Harvard University announced yesterday that it had paid its six top money managers $22.4 million to manage its $36.9 billion endowment fund. The fund paid the same six, all internal employees, $23.3 million in 2007.

The payouts were based on an 8.6% increase in the funds assets for the fiscal year ended June 30th. All well and good up to this point. Unfortunately, Harvard announced last week that these same six men had seen the value of the endowment shrink by 22% from July to October and predicted that it could be down by 30% at the end of the year.

Now most academics, and I suspect more than a few Harvard professors are among them, have been highly critical of Wall Street’s bonus structure. I think the logic is roughly that rewarding year over year performance incentivizes money managers to focus too much on short term gains at the expense of longer term strategies. I think they also carp about employees not having enough skin in the game.

So all of this begs the question as to what happens at the end of Harvard’s next fiscal year. Does Harvard intend to claw back some of this money if the managers don’t turn things around? Might we see Harvard adopt a compensation structure for them that actually incorporates what they teach and lecture about?

It’s always difficult when reality intrudes on academia, isn’t it?