A group of 10 Harvard University alums recently asked their alma mater to take back over $20 million in bonuses awarded to the money managers of its endowment, calling their compensation "exorbitant" and "unnecessary" in a letter to Harvard President Drew Faust.
Reacting to a December 2008 announcement about the endowment's 30 percent projected loss this fiscal year, the alums from the class of 1969 also insisted that Harvard reconsider its compensation policy for Harvard Management Company employees.
In the Jan. 10 letter, the alums urged Harvard to "put its financial house in order" and offered several recommendations, including a policy that would ensure that bonuses awarded are based on increased annual income for the university rather than the total value of the school's endowment.
The letter from the alums also requested a endowment manager pay cap equitable to the president's salary, as well as a discussion to "redefine the values and objectives that should guide the endowment's
investment policies."
At Harvard, bonuses are awarded through a performance-based system that relies on market index benchmarks, University spokesman John Longbrake wrote in an e-mail to The Herald. The bonuses are paid out over time and are subject to "clawback provisions" if future performances do not meet benchmarks, he wrote.
"The compensation system is reviewed periodically by the Board, which remains confident that it is appropriate and has saved significant money for the university, relative to the costs of external investment management," Longbrake wrote.
In December, the Harvard Management Company released figures that showed its five highest-paid employees collectively earned nearly $27 million in salary and bonuses during the fiscal year that ended last June. During that same fiscal year, Harvard enjoyed a growth of about 8.6 percent overall, while the S&P 500 dropped 13.1 percent.
Since ending the 2007-2008 fiscal year with $36.9 billion, Harvard's endowment has dropped approximately 22 percent from July 1 to October 31, according to a December letter written by Faust.
David Kaiser, one of the signatories of the letter, was a part of a smaller group that sent a similar complaint in 2003, criticizing the compensation of over $100 million for the six highest-paid employees at the Harvard Management Company.
The 2003 protest came partly in reaction to the news of increasing tuitions, Kaiser said.
"We were concerned with simple equity and whether funds of non-profits should be used to enrich private individuals to this extent," Kaiser said.
"We didn't see how we could justify these bonuses when tuition was going up."
The uproar led to a pay cap that significantly lowered the amount of money awarded to the top money managers within the company.
Kaiser said he would not speculate as to whether Harvard would make any immediate changes in response to the current complaint, particularly whether it would retract investment managers' bonuses.
The spiraling economy has added a new dimension to the protest this time, Kaiser said, coinciding with a similar request from the current administration for pay caps for firms receiving bailout money.
"Major financial institutions have been extravagantly rewarding people for behavior that has been causing a great deal of harm, and we want to see that stop," said Kaiser.
