NEWS ANALYSIS: Protracted HMC Search Leads To Rocky Transition

The trading floor at the Harvard Management Company (HMC) will be marked by a number of empty desks this morning.

The vacancies at the Boston offices where Harvard manages its endowment will reflect the Friday departures of CEO Jack R. Meyer, four top money managers, and other members of their staff. It is a watershed moment for HMC, one that has introduced a new air of uncertainty over the future stewardship of Harvard’s endowment.

With no permanent chief in place and the University’s nearly 10-month search for Meyer’s successor continuing, Harvard has installed a temporary framework of leadership at HMC that gives new prominence to two individuals who live hundreds or thousands of miles from Boston, where the University invests its $25.9 billion war chest.

The failure of the prolonged search so far has placed HMC in a nebulous position.

Peter A. Nadosy ’68, a member of the HMC board, will serve as interim chief investment officer. But James F. Rothenberg ‘68, the University’s treasurer, said Nadosy will not be on site every day to supervise the University’s investments.

“He’ll be there certainly several days a week and sometimes the whole week,” Rothenberg said in an interview Friday. “But he does live in New York.”

And Rothenberg, who chairs the HMC board, lives even further from the firm’s offices, in Los Angeles, where he is president of the investment management firm Capital Research and Management.

While it is not clear if the HMC board will begin to pick specific investments, the board is set to play an increased role in the management of HMC. This is an apparent shift from its traditional involvement, in which it only issued decisions related to broad investment strategy and policy.

“The board discusses policy issues, not individual transactions,” Meyer told The Crimson in a May interview. “We do not in the boardroom talk about ‘should we buy General Motors or sell Ford.’”

Rothenberg said he expects the HMC board to revert back to its old structure upon the appointment of a permanent CEO.

ON THE SEARCH

While Harvard officials have downplayed the protracted search—Rothenberg said the search that produced Meyer took 18 months—the process has dragged far beyond the University’s initial hopes of having a successor in place on June 30. With Harvard not having found such a successor, Meyer agreed to stay at his post until last Friday.

In the time since Meyer announced his departure, a chief justice for the U.S. Supreme Court has been selected, nominated, and confirmed. And while Harvard officials have exuded confidence that the position would be filled promptly, the University’s expectations for completing the search have clearly turned into moving targets.

“We’re well along,” Rothenberg said on Friday. “We’ve been talking to a lot of interesting people.”

But Harvard’s inability so far to turn these conversations into an appointment of a new HMC chief has highlighted the difficult task of filling a position that attracts intense outside scrutiny over issues like compensation.

“I think people recognize that taking this position will put you a little bit in a fishbowl,” Rothenberg said.

Last week, University officials said Meyer’s departure would have little effect on daily work at HMC given the contributions of its senior professionals, but the firm will incur a loss of 30 employees in total, comprising about 17 percent of its staff.

The transition in leadership may affect the morale of an organization, Meyer acknowledged in May.

“Obviously there’s some anxiety,” Meyer said. “Anytime a person at the top changes, there’s anxiety, but I think people are dealing with it now.”

While Nadosy’s interim post was announced alongside the strong returns on Harvard’s investments in fiscal 2005, the temporary leadership structure at HMC seems poised to produce a rockier transition than University officials had first sought—an arrangement that, according to Rothenberg, will include Meyer and his colleagues as advisors “for some time.”

—Zachary M. Seward contributed to the reporting of this story. —Staff writer Nicholas M. Ciarelli can be reached at ciarelli@fas.harvard.edu.