Students ready to receive their diplomas at the Stanford Graduate School of Business 2017 Commencement. Photo by Nathan Allen
The students who graduated from Stanford University’s Graduate School of Business this year can rightly boast of being among the most highly compensation MBAs in history. The average total compensation for a Class of 2017 graduate at Stanford was an unprecedented $180,284, up slightly from $179,346 a year ago. But that total barely tells the story this year.
Median base salaries rose to $140,000 from $136,00, the third consecutive year in which base pay increased. Median sign-on bonuses, received by 51% of the class, remained stable at $25,000. But median other guaranteed compensation, reported by 25% of the graduates, jumped to $50,000 from $40,750. And for the first time, Stanford reported a new category of compensation called median “expected performance bonus,” reported by 65%, of $35,000. The latter category includes bonuses that are commonly mentioned in offer letters but not explicitly guaranteed.
While the median numbers were impressive enough, the truly “wow” occurred in the reported averages. Average base salary rose to $144,455, from $140,553 a year earlier, while signing bonuses also advanced to $29,534, versus $23,636 last year. Average other guaranteed comp increased to $83,065, from $74,665. Average expected performance bonus, not reported last year, came to a whopping $71,946. Add it all together and the average first-year compensation for a Stanford MBA this year is a rather remarkable $227,768, a pretty big bump on the $180,282, without the anticipated performance awards.
STANFORD PAY IN 2017: THE HIGHEST FIRST-YEAR TOTAL COMP EVER REPORTED FOR MBAS
That is the highest first-year total for any MBAs ever! Of course, it does include bonuses that might disappear in a recession, but with no downturn in sight, that is an unlikely prospect. And yet even that very hefty sum does not include tuition reimbursement, auto allowances, profit sharing, 401K match plans, the reimbursement of relocation expenses, or, for that matter, stock options and restricted stock grants, even though 32% of Stanford’s graduating class reported getting stock compensation in their offer letters.
In contrast to several peer schools, Stanford is the only school to report expected bonuses. But the school still comes out on top compared to Harvard Business School which reported median total pay of $174,600 for its MBA grads this year, nearly $6,000 less than Stanford’s $180,284 without the extra expected bonus bump (see following page for our table of pay at the top schools so far). The highest paid members of Stanford’s Class of 2017 grabbed truly sensational pay packages. The highest base salary–$285,000–went to a student landing a job with a venture capital firm. The highest sign-on bonus–$77,000–was given to a grad who went to work for a hedge fund. The top other guaranteed compensation–a whopping $450,000–also went to a hedge fund-bound MBA. And the highest expected performance bonus–also $450,000–was reported by a student employed by a hedge fund.
Maeve Richard, assistant dean and director of Stanford’s Career Management Center, says she decided to include the new category of bonus because she is less than satisfied with other guaranteed compensation, which will no longer be reported by most schools next year. “I felt there were issues with other guaranteed compensation. It was an opportunity to misunderstand the data and end up under reporting what the bonus opportunities were for our students. So we gathered data around expected bonus which often appears in offer letters. That is the one place where we are stepping out from what we typically report.”
‘PRETTY PUMPED UP’ BY A STRONG EMPLOYMENT REPORT
Maeve Richard, director of the Career Management Center at Stanford GSB
As is often the case with Stanford, job offers and acceptances at graduation and three months later often trail other schools. That is typically a function of MBAs being more choosy about landing the perfect offer. Just 73% of the students had job offers at graduation, up a single percentage point from a year earlier, with 92% three months after commencement. Acceptances at graduation trailed offers by 10 percentage points at 64%, also up a percentage point, while acceptances three months later hit 88%, up six percentage points from the 82% accept rate of last year. Those comparatively lower numbers, versus Wharton where 97.1% had offers three months after graduation and 92.6% accepted, tend to hurt the GSB in U.S. News‘ rankings.
“Many students have a couple of opportunities to choose from and they want to take their time to make sure they accept what they really want,” explains Richard. “We are providing more guidance as a school in terms of encouraging students to choose a little sooner. Fundamentally, the school’s posiotion is that these are adults, and we emphasize making high quality decisions so we leave the decision for them and don’t put pressure on them.”
MBAS GOING INTO TECH DROP EIGHT PERCENTAGE POINTS TO JUST 25% OF CLASS
The single biggest surprise this year was a significant decline in the percentage of Stanford MBAs going into the tech industry. While nearly every other highly selective business school saw record numbers of their graduates enter tech, Stanford MBAs headed into the industry fell by eight full percentage points to 25% this year from 33% in 2016 when it was the school’s number one employer.
After looking at tech employment from five and ten years ago, Richard concluded that the industry’s MBA hiring patterns tend to be “the most volatile” over the years. “I don’t think we have true data that is reliable enough to say with certainty what is going on, she adds. Fewer students did their summer internships with tech firms and that may explain some of the drop. “It may not be that there is less interest in tech, but that other industries were more interesting and compelling for the students. We don’t see the shift as being that significant. Tech is still really important here and entrepreneurship is really important. Our studnets are very much interested in distruptive business models, opportunities to innovate and the chance to take on a lot of responsbility right away and tech offers all of that. Besides, tech is not only a vertical industry. It is increasingly a horizontal choice with fin tech, health tech, education tech, machine learning, and even a Tesla.”
