When The Sky Is Nearly the Limit: Highest Paid MBAs of 2010

by John A. Byrne on

This year the MBA who landed the highest annual base salary–a whopping $350,000 to start–graduated from the University of Pennsylvania’s Wharton School and went into a private equity job with a firm in New York. The starting salary alone was more than three times as much as the median pay–$110,000–of the MBA’s classmates and 14 times the $25,000-a-year job the lowest-paid Wharton MBA assumed. Not bad in a year when the job market for MBAs improved but was still not vastly better than 2009.

Yet, that highly-paid person is hardly unique. MBAs from at least five U.S. business schools–Wharton, Stanford, Chicago, Columbia and Northwestern–report that the highest base salary received by a Class of 2010 graduate was $300,000 or more. Harvard Business School’s top grad this year pulled down a $250,000 base salary, while the highest paid at MIT’s Sloan School got $180,000 in base pay.

At Wharton, the $350,000 base–earned by at least two graduates with one going into investment management–was not even a record. In 2009, when the nation was in the midst of its severe recession, one Wharton MBA landed a hedge fund job in London with an unprecidented base salary of $420,000, while another grad from the school gained a $400,000-a-year post with a private equity firm in New York. Back in frothier times such as 2007, a Wharton MBA took a PE job in London with a base pay of $392,000 a year (see table below).

Yet, as extraordinary as these sums are, they still fail to capture the total compensation these MBA rock stars got. Once you tote up a signing bonus, a guaranteed year-end bonus, as well as the reimbursement of relocation expenses and tuition, it’s possble for a top-flight MBA to exceed half a million dollars a year in compensation for the first year.

“There is always this lure of the $500,000 offer,” says Mel Wolfgang, who heads up MBA recruiting in the Americas for Boston Consulting Group. “It’s a real draw and there are people who will not even apply to consulting because they won’t get one of the three half-a-million-dollar offers that will be extended on their campus that fall. I have yet to meet a person who gets that kind of money, but we know it’s out there and it has caused a lot of conversation.

WHARTON REPORTED A FRESHLY-MINTED MBA EARNED TOTAL COMP OF $680,000 IN 2004

When Wharton published the highest total compensation of its graduates, a practice it ended in 2007, the numbers were even more staggering. In 2004, for example, when the highest reported salary of a Wharton MBA was $180,000 for a private equity job, the largest first year total compensation reached $680,000, a number that in all likelihood included a generous sign-on bonus, a year-end bonus, relocation and tuition reimbursement. This year, for instance, nearly four out of every ten Harvard MBAs who went into private equity received “median other guaranteed compensation” of $155,000 each. Some 9% of Harvard’s Class of 2010 took jobs in private equity.

By and large, the highest-starting salaries these days are being paid by private equity firms and hedge funds which recruit far fewer MBAs than the elite consulting firms and investment banking partnerships that buy MBAs in the boatloads. Among the largest private equity players, TPG Capital and Kohlberg Kravis Roberts (KKR) are known as the highest paying PE shops. Not far behind, according to a recruiter for a top private equity firm, are Blackstone, Bain Capital, Carlyle Group, Providence, and Apollo. Even so, median pay in private equity isn’t nearly as large as these big numbers. At Harvard, the median salary for an MBA going into private equity this year was $135,000.

The very highest paid MBAs tend to be special cases. To these first MBA jobs, they bring extraordinary work experience and track records that convince firms who want to hire the absolute best and brightest that they are worth the money. In private equity that means hiring grads who already have been in the business–often as high-performing analysts for the same companies that hire them back. Private equity, moreover, is taking a smaller percentage of the top MBAs. At Harvard, private equity and leveraged buyout firms hired just 9% of this year’s class versus 17% of the class in 2008.

The recruiter for a top private equity firm that recruits only at Harvard and Stanford attributes the size of these packages to “the arms race, and generally trying to get the ‘best,’ which often correlates with these numbers. Many of them (private equity firms) take back their former analysts which means those spots are incredibly limited for anyone who hasn’t worked in PE before school.”

