HMC Lowers Cap on Payouts

Harvard’s top fund manager will see a pay cut next year following a flurry of alumni criticism of the University endowment managers’ multi-million dollar salaries.

Harvard Management Company (HMC) President Jack Meyer said yesterday that the maximum fund manager compensation had been lowered, and University President Lawrence H. Summers indicated the difference would be substantial.

“There have been some changes that, you know, in the event of another year like last year, would lead to a significant reduction in top compensation levels,” Summers said in an interview Wednesday.

HMC fund managers typically receive a base salary of $400,000, but the bulk of their compensation comes in the form of performance-based bonuses which push their total salaries into the millions.

In lowering the cap below last fiscal year’s payouts, Harvard will at least cut the salary of Maurice Samuels, who earned $35.1 million in fiscal year 2003. David R. Mittleman, who made $34.1 million, will likely also see a pay cut.

Last fiscal year’s bonuses were particularly high after the endowment jumped a hefty 12.5 percent.

The salary cap reduction comes in the wake of increased scrutiny from alumni, who have called the fund manager payouts inordinate. A group of seven graduates in the Class of 1969, whose November letter to Summers drew newfound attention to the issue, reiterated their objections in another letter this month.

“If Harvard can afford to pay $107.5 million to six fund managers this year, Harvard can find the funds to make college education more affordable in fundamental ways, benefiting a far larger proportion of students,” they wrote.

Informed of the lower salary cap yesterday, William A. Strauss ’69, a signer of the letter to Summers, said the change was not sufficient.

“We don’t think they should be paid more than the president of Harvard,” Strauss said.

Summers made just over $500,000 in salaries and benefits in fiscal year 2002, according to the most-recently filed tax forms.

In advance of their 35th reunion this June, the seven graduates from the Class of 1969 garnered particular attention for their ability to wield financial power at what is typically a lucrative reunion year for the University.

According to figures published by the Harvard College Fund as of Feb. 12, the Class of 1969 had the lowest participation rate, at 34.7 percent, among reunion classes in their 25th year or higher.

David Kaiser ’69, who also signed the letter to Summers, said he had spoken with several class members who were concerned with the fund manager salaries.

“We did get a lot of favorable reaction when the story first broke,” Kaiser said, “and we’re hoping to organize some kind of discussion of the issue at the reunion.”

Meyer said the lower salary cap did not represent a structural change in HMC’s compensation formula.

“We have always had maximum caps on payouts, and they change every year based on how much money is in the bank and based on where we want to set them,” he said.

Meyer said the compensation issue was heavily discussed at the September and December meetings of the HMC board, which includes Meyer, Summers, University Treasurer D. Ronald Daniel, Vice President for Finance Ann E. Berman and Dwight P. Robinson Jr. Professor of Business Administration Jay O. Light.

The board, which sets policy for HMC, voted to lower the maximum compensation, but neither Meyer nor Summers would specify the level at which the maximum was set.

—Staff writer Zachary M. Seward can be reached at seward@fas.harvard.edu.