public money while touting for customers like a business. They operate in a marketplace

which is opaque – how can a teenager easily measure the worth of a geology degree at Manchester against a chemistry degree at Leeds? – and many of their consumers have little choice but to

buy their product if they want to get ahead. It is understandable that all this makes it harder for the public to accept lavish rewards for university leaders – compared with the obvious

risks taken by an entrepreneur. But the design of the system is not Breakwell or Snowden's fault. By all means punish our leaders when things go wrong. Vice-chancellors should be held

responsible for failing their students by delivering a sub-par education. But reward them for their achievements too. It is time for Britain to decide how comfortable we are with

meritocracy. The example of vice-chancellors like Breakwell and Snowden – two people who have strived hard for success – should be an inspiration to undergraduates. If these two do not

deserve to be handsomely rewarded for their work, who does? Jeevan Vasagar is a former Guardian education editor