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Alumni Criticize HMC Executive Compensation As ‘Excessive’

By Joshua J. Florence, Crimson Staff Writer

A group of alumni decried “excessive” compensation for executives at Harvard Management Company, the University’s investment arm that oversees its $35.7 billion endowment, in a letter sent Monday to the Harvard Corporation.

In the letter, 11 members of the Class of 1969 wrote that HMC executives do not deserve their compensation packages as endowment returns have remained “poor or mediocre.”

In fiscal year 2016, the value of Harvard’s endowment dropped nearly $2 billion after HMC returned negative 2 percent on its investment portfolio. The negative returns combined with other financial flows, including the $1.7 billion HMC distributed to fund more than a third of Harvard's annual budget, resulted in the endowment’s drop in value. In the last few years, Harvard’s endowment performance has lagged behind that of many of its peers, including Yale.

In the letter, sent to the University’s highest governing body, the alumni presented an analysis that claimed that HMC executives have seen increases in compensation packages for nearly every year since the 2008 financial crisis, despite lackluster endowment returns. The alumni proposed that HMC alter its current compensation packages and increase transparency regarding payments to executives.

“The compensation given to the highest-paid employees of Harvard Management, extravagant in its own right, continues to be vastly disproportionate to performance,” the alumni wrote.

Emily Guadagnoli, an HMC spokesperson, wrote in an emailed statement that HMC will increasingly tie compensation to performance in coming years.

“Starting in fiscal year 2017, compensation paid to internal investment managers will tie a meaningful share of variable compensation to HMC’s overall performance,” Guadagnoli wrote, adding that “current and former employees will forfeit compensation that was held back in prior years” because of HMC’s losses in fiscal year 2016.

In 2014—the last year for which compensation data has been made public as part of Harvard’s tax returns—Stephen Blyth, then the CEO of HMC, made $8.3 million. Andrew G. Wiltshire, who has since retired as the head of alternative assets, made $10.4 million.

The impetus for the alumni letter was a PowerPoint presentation consulting firm McKinsey and Company created for HMC, the authors wrote. The McKinsey presentation, first reported by Bloomberg, quoted HMC employees calling the culture at HMC “lazy” and “stupid.”

This is not the first time this group of alumni has written to a Harvard president to express disapproval with the compensation of HMC executives. Led by David E. Kaiser ’69, the cohort of alumni wrote to former University President Lawrence H. Summers during his tenure as well as Faust in 2009, 2011, and 2014.

Following criticism in 2014, Vice President for Alumni Affairs and Development Tamara E. Rogers ’74 penned a letter to alumni to argue that the salaries were justified.

The group’s letter comes as HMC undergoes a transition of leadership. N.P. Narvekar, formerly the head of Columbia’s endowment, will become the CEO of HMC in early December. He will succeed Blyth, who resigned in July after 18 months at the helm of the investment arm.

—Staff writer Joshua Florence can be reached at Follow him on Twitter @JoshuaFlorence1.

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