Tuesday, May 18, 2010

Harvard discloses pay for endowment officials

Harvard discloses pay for endowment officials

By Beth Healy, Globe Staff  |  May 18, 2010

The chief of Harvard University’s endowment earned nearly $1 million for her first six months on the job in 2008, according to a tax filing made public Monday, as global markets plunged and dragged the fund down with them.

Jane Mendillo joined Harvard on July 1, 2008, and oversaw a 22 percent dive in the endowment through October of that year. The fund’s value would tumble 27 percent, to $26 billion, by the end of her first full fiscal year on June 30, 2009.

In a trying period for the elite institution, Harvard’s president, Drew Gilpin Faust, earned $822,011 in total compensation in calendar 2008, up 6 percent from the prior year. Of that, $96,000 was for housing.

The highest-paid faculty member on the tax disclosure is professor William E. Fruhan of Harvard Business School, who took home nearly $1.2 million that year. Harvard declined to comment on the pay reports.
Paychecks at the endowment have long riled critics, even in the years when the fund was vastly outperforming those of other schools. The five highest-paid managers of the endowment earned $26 million for calendar 2008, as previously reported. The lion’s share of that comes in performance-based bonuses, which can be taken back later if managers fall short of longer-term goals. In the mid-2000s, some Harvard managers made tens of millions of dollars each.

In a letter to alumni on the pay disclosures, Mendillo nodded to recent national scandals over pay on Wall Street and said Harvard’s compensation was “designed to align the interests of HMC’s investment management staff with those of the university.’’

Mendillo wrote in her letter that the active management of Harvard’s best investment professionals has paid off over time: The endowment has gained 11.7 percent annually over 20 years, vs. 7.8 percent for an index of stocks and bonds.

Mendillo, who has been credited with pulling in the reins at the endowment after a period of heavy risk-taking that left the university cash-strapped, also said Harvard Management has instituted tougher pay rules on its top people. Starting in July, members of the fund’s entire senior team — not just the chief executive — will have their pay linked to performance of the overall endowment. And senior managers will see their pay cut in any year when the endowment loses money; portfolio managers will continue to be paid for performance relative to benchmarks.

Mendillo’s half-year pay was comparable to that of a recent predecessor, Mohamed El-Erian, who resigned as president of Harvard Management at the end of 2007 and earned $921,000 in his final six months.

Beth Healy can be reached at bhealy@globe.com.

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