Often, these recruits already were pulling down big salaries before deciding to go to business school. “Even more shocking is the fact that some of the pre-MBAs were made offers that were easily $500,000 to $600,000 over two years,” adds the recruiter. “That’s right, the 24-year-olds who were made offers when they were eight months into their two-year analyst programs, just eight months out of college.”

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  • http://blogs.ft.com/mba-blog/author/miguelsuarez/ Miguel Suarez

    John, it would be interesting to see a ranking based on “happiness” or some sort of “goals achieved” that has nothing to do with cash. I don’t know if there is such a study, is there? I wonder how different it would be from this.

  • AzhakMansor

    Kellogg and Duke made it into the highest pay ranking without relying on finance related industry. I presume its safe to extrapolate that both schools are well known in consulting and health care respectively?

  • http://poetsandquants.com/members/jbyrne/ John A. Byrne

    Azhak,

    Yes, that’s partly true. But all of these highest-paid MBAs are special cases so it’s hard to extrapolate from them. Also, there are other schools, such as Yale, Cornell, Michigan, NYU, Virginia where this data is not available. So I had to cherry pick among the top schools that reveal this information.

  • http://poetsandquants.com/members/jbyrne/ John A. Byrne

    Miguel,

    Ah…the happiness index. As far as I know, the closest you can get to this is BusinessWeek’s surveys to recent grads asking them detailed questions about the level of satisfaction with the two-year MBA experience. In 1988, when I created the first regularly published MBA ranking at BusinessWeek, I included an interesting question on the survey I cranked out on my Mac: “What percentage of your classmates would you have liked to have as friends?” It’s not exactly a “happiness index,” but it is as close as one can get to a “friendliness index.” The schools that did best on this question tended to be those that heavily emphasized teamwork, group projects and intimate relationships, things that were not a given in business education in the late 1980s. The best schools on this index? Yale’s School of Management, Dartmouth’s Tuck School, North Carolina’s Kenan-Flagler School, Northwestern’s Kellogg School, and Stanford. The weakest of the elite schools? Columbia, Chicago, NYU and Wharton, all far larger schools in urban settings where students often disperse after class. Now this was in 1988–not 2010. Not having access to this data at BW today, I couldn’t tell you how different the result would be. But I think people would be very surprised at how little has changed over time.

  • R2apps

    John, I think a great Poets and Quants article would be something explaning what I’ll call the “High-Yield Paradox.” I am applying to three schools Round 2 this year and have spent a lot of time (probably too much!) lurking on sites like this and gmatclub to learn about the b-school process.

    I think I generally *get* the process but one thing that blows my mind is the way the top few simultaneously manage to have astronomical yield percentages. What makes this so hard to understand is that one might assume there would be a ton of overlap among high-caliber applicants to these “Usual Suspect” schools.

    Let’s take Wharton and HBS, for example. Both unquestionably great schools, and both have lots of overlap with applicant pools. No major surprise that HBS would its phenomenal yield %, but how does Wharton still have such a high percentage? Am I wrong in assuming that many who matriculate at HBS also apply to, and are accepted by, Wharton?

    I suspect part of the “High Yield Paradox” can be explained by certain schools’ tendency to waitlist like crazy (that way, you can keep the applicant in limbo until you know more about his/her intentions and plans towards the end of the cycle). I also think it has to do with the various rounds and the way candidates use them to stagger out apps…they might only apply to top choices in early rounds and save *safer* schools for later (and thereby might not need them at all).

    Still — I’m intrigued. Who out there in b-school land can REALLY explain this in a way that doesn’t sound like some adcom boilerplate non-answer to a question?

  • http://poetsandquants.com/members/jbyrne/ John A. Byrne

    Very good question. I’ll check around and see what I can find out.

  • Arthur Dullsworthy

    People who really want to go to HBS know they don’t Wharton and vice versatile.

    What is the information value for b-school applicants in knowing salaries of a small few outliers at Harvard and Wharton. There’s substantially more to those stories than the fact of admission to business school.

