David Kaiser is a war historian, sabermetrics amateur and a perennial thorn in the side... Read More
Kaiser leads a group from the class of 1969 that has pushed Harvard to defend why it pays more than any other university for staff overseeing its $32.7 billion endowment. The group includes academics, an artist, a pastor and two lawyers -- all tracing their activism to anti-war protests that defined their college experience. Some members are gathering for the class’s 45th reunion, which begins today in Cambridge, Massachusetts.
“None of us were radicals back in college, but David has led us in giving voice to the spirit of the ’60s that Harvard needs to do a better job of
serving its ideals,” said Kenneth Jost, a journalist who writes about the U.S. Supreme Court and teaches law at Georgetown University in Washington.
In the group’s latest move, Kaiser and eight other members wrote to Harvard President Drew Faust demanding to know why compensation at the endowment doubled in three years. The letter came as the university searches for a replacement for Jane Mendillo, who oversees the endowment.
The group coalesced more than a decade ago sparked by outrage as individual pay for some top traders at Harvard Management Co., the Boston-based firm that manages the world’s largest university endowment, reached $35 million a year. The group evolved into a watchdog, and again attacked the school in 2009 for paying bonuses to endowment staff during the global credit crisis when investments fell an unprecedented 27 percent.
Nonprofit Pay
“We’ve started a surprising amount of discussion,” said Kaiser, 67, who has taught at the Naval War College in Newport, Rhode Island, and Carnegie Mellon University in Pittsburgh. “We did not think anybody should be making tens of millions of dollars a year working for a nonprofit.”While the group’s skepticism is rooted in lessons from the 1960s, it evokes more recent concerns about growing inequality and the concentration of wealth. Last month’s letter was sparked after the group saw that compensation at the endowment surged to $132.8 million 2013 from $63.5 million in 2010.
Harvard saved $1.5 billion over a decade using its own traders rather than paying fees to outside managers, Tamara Rogers, vice president for alumni affairs, wrote the group in a Sept. 12 letter. The amount of assets managed internally rose to 42 percent from 30 percent five years ago, she said.
Faust is scheduled to appear today at an event with alumni from three classes including 1969 as part of reunion activities.
Bloody Protest
The growing discontent over the Vietnam War peaked at Harvard in 1969 when students seeking the removal of the Reserve Officers’ Training Corps from campus among other demands stormed and occupied an administrative building known as University Hall.Robert Shetterly, a signatory to last month’s letter to Faust, was a 22-year-old English major at the time and nearing graduation when he said he was arrested as Cambridge police forcibly removed students, leaving many bloodied.
While the university has reined in top pay at the endowment in response to the scrutiny, its performance has lagged, with the worst average five-year return in the Ivy League. Mendillo, who was hired in 2008 as Harvard Management’s chief executive officer, is leaving at year end.
At the same time it is still trying to rebuild an internal investing team in Boston that was devastated by the departure of former CEO Jack Meyer, who left in 2005 with much of the staff in the wake of the first compensation controversy.
Top Talent
Mark Yusko, founder of Morgan Creek Capital Management, disagrees with the group’s argument. Harvard benefits from assembling top talent to manage its money, said Yusko, who used to run the endowment at the University of North Carolina. It is often cheaper to hire traders and pay them based on their performance than to give the money to an outside manager who will charge more in fees, he said.“Every time they go down this path and they try to say it’s not fair or it’s not right, they’re missing the point,” Yusko said. “When Jack was there the performance was outstanding. Since he’s been gone, and they changed the pay model in response to the first letter-writing campaign of this class, the performance is down.”
Kaiser has heard the criticism and is unapologetic about the ongoing campaign. Instead he and others see an institution that has fundamentally lost its way when it offers exorbitant pay packages at the same time it raises tuition every year and, during leaner times, lays off support staff to save money.
Lower Costs
“We feel good about our approach, and are confident that management costs are significantly lower than they would be if our endowment was managed entirely externally,” said Christine Heenan, a university spokeswoman.It’s all about funding scholarships and academic research, William Shutzer, a 1969 alumnus said in support of how the management company oversees the endowment.
“I’m not sure that the people who are providing the critique are as knowledgeable as they should be, said Shutzer, a senior managing director at investment bank Evercore Partners in New York. ‘‘They don’t fully understand the issues.”
The group first took shape at the Class of 1969’s 25th reunion when Kaiser said he met William Strauss, a fellow historian and founder of the political satire group Capitol Steps. Strauss, who died in 2007, became increasingly concerned by the salaries being paid at the endowment. By the time the 35th reunion came around, the two began organizing a protest.
Pennypacker Hall
At least two of the signatories on the most recent letter are friends of Kaiser’s from Pennypacker Hall, one of Harvard’s freshman residences. Others were inspired by hearing Strauss or Kaiser speak at previous reunions. All of the people reached by Bloomberg News said their activism is at least partly linked to their experiences coming of age on a campus roiled by political protest.“There was a group of us who were all interested in social and political issues,” said Jonathan Hoffman, 66, a lawyer in Portland, Oregon, whose roommates in his freshman year included Strauss and television journalist Christopher Wallace. “We were roommates at the time Vietnam was becoming a real war.”
Wallace, a Fox News personality who hasn’t signed any of the letters, declined to comment. Other notable 1969 graduates include former U.S. Vice President Al Gore and actor Tommy Lee Jones.
Disparate Group
Kaiser became the lead organizer after Strauss died, pulling together the disparate group when he uncovers something objectionable in tax filings from Harvard and the management company. After writing histories of the Vietnam War and World War II, Kaiser left the War College faculty in 2012. He is currently working on his second book about baseball, using thousands of statistics to show who does and doesn’t deserve to be in the Hall of Fame.“These letters are probably not going to change the world but they are certainly going to get some people thinking,” said Shetterly, 67 and a painter and illustrator based in Brooksville, Maine. “It’s not about the returns or whether they’re meeting their goals. It’s that kind of money being paid when we have these disparities is wrong.”
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