Word: compensationitis
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Meyer defends the compensation system but notes that it is less generous than most private sector firms, thus making it harder to attract managers. And HMC’s troubles may only increase with the cap on maximum compensation set by its board in March 2004.
But competition for high quality external managers mean that their fees are much higher than the relatively low compensation Harvard grants its internal staff.
Another factor that may have drawn away managers from HMC is the visibility of Harvard’s endowment. Because it is owned by a nonprofit, HMC must report the salaries of its highest-paid employees, so the details of top managers’ compensation are openly available.
Public knowledge of compensation has bothered many top managers at HMC, according to Meyer. This stands in stark contrast to private investment firms, where compensation is not disclosed.
And while higher, and confidential, pay scales can be found outside of HMC—“I don’t think anyone has left because we’ve paid them too much,” Meyer jokes—he says that the opportunity to start...