Harvard University has reduced the amount managers of its $19.3 billion endowment can earn in years when the fund performs better than expected after criticism from some alumni who think the school handed out extravagant bonuses last year.
Compensation caps would not be triggered in what the university termed "more normal" years.
Harvard's president, Lawrence H. Summers, said that the changes would result in a "significant reduction in top compensation levels" in good years, according to the Harvard Crimson, which first reported the story in yesterday's edition.
Fund managers at the endowment typically earn a base salary of $400,000 and receive performance-based bonuses in addition to that, according to the Crimson.
Two portfolio managers, Maurice Samuels and David R. Mittelman, were paid more than $34 million last year, most of it in bonuses calculated by their investment performance over several years.
Four others made at least $6.9 million.
Harvard's endowment has consistently beaten benchmarks; in the last fiscal year it grew more than 12 percent, compared with an average return for university endowments of about 3 percent.
The Harvard Management Company maintains that if managers had simply recorded average returns over the last 10 years, the endowment would be $9.6 billion smaller than it is today.
Those returns justify the salaries of top managers, who could earn even more in the private sector, Harvard Management has said. Indeed, foreign equity manager Jeff Larson is leaving to start his own hedge fund, though the university is giving him $700 million to manage.
"The board continues to believe the compensation system is fundamentally sound and a good economic deal for Harvard," D. Ronald Daniel, Harvard's treasurer and chairman of the Harvard Management Company board, said in a prepared statement yesterday.
Harvard Management president Jack Meyer told the Crimson that the lower salary cap was consistent with the firm's compensation formula.
"We have always had maximum caps on payouts, and they change every year based on how much money is in the bank and based on where we want to set them," he said.
The university did not say what would trigger the new compensation caps.
After criticism from some alumni after last year's bonuses were disclosed, Harvard Management said it would reexamine its compensation caps.
"I don't think anybody needs to be paid $35 million to do the best job they can," said David Kaiser, a professor at the Naval War College in Newport, R.I., and one of several members of Harvard's class of 1969 who wrote to Summers in November to express outrage over the endowment managers' pay.
Meyer said that the compensation issue was discussed at HMC board meetings in September and December.