Swensen’s raise tops $1 million

This article has been corrected. You may view this article’s correction here.

Yale Investments Office czar David Swensen GRD ’80 received a $1.1 million raise in 2005, increasing his salary to more than three times that of University President Richard Levin, according to Yale’s most recent federal tax filings.

Swensen, who earned $2.7 million, was among three Yale employees with a paycheck over $1 million. Levin’s 2005 salary of $869,000 was only fourth-highest on the University’s payroll, although it was the highest among presidents of Ivy League schools.

Swensen’s deputy, Dean Takahashi ’80 SOM ’83, earned $1.7 million, and School of Medicine professor David J. Leffell made $1.2 million, according to the filings obtained by the News. Following Levin were gynecology professor Thomas J. Rutherford and dermatology professors Jennifer McNiff and Earl Glusac, all of whom earned more than $700,000.

Swensen and Takahashi’s salaries are tied to the long-term performance of Yale’s endowment, which grew a nation-leading 28 percent last year, to $22.5 billion.

Levin said the large raises were the product of the Yale Corporation’s decision several years ago to revise the compensation structure for the Investments Office after Harvard and Stanford universities both lost their top investment officials to the private sector.

“The compensation committee, after doing rigorous research on compensation practices at other non-profits, concluded that significant increases were warranted,” Levin said. “Their performance,” he said of Swensen and Takahashi, “is truly extraordinary.”

Still, their pay pales in comparison to those of their counterparts at the Harvard Management Company, which oversees Harvard’s $34.9 billion endowment. Harvard’s highest officials have earned as much as $35 million in recent years.

Yale, on the other hand, outsources the direct investment of its endowment to external financial managers, whose pay is not reported on mandatory tax filings.

The compensation for Yale medical school professors is determined by Robert Alpern, the school’s dean. Alpern said the highest-paid professors typically generate much more money in revenue for the medical school through their clinical work than they earn in pay.

And without competitive salaries, Alpern said, the medical school risks losing top specialists to the alluring pay found in private practice.

“They’re actually earning less at the medical school than they would in private practice,” Alpern said. “The issue is how much of a difference they can tolerate. That’s the challenge in trying to get them to stay.”

In an interview last year, Leffell said that although medical school professors could generally earn more in private practice, many do not want to make the sacrifice teaching.

“In general, faculty salaries are lower than what they could get in private practice … [but faculty] value the opportunity to be in an academic environment,” he said. “The academic mission is a primary motivator.”

Leffell declined further comment Wednesday night.

Still, while faculty may be able to earn more in the private sector than in academia, their pay is Yale’s single largest expense.

Of the University’s 2007-2008 expenditures, 56 percent will go toward faculty and staff compensation, according to University budget projections provided to the News. At the School of Management, 69 percent of the school’s $49.7 million in spending this year will go toward salaries.

Levin, meanwhile, is now the highest-paid Ivy League president, according to fiscal year 2006 tax filings reported Monday by the Chronicle of Higher Education. His 14-year tenure in the Ivy League is the longest of any current president.

Levin’s salary is recommended by the Yale Corporation’s three-member Compensation Committee and must be approved by the Corporation. Levin declined to comment on his salary Monday night.

The president received an 11.6 percent raise over his 2004 salary. Swensen’s raise was more than five times that — almost 65 percent.

Through an assistant, Swensen declined to comment for this article, and Takahashi, Rutherford and McNiff did not return phone messages Wednesday. Glusac was unavailable for comment.

Federal law requires non-profit organizations like Yale to annually disclose the compensation of its officers and its five highest-paid employees who are not officers. Aside from Levin, Yale’s six other officers — the University’s secretary, general counsel, provost and vice presidents for New Haven and state affairs, development and finance and administration — earned an average of $380,000 in the 2005 calendar year.

Overall, Yale spent $1.2 billion on salaries and benefits for the equivalent of 11,400 full-time faculty and staff positions in the 2006 fiscal year, according to a University financial report. The average employee earned $105,000 in total compensation, according to the report.

Comments

  • Anonymous

    Your article states that faculty salaries are the largest expense, but the figure you gave -- 56% -- is actually for faculty and staff. More accurately, salaries are the largest expense at Yale, as most other organizations.

