Cynthia Frost, the University's vice president and chief investment officer, netted a total of $1,011,351 in compensation for 2009 — the highest amount for any University official. The figure represents an increase of over 13 percent in Frost's annual earnings from the 2008 calendar year, according to the University's most recent Form 990 tax filings. In 2009, some top officials, including President Ruth Simmons, took voluntary pay cuts in response to the 2008 economic downturn.
Frost, hired as the University's CIO in 2000, bears chief responsibility for investing the University's more than $2 billion endowment. She reports to the chair of the investment committee of the Corporation — the University's highest governing body — and Beppie Huidekoper, executive vice president for finance and administration. Frost was acting chief during the financial crisis of 2008, when the University lost about $800 million, roughly 27 percent, from the endowment. Since then, Frost has presided over the University's recovery. Taking the difficult market into consideration, Frost's job is one that "not many are qualified to do," Huidekoper said.
To keep an employee like Frost, who had years of experience in Duke University's finance administration, the University must pay a premium in "retention bonuses," Huidekoper said. Keeping a person of her qualifications is a priority, regardless of the success of the endowment.
"It's like the basketball coaches you see for big universities," she said. "Not everybody wins the Final Four."
Frost "might not be a star," said Huidekoper, but she hits the targets the investment committee sets for returns on the endowment. The targets are made with the performance of market indexes in mind, and both Frost's base salary and her added compensation are derived based on the endowment's performance against those indexes.
The Corporation further increases Frost's job security by considering qualitative factors independent of the endowment's success, including whether she found highly rated money managers to work beneath her and how effective she was at weeding out underperforming managers. These criteria have been changed during Frost's tenure.
A recent shift in the way the Form 990 is reported requires reporting the calendar year salary of top officials, while it had previously only been reported for the fiscal year. This change took effect for the 2008 calendar year salaries. Accordingly, "There's some overlap," Huidekoper said.
In regard to Frost's pay increase — her base salary increased from $412,882 in 2008 to $430,891 in 2009 — Huidekoper said everyone hired to a long term job hopes for a raise. Meanwhile, the threat of losing Frost to another institution is real. "People get offers," she said. "To keep the best talent, the University must pay the market's price." In comparison, Yale's CIO David Swensen received total compensation of $3,875,940 for 2009.
