One hundred eighty to one represents the ratio of the highest-paid Harvard employee’s salary to the lowest. For a university with a $32 billion endowment, this wage disparity is ridiculous and embarrassing, and Harvard must amend it not only by ensuring good jobs for Harvard’s lowest-paid workers, but also by significantly reducing top executive compensations.
Harvard’s top compensated employee, Stephen Blyth, is the head of internal investments for Harvard Management Company (HMC). He took home $8.4 million in 2009 (the ratio 180 to 1 is based on his 2008 compensation of $6.4 million). Other top executives also made seven-figure salaries, and President Drew Faust made $875,000. Meanwhile, Harvard’s lowest-paid employees, our custodians, often must find multiple jobs simply to support their families.
In a recent editorial, the Crimson Staff has argued that Harvard’s enormous pay disparity makes sense—after all, those earning multiple millions a year all work at HMC, managing Harvard’s investments and ensuring the returns that allow Harvard’s now-$32 billion endowment to grow each year. These hedge fund managers earn bonuses tied directly to the endowment’s performance. Between 2009 and 2010, the endowment did well; hence, Blyth earned $8.4 million.
The Crimson suggests that Harvard must pay its hedge fund managers a salary competitive with those on Wall Street. It argues that with no economic incentive to perform well, Harvard could never attract top hedge fund managers and its endowment would do poorly. You get what you pay for, right?
Unfortunately, Harvard is not an investment bank, it is a taxpayer-supported nonprofit. As a subsidiary of Harvard, HMC exists to further the aims of the University, not to generate wealth. In fact, in 2003, when HMC’s CEO made risky bets that paid off well both for Harvard’s endowment and his own salary, Yale’s Chief Investment Officer David Swensen spoke out against disproportionate compensation at the Harvard Management Company. Swensen told the New York Times in 2007: “Paying some people $35 million where others earn $35,000 tears at the fabric of an institution.” Harvard’s continuing 180 to 1 wage disparities continue to rip Harvard’s values to shreds.
Harvard’s administrators repeatedly tell me and other concerned students that the growth of Harvard’s endowment is absolutely necessary for our college experience. The interest earned on the endowment funds our financial aid, our facilities, and our academic resources.
Harvard’s operating budget is $3.7 billion per year, not significantly different from the operating budgets of Yale and other large research and academic institutions in the United States. Grants, tuition, and endowment income all contribute to this budget. Must our endowment really continue to grow larger and larger just to help sustain financial aid and House upkeep? Providing exceptional financial aid should not necessitate continual and exponential growth of Harvard’s endowment.
The Crimson has repeatedly endorsed the principle of socially responsible investment. After all, as a nonprofit educational institution, it simply makes sense for Harvard’s endowment to oppose genocide and unjust land grabs, oppose environmentally degrading practices, and affirm labor rights. If we acknowledge that Harvard’s endowment is not a Wall Street hedge fund—if we are willing to accept a slightly lower rate of return on investment for the sake of social justice—then we must be consistent. Twenty-two percent returns cannot justify $8 million salaries.
Fundamentally, Harvard is prestigious. Our alumni lead in the world of investment banking and hedge fund management. Undoubtedly, Harvard could find an excellent and successful investment manager who would manage the endowment for a salary less than what she would earn on Wall Street—in fact, most of HMC’s current executives probably would make much more working in the private sector. Those who choose to manage nonprofits instead of for-profits regularly accept lower salaries for equivalent work; this principle should extend to endowment management as well. But even barring this possibility, Harvard’s endowment can afford to perform a little less well than it has historically. There is no justification for Harvard’s exorbitant executive salaries.
The huge wage discrepancies between HMC’s top executives and Harvard’s custodians, dining hall workers, and clerical workers are astonishing and alarming. Of course, ensuring good jobs for Harvard’s lowest-paid workers can help fix this dichotomy: For example, we must ensure that custodians receive a fair day’s pay for a fair day’s work and have time to spend with their families, as requested in their current contract negotiations.
But Harvard must fix the top of the wage scale as well. No one deserves an annual income of $8.4 million dollars. We must cap compensation for Harvard’s hedge fund managers and HMC’s CEO—only then can Harvard end 180 to 1.
Sandra Y.L. Korn ’14, a Crimson editorial writer, lives in Eliot House.