Just how well compensated are the MBAs who graduate from Stanford’s Graduate School of Business? Let’s put it this way: It’s telling that the official Dec. 11 news release accompanying today’s release of Stanford’s 2019 MBA employment report completely buries the lead, seemingly embarrassed by the starting pay of its Class of 2019 graduates. Instead of reporting the actual numbers, the school prefers to note that the percentage of social impact careers jumped this year.
That may be all well and good, but the truth is that year in and year out, Stanford grads land the highest starting compensation for MBAs anywhere in the world. For the fifth straight year, the school reported record-breaking pay for its latest graduates. A conservative estimate of the average first-year compensation for its newly minted MBAs is $216,111, up 3.3% from $209,157 a year earlier. It is the third year in a row that total average starting pay was above the $200K mark for Stanford’s MBAs.
That princely sum includes average starting salaries of $152,503, signing bonuses of $28,328, received by 56% of the class, and expected performance bonuses of $66,311, reported by 72% of this year’s graduates. The total of $216,111 is adjusted to reflect the percentage of MBAs reporting sign-on and performance bonuses.
STANFORD’S 2019 MBA EMPLOYMENT REPORT BOASTS BIG NUMBERS
On a median basis, total pay came to a still impressive $187,760, up from $180,950 in 2018. The increase occurred largely due to a sizable jump in median base salaries which rose by $8,000 to $150,000 this year from $142,000 a year ago. Median sign-on bonuses came to $25,000, same as last year, while the median performance bonus was $33,000, a tick below the $35,000 median in 2018. The only other business schools to even come close to that median this year are Columbia Business School, with total median pay of $177,970, the University of Pennsylvania’s Wharton School at an estimated $175,000, Harvard Business School at $172,090, and Chicago Booth at $168,060.
But it’s worth noting that we are only dealing with “reported” numbers that tend to diminish the actual gap between Stanford and its rivals. That’s because the GSB total does not include the value of stock grants or options, reported by a record 41% of this year’s graduating class, a perk far more elusive outside Silicon Valley where startups and early stage companies are more likely to hand over equity to MBA graduates. Nor does it include reimbursement for tuition or relocation expenses, or a portfolio of benefits and perks that range from auto allowances to 401K match plans.
Domestic students made even more than the class average, racking up average first-year compensation packages of $223,804 versus $195,654 for international students. That’s because international graduates who return home generally accept job offers that are not as lucrative as those in the U.S. Working for McKinsey & Co. in India or China, for example, pays considerably less than a consulting gig in a U.S. office of the global consulting firm.
A THIRD OF STANFORD’S CLASS OF 2019 TOOK JOBS IN THE FINANCIAL SECTOR
Yet, as startling as the overall class numbers are at Stanford, they don’t come close to capturing the highest paid graduates at the school. The highest reported starting salaries this year were gained by a couple of MBAs who gained jobs with an undisclosed venture capital firm and a private equity shop. Those MBA graduates topped out at $300,000 each in base salary. One student who landed a PE job reported an expected performance bonus in their first year of $450,000, while another–a graduate with non-permanent work authorization–expected $325,000. Even more surprising, another Stanford MBA expected his or her performance bonus to total $180,000 from an e-commerce firm. The highest sign-on bonus this year also went to a student who accepted a job with a PE firm: $150,000 just to say ‘yes’ to a job offer.
One of the main reasons for Stanford’s jumbo pay has to do with the career choices of the school’s graduates. While Wharton, Columbia and Chicago are known for their financial prowess, Stanford beats all of them in placing MBAs into the most lucrative financial jobs. While one in three GSB grads accept jobs in finance, a record 16% of this year’s class won highly lucrative PE positions while 9% of the entire class went into venture capital. In private equity, hedge funds and venture capital, Stanford MBAs immediately make more than Wharton’s MBAs despite the East Coast school’s reputation for finance. In VC alone, Stanford MBAs claimed median base salaries of $195,000 this year, $45,000 over the Wharton median. What’s more, a higher percentage of Stanford’s MBAs claimed jobs in PE and VC: 25% at Stanford versus 16% at Wharton and 9% at Columbia.
What accounts for the stampede into PE and VC? Pay certainly explains a lot of it. Private equity and venture capital pay MBAs handsomely, among the highest starting pay packages offered to new graduates. In an interview with Poets&Quants, Jamie Schein, assistant dean and director of the GSB’s Career Management Center, suggests another reason. “A lot of our students desire to have impact,” says Schein. “Many students talk about the decision to be an investor or an operator. There are opportunities in PE firms to influence the operations side of their portfolio companies to get experience there and to be innovative and entrepreneurial in terms of identifying investment targets.”