Let’s spend five days reviewing the latest annual report (pdf) from the Investment Office. Greatest hits commentary on related topics include here, here, here and here. Today is Day 4.

We dramatically overpay the folks who work in the Investment Office, primarily Collette Chilton but also Bradford Wakeman. The Record ought to write an article about this. Here are the questions they should ask along with my commentary.

The latest Form 990 (pdf) reports that:


Q: How many people in the Investment Office are eligible for bonuses? What is the formula used to award those bonuses? How much money, if any, in total bonuses was paid out last year? [See here for more background. The College will try to claim that releasing this information would violate the privacy rights of College employees. But note that the questions do not ask for the specific amounts given to named individuals. We just want to know how many and how much in total. Privacy concerns do not prevent Williams from releasing this data.]

Q (for Collette Chilton): If the College decided to stop paying performance bonuses, would you work less hard? Would anyone on your staff? [The College worries that Chilton and other (how many?) investment professionals won’t work hard enough even though Williams is paying them hundreds of thousands of dollars per year. So, in addition to all that guaranteed money, we need to pay them extra bonuses or else they’ll —- what exactly? Spend all day at the movies?]

I think that this is the sleaziest arrangement at Williams today and have been complaining about it for years. How did this happen? Tough to know. I am still trying to get the inside story. My guesses/speculation:

a) Both previous president Morty Schapiro and key trustees were in favor of starting an Investment Office and other steps for turning Williams into Yale.

b) No one worried too much about Chilton’s compensation. The Trustees, of course, see their role as more supervisory. They don’t set salaries. There may have been a head-hunter or compensation consultant involved. Morty, while in theory worried about the College’s overall budget, had no real incentive to pay Chilton less.

Never forget that Morty, for all his many wonderful qualities, is not — How to put this politely? — immune to the siren song of worldly wealth. It is not out of the goodness of his heart that he serves on the board of MMC. It was not an accident that he failed to take a pay-cut, unlike presidents at some other schools, during the budget crisis. It is not irrelevant to him that the Northwestern job pays around twice as much. It was not via random motion that his annual salary increased by hundreds of thousands of dollars during his time at Williams.

So, subconsciously or not, Morty would realize that a proposal to pay the new Chief Investment Officer substantially more money than he was then making would only provide a (dramatic?) upward push to his own compensation.

c) This deal was made in the bubble years. There is no way that Chilton could find a comparable job paying this much money today. Even for 2006 (when Chilton was first hired), the compensation was excessive. Professionals I quizzed felt that someone with Chilton’s resume — modest compared to others in the field — would be somewhere in the $300,000 to $500,000 range.

Consider how the actual numbers have changed from 2009 (pdf) through 2015 (pdf):



Collette Chilton’s pay has almost doubled in 6 years. She now makes $1.3 million dollars! Bradford Wakeman’s total compensation has gone from $360,000 to $639,000. And it is not like Wakeman is some sort of financial genius. Recall our discussion from when he was hired:

Consider a presentation by Wakeman to a risk meeting. His content seems sensible enough, but the topic (making a better 401(k) plan for Lucent) has almost nothing to do with running a major endowment.

That’s fine, perhaps Wakeman knows about other stuff as well. But I laughed out loud when reading the last slide.

Outside experts have noted, and applauded the changes Lucent made to its 401(k) plans.

Nobel laureate William Sharpe notes the changes Lucent made to its 401(k) plan: “better aligns their DB and DC plan methodologies.”

James Palermo, Vice Chairman of Mellon Financial Corporation, observed that: “Lucent is on the cutting edge of our client base with respect totreating their 401(k) plan in the same manner as their defined benefit pension plan.”

Stanford Law School Professor and co-founder of Financial Engines, Joseph Grundfest, commented that: “Lucent has made an important step in fiduciary oversight by implementing consistent management practices from plan to plan.”

Fidelity Investments recognized that: “Lucent was early in this initiative.”

Wakeman is quoting a bunch of vendors who sold things to Lucent, for whom Lucent is a customer, people who will say nice things about Lucent even if (especially if!) they think that the people in charge of the Lucent pension fund are the dumbest of the dumb.

And, as best as I can tell, Wakemen is using these quotes without a bullet point of irony. He really thinks (?!) that William Sharpe’s complimentary testimony about Lucent is meaningful information to his audience even though his audience knows that Lucent is paying thousands of dollars to Sharpe’s company: Financial Engines. My hope is that Wakeman is not this clueless, that he showed the slide but made a joke about the reliability of the testimony cited. That, anyway, is the best case scenario.

The Record should do an article about Chilton’s (and Wakeman’s and the entire investment staff’s) compensation. Don’t the editors believe in muckraking anymore? I bet that some of the more left-wing Williams professors would provide good quotes, either on or off the record.

What should be done? The College ought to close the Boston Investment Office. (Read the whole comment thread for details and background.) Most/all of the senior investment professionals (like Chilton) would decline to move to Williamstown. Problem solved, without any nasty firings or salary cuts.

In the meantime, it is hard to take seriously any of the mewlings about the problems of increased income inequality in the US — which is, sadly, a real problem — from our progressives friends on the Williams faculty if they can’t even be bothered to ask questions about the out-of-control salaries/bonuses that Williams itself pays out to some particularly undeserving members of the 1%.

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