  • Anonymous

    Swensen is a hero, and a treasure to Yale. NO ONE would do what he does--and deliver the returns that he has--for his relatively modest paycheck. Harvard Mgmt Co managers jump ship every year for paychecks in the tens of millions. Bravo, David!

    Swensen took Yale's flagging--nay, failing--endowment (almost done in after years of--sorry--liberal overspending) from its paltry $1.3 billion to its current and more princely $22 billion. He has delivered more value to Yale than all donors combined--and he does it for practically nothing.

    Outside of Yale, Swensen is a giant in the industry, a true pioneer, whose thinking is responsible for asset-allocation policies for endowments worldwide.

    Every student at Yale--most especially every student on financial aid--should make a point of passing by David's office and tipping their caps to him. Buy him lunch, for crissakes! And when you see him on the street (those of you who might actually recognize this humble, low-key fellow), thank him, thank him, THANK him!

    [And any student still chanting the perennial "Yale should spend more of its endowment mantra," please take Econ 101 first--and study the history of the Yale endowment--before spouting off.]

    The man is a giant, I tell you , a GIANT.

  • Anonymous

    Were Yale to hire a full-service (outside) institutional investment-managment firm, it could likely negotiate a very low rate. For the sake of argument, let us set that rate at an absurdly low 25 basis points (i.e., one quarter of one percent), all in, on assets under management. I will even exclude any consideration of performance bonuses.

    Let's see… 25 bps on $22 billion, what's that work out to, kids?

    Hmm…? I can hear your fingers whizzing about your ol' HP 12Cs; got it yet?

    For you liberal arts majors, here comes the answer:

    $55 million

    David Swensen, by accepting his $3 million, effectively donates $30 million to the university on an annual basis.

    How much did YOU give this year?

  • Anonymous

    I don't understand why Swensen does what he does for so little money. Why doesn't he at least take a year off and make 50 million or more in the private sector? He could probably triple his net worth in one year by doing this and still come back to Yale afterwards.

  • Anonymous

    Nobody is daring to come forward on just what kind of investment is going on there.Tax Shelters ?, Naming new structures after a donor?Promises of Tenured and professor positions for contributors to this Endowment?
    Is Enron money in there ? Halliburton ?
    Mexican Fox affiliated factories ? Mexican Oil researchers ?
    it's still a vulgar paycheck, but if the University say's ok then, Or is this President Bush's Northeast pittance that is redirected to a university promising better,safer communities here for the visiting important relatives of this country and others

  • Anonymous

    Swensen should start up his own hedge fund. He could be pulling in upwards of a billion a year.

    -John Young

  • Anonymous

    Oi: I *knew* some no-nothing would come out of the woodwork, spouting her scripted "vulgar paycheck" and "just what kind of investment is going on there."

    I *did* enjoy how the cut/paste script degenerated quickly into incoherency (I guess ADD hits the lock-step Lib crowd just like everyone else). Kid is probably on full scholarship, too.

    Here's a message, El Liberala: I *dare* you to forego your financial aid (it is, after all, "vulgar" financial aid, no?); more important, I dare ANY disgruntled Yalie to forego his/her diploma. NEVER HAPPENS. Yes, you will cry and whine and kick and scream--you will even put something mildly distasteful on your mortarboard at graduation--but, by gum, graduate you will, won't you?

    NO GUTS; NONE!

    Other questions answered:

    David Swensen ALREADY did what several of you suggest (i.e., he already made millions on Wall St.).

    Why does he do what he does? Well, in addition to being a humble man (as previously noted), and loyal and grateful to Yale (as you all someday will be--even you wet-behind-the-ears protestors will use your network someday), I will paraphrase his thinking (and, David, if you are reading, please forgive me):

    "I earn more money than I can ever spend, I feel good doing it, I coach Little League, and I have never missed any of my children's games."

    Yes, I might sound a bit sycophantic (and David, if reading this, would be embarrassed), but you all chose Yale for certain reasons--and Swensens' work underpins ALL of those reasons.

  • Anonymous

    Swensen has had a bigger role in the success of Yale than any other single person ever.