WITH THE FILING in mid May of its tax return for nonprofit organizations (Form 990) for 2010 (covering the tax year from July 1, 2010, to June 30, 2011—Harvard’s fiscal year 2011), the University has also released information on the compensation paid to Jane L. Mendillo, president and chief executive officer of Harvard Management Company (HMC, which is responsible for investing the endowment) and its highest-paid portfolio managers. (As noted in May 2010, the basis for such reporting has changed, so the HMC information just released covers calendar year 2010). Thus, the newly released compensation figures, reflecting annual incentive pay disbursed once each year, span the second half of fiscal 2010 (a year when the endowment achieved an investment return of 11.0 percent, and appreciated in absolute terms by $1.4 billion, to $27.6 billion, after taking into account both distributions to support Harvard operations and new endowment gifts received) and the first half of fiscal 2011 (a year when the rate of investment return was 21.4 percent, and the endowment as a whole appreciated by $4.4 billion, to its reported value of $32.0 billion as of June 30, 2011).
For calendar 2010, HMC reported these total-compensation sums for Mendillo and the five most highly compensated portfolio managers; where the same people were among the most highly compensated HMC personnel in calendar year 2009 (reported last May), that year’s compensation is also shown (in parentheses):
Jane Mendillo, president and CEO: $3.5 million ($3.5 million)
Andy Wiltshire, external platform: $5.5 million
Apoorva Koticha, fixed income: $4.4 million ($4.5 million)
Stephen Blyth, internal platform: $2.7 million ($8.4 million)
Graig Fantuzzi, fixed income: $2.1 million ($2.7 million)
Marc Barrozo, fixed income: $2.1 million
In a statement accompanying the release, Treasurer James F. Rothenberg, who chairs the HMC board of directors, noted that “Jane Mendillo and her leadership team continue to steer the endowment through challenging markets, returning value to the portfolio and the University while positioning Harvard’s endowment for the long term.”
HMC portfolio managers’ compensation is overwhelmingly (in excess of 90 percent, HMC says) variable, and tied to their investment performance: to earn any variable compensation, their performance must exceed that of a market benchmark for the class of assets they oversee. In addition, performance-based incentive compensation is not paid immediately; a portion is paid at the end of the year in which it is earned, but the rest is kept in the endowment for possible future distribution, subject to continued outperformance. Hence, the compensation payments reported in any given year, including the figures above, reflect results over multiple years.
In addition, the release repeated language incorporated last year, highlighting changes in the compensation system instituted by Mendillo:
The holding period before incentive compensation is wholly paid out to internal portfolio managers has been extended (from two years to three).
And compensation for HMC’s entire senior management team is now tied to the performance of the endowment portfolio overall (and caps have been put in place to reduce compensation to those personnel in any year when the endowment suffers a negative return).
Presidential and Administrative Pay
The tax filing also discloses total compensation paid to high-ranking University officials, including President Drew Faust ($875,000, of which $714,000 is salary; $121,000 is attributable to use of the official president's residence at Elmwood; and the rest is other benefits) and various vice presidents and senior administrators (ranging from $604,000 to $233,000).
