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Boston College Endowment Shifts to Wall Street-Style Pay Packages

  • The $2.2 billion fund implemented performance-based plan
  • CIO John Zona’s compensation package doubled in 2015

Boston College has implemented a performance-based compensation plan for its investment office, following the lead of other large university endowments with Wall Street-style pay packages.

The school’s plan, established in 2015, led to bonuses for some in the investment office, according to a recent tax filing. Chief Investment Officer John Zona received a $1.1 million pay package that year including a $550,000 salary, a $266,200 bonus and $242,700 in deferred compensation, according to the filing.

His pay package was doubled from 2014, when he was paid $535,708 in salary and other compensation but no bonus, according to tax filings.

Late Adapter

Three other members of Boston College’s investment office -- which totals about six people -- also earned performance-based pay in 2015, said Jack Dunn, a college spokesman.

“Boston College was late to the game regarding incentive-based compensation,” Dunn said in an interview. “It helps retain excellent employees and rewards them for performance.”

Schools may be slow to adopt performance-based pay if they are more conservative institutions, and they may make the shift when they recruit from Wall Street or their endowments become bigger, recruiter Charles Skorina said.

“Most schools have taken their cue from Wall Street,” he said.

The Jesuit university’s $2.2 billion endowment had an annualized investment gain of 5.8 percent in the past five years through May 31, 2016. That’s compared with an average 5.4 percent return in the same period for endowments of all sizes, according to the National Association of College and University Business Officers. The fund’s investments declined 4.3 percent in fiscal 2016.

Zona has been at the helm of the fund since 2010.

Strong Incentives

Almost every university with a large endowment offers performance-based compensation to one or more members of their investing staff. Schools across the spectrum that offer such pay include Bowdoin College, the University of Chicago and Lehigh University. Harvard University’s endowment pays its top investors millions of dollars in bonuses, though under its new leadership the school is shifting the way it structures performance-based pay.

“This has been going on for sometime, but there are probably still some that are lagging,” said Debra Brown of recruiting firm Russell Reynolds Associates. “The goal here is that interests should be aligned.”

Performance-based compensation provides strong incentives for investment officials, but the plans may lead to eyebrow-raising pay at nonprofit institutions.

Lindalee Lawrence, president of compensation consulting firm Lawrence Associates, said universities may need to navigate regulations and public perception.

“There’s been a shift in nonprofits, like everywhere, moving toward the use of variable pay and incentives,” Lawrence said. “You really have to think about what they’re setting in terms of the performance targets. They can have unintended consequences.”

— With assistance by Michael McDonald

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