One perhaps more obvious reason for the decline: Tech firms tend to pay MBAs significantly less than finance or consulting. The average base salary in tech at Stanford was $132,392, well below the $177,653 in venture capital, $175,690 in private equity, $159,000 in investment management or $144,750 in consulting. The same is true of average signing bonuses. In tech, sign-on money averages out to just $27,120, compared to $43,333 in investment management, $39,107 in PE shops, $36,250 in VC firms, and $28,092 in consulting. And then there is the other guaranteed and expected performance bonuses, both of which are relatively rare in tech.
THE SECRET TO STANFORD’S HIGH COMPENSATION NUMBERS
That in a nutshell is, as it has often been in the past, the real story behind Stanford’s high compensation numbers. Reputation to the contrary, Stanford funnels more MBAs into the most lucrative fields in finance than peer schools known for their finance expertise, such as Wharton, Columbia, NYU Stern, and Chicago Booth. It’s not necessarily the percentage of MBAs going into finance from Stanford, which is 32% this year. It’s more about where in finance they go. The largest group of financial-bound MBAs go into private equity, which accounts for a full 15% of the class. Then, there is the 7% flowing into venture capital, and the 4% into hedge funds. Those three sectors in finance dangle the most lucrative compensation packages paid to freshly minted MBAs.
While consulting was up just a tick to 20%, that number is considerably lower than most peer schools. At Chicago Booth, for example, consulting overtook finance for the first time ever this year, attracting 34.7% of Booth’s Class of 2017. At Wharton, consulting industry firms hired 28.3% of the class. At Harvard Business School, some 23% of the MBAs this year went into consulting.
After the big three industries–finance, tech and consulting–Stanford MBAs really spread their wings. Some 4% of the class went into healthcare, with another 4% taking jobs in consumer packaged goods (see table on following page). About 3% of the class each accepted offers to work in real estate, the non-profit space or transportation. Some 2% went into retail, while 1% took jobs in the energy sector. While the number of Stanford MBAs going into the nonprofit arena are relatively low, Richard points “student sentiment and interest is very high in terms of socially responsible careers. About 13% said they chose a socially responsible role in a private business.” Last year when the question was introduced, 8% answered yes.
SOME 63 STUDENTS LAUNCHED THEIR OWN STARTUPS THIS YEAR
The school reported that out 392 graduates, 266 were seeking employment this year. Some 16% of the class–63 of the 392 graduates–started a new business this year. The top five industry choices for these entrepreneurial graduates were software (15%), finance (11%), healthcare (9%), real estate (9%), and internet services (9%). This year’s entrepreneurs represent a one percentage point rise over last year. Twenty-two students were sponsored and returned to their employers, while another 18 students decided to continue their education.
In 2017, 62% of GSB graduates selected careers in the West region, representing a slight three percentage point decline compared to last year. Counter to assumptions, only 35% of these West region jobs relate to technology. Finance represented 26%, and consulting represented 15%. Outside of the West region, the Northeast was the next most popular location drawing 16% of the class, while international jobs attracted 11%.
One other trend was cited by Richard. The number of women going to private equity and venture capital has nearly doubled since 2014. “While we do not disclose fine-grain gender detail and the numbers are still small, we see a definite widening of the cracks in the glass ceiling,” she says.
Pay & Employment Remains Strong At A Wide Range Of MBA Programs
| School | Job Offers | Total Median Pay | Major Employers |
|---|---|---|---|
| Chicago (Booth) | 97% | $141,500 | McKinsey, Amazon, BCG, Bain, Accenture, Morgan Stanley |
| UPenn (Wharton) | 97% | $149,300 | McKinsey, BCG, Amazon, Bain, Goldman Sachs |
| Michigan (Ross) | 97% | $147,845* | Amazon, McKinsey, Deloitte, BCG, Microsoft |
| Duke (Fuqua) | 96% | $145,500 | Deloitte, McKinsey, Amazon, BCG, Accenture |
| Minnesota (Carlson) | 96% | $122,400 | 3M, Deloitte, Ecolab, Land O’Lakes, Microsoft |
| Harvard Business School | 95% | $154,750* | NA |
| Dartmouth (Tuck) | 95% | $146,250 | McKinsey, Bain, Amazon, BCG, Microsoft |
| Northwestern (Kellogg) | 94% | $140,350 | McKinsey, BCG, Amazon, Bain, Microsoft |
| New York (Stern) | 94% | $154,147* | Amazon, Deloitte, JP Morgan, McKinsey, Credit Suisse |
| Emory (Goizueta) | 94% | $144,580* | E&Y, Amazon, PwC, Deloitte, Citigroup, Georgia Pacific |
| Columbia | 93% | $146,550* | McKinsey, BCG, Bain, Amazon, Deloitte |
| Virginia (Darden) | 93% | $149,750 | Microsoft, BCG, McKinsey, Accenture, Amazon |
| Vanderbilt (Owen) | 93% | $130,750 | Amazon, Deloitte, Wells Fargo, Microsoft, North Highland |
| Stanford GSB | 92% | $165,250* | NA |
| Indiana (Kelley) | 92% | $134,113* | E&Y, Microsoft, P&G, Amazon, Deloitte |
| Cambridge (Judge) | 92% | $130,218 | Amazon, McKinsey, Google, Uber, BCG |
* Reflects starting salary, sign-on bonus and other guaranteed compensation, adjusted for the percentage of students receiving bonuses and other comp. The rest of the numbers include only salary and sign-on bonus because the school does not report other guaranteed compensation. Job offers data is for three months after graduation
Stanford University’s Graduate School of Business
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