  • Laurenscharer

    John,

    Do you really think that nothing has changed at the top MBA programs in 22 years? As a recent graduate of Wharton, I would argue that the happiness index you reference would have changed greatly, particularly at Wharton. Not only has the school’s curriculum been overhauled twice during this period, but the installation of a new Dean of Students, Kembrel Jones, has drastically improved the culture. Ask anyone that has graduated since Kembrel was installed, Wharton is now known for its culture among the top three programs.

    Please, if you are going to make statements about the “happiness index” make the data relevant to this millennium!

  • http://poetsandquants.com/members/jbyrne/ John A. Byrne

    Lauren,

    I think the culture has changed at Wharton as it has at Chicago. And the differences among most of these schools today is much smaller than it had been years earlier when there was little thought given to culture, collaboration, teamwork, and leadership. I’ve met and spent time with Kembrel so I know that he has significantly improved the Wharton culture.

  • applicant2013

    I agree with Arthur. People who end up getting offers upwards of $200,000 – 250,000 never put it past themselves to be able to pull that off right after business school. It doesn’t give an average applicant any relevant point of reference.

  • Stanford_gal

    Given all these i have always wondered why Tuck is rated so high in top 5.
    And a smack down between Dartmouth with Stan/Harvard is not even relevant, they are not even on par schools! Only see P&Q inclined more towards Tuck.

  • http://poetsandquants.com/members/donscott/ Donald

    Is tuition reimbursement a common component of post-MBA compensation packages or is it a rarity. If its common, what industries, or even better, what companies commonly offer tuition reimbursement. I want to do an MBA at a top 5 program but the100k tuition bill is a hard pill to swallow, especially when you already have loans to pay from a masters program. I’ve therefore been reconsidering holding off applying this year in hopes of getting an early start on applying for available fellowships and scholarships for next years application cycle. However if theres a good shot of obtaining a job offering tuition reimbursement I think that alters the equation a little for me.

  • http://poetsandquants.com/members/jbyrne/ John A. Byrne

    Donald,

    Tuition reimbursement is not common, and getting a handle on this is hard because not all of the top schools report the percentage of grads who get this benefit. Dartmouth’s Tuck School says that 14% of its Class of 2010 received this perk. For Tuckies, the range of reimbursement was from a low of $14,000 to a high of $103,000. The mean was $46,000, while the median was $40,000. At Wharton, some 4.2% of the Class of 2010 reported receiving tuition reimbursement, ranging from a low of $7,000 to a high of $112,000. The median at Wharton was $85,000. One thing to keep in mind: many of the grads who get this benefit are returning to pre-MBA employers like McKinsey or Goldman Sachs. So it’s not something that is generally available to many people. Hope this helps, even though it’s not necessarily very good news.

  • mainhoon

    I fail to understand the justification for such astronomical salaries. What is this one guy going to be able to do that say 3 guys I can hire for that 1 salary cannot? I think there is a bit of ego involved in these firms throwing our money like this…

  • http://poetsandquants.com/members/joshua/ Joshua Stanley

    A good insight about the top paid MBA’s.It is compelling to say almost all top-paid MBA’s are related to finance and those who are already worked on big IB’s.

  • Rutgersdude

    I graduated from Rutgers and made $900k in my first year. I didnt bother filling out the college comp survey, that why it doesnt appear here.

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  • Matt

    John,

    First, thanks for the work you do on this site. In regards to this story, I would love to hear what type of background these highest paid applicants had prior to entering b-school. Were they already highly paid prior to their education, or was this as high a markup in salary as it sounds?

    I know it may be very difficult to find this type of information, but it would be great to hear anything that may provide context.

    R2apps,

    I recall a story from around 1998 revealing that top programs — HBS and Stanford, for example — were caught sharing information with one another as to which applicants they planned to accept. They did this to keep yield rates as high as possible. The programs claim to have fixed this “procedural error,” but I wonder if any recent admissions officers have updated news along these lines.

  • califmerchant

    thats nothing, i make $3M a year, without an MBA, beat that

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