Last year, the University’s two best-paid money managers took home $17.5 million and $17.4 million, enough—according to Boston Magazine—to make them the Boston area’s second and third highest-compensated employees, and enough—according to the Chronicle of Higher Education—to make them the highest-paid in academia. And those salaries will jump even higher this year, according to Jack Meyer, president of the Harvard Management Company (HMC), the University’s in-house endowment manager.
Meyer said that although the University has no obligation to report fund managers’ salaries until May, those figures have typically been reported in November or December. The figures will be released later because HMC’s board of directors wanted to review the compensation at its quarterly meeting yesterday, he said.
In response to the rising compensation of HMC investors, seven members of the Class of 1969, whose members are entering their 35th reunion year and will thus be heavily solicited for donations, sent a letter to University President Lawrence H. Summers on Nov. 25, objecting to the size of HMC salaries in light of rising student expenses.
“We consider these issues to be directly related,” the letter says. “If Harvard can afford to pay over $50 million per year to a small number of financial managers, and if it does so because the Endowment has recently experienced excellent growth, it is clear that Harvard can afford to reduce more than $50 million per year from the ever-increasing cost burdens on current students and debt burdens on recent graduates.”
The letter’s signatories—who also sent copies to the officers and reunion co-chairs of their class, Vice President for Alumni Affairs and Development Donella Rapier and Vice President for Government, Community and Public Affairs Alan J. Stone—leverage their financial power in the letter, threatening to curtail their giving to the University unless it reconsiders the issues they raise.
“Unless the University limits payments to financial managers to appropriate levels, stabilizes the costs for current students at the College, and reduces debt burdens on recent graduates, we see no reason why alumni should be asked for gifts,” the letter says.
Over two weeks later, neither Summers nor anyone else at the University has responded to the letter, according to Stone. He said a response would be forthcoming and declined to comment further.
At least one signer said he was upset by the University’s failure to respond thus far.
“I’m also somewhat disappointed that we haven’t received any reply at all in two weeks, not even an acknowledgement that it was received,” David E. Kaiser ’69 said.
It’s The Money
Meyer said the letter failed to account for the improved endowment performance that such large bonuses generate.
“The letter fails to recognize that there is a direct connection between bonuses and value added to Harvard,” he said. “If you don’t pay the $17.5 million bonus, you don’t get the approximately $175 million in value added—so their math is a little perverse.”
But Jeffrey C. Alexander ’69, who is chair of Yale University’s sociology department, said Harvard’s system doesn’t necessarily net better returns.
“I’ve checked with other universities and most of the fund managers believe that Harvard doesn’t get a higher rate of return than the others,” Alexander said.
The crux of the issue is that Harvard is one of only two universities—Duke University is the other—that retains an in-house endowment management firm. As a result, while the managers of other schools’ endowments might also draw large salaries, they are not directly paid by those schools.