Derek C. Bok earned $81,659 last year, his highest salary in 12 years as Harvard's president. The University of Chicago's president Hanna Gray pocketed more, with earnings of $105,000. So did the presidents and chancellors of most leading universities.

Bok, in fact, wasn't even close to the top moneymaker among Harvard officials. Publicly available financial forms show that, in 1981-1982, Bok was out-earned by two deans, one University Health Services surgeon, two Medical School professors, and a vice president. And while the precise salaries of individuals are known to only a handful of officials, another 20 Med School faculty members probably bring home larger Harvard paychecks than Bok in any given year, according to Financial Vice President Thomas O'Brien.

Bok's surprisingly modest salary salary reflects the two chief tenets of Harvard's approach to setting administrators' pay. To the extent that the president's wages are topped by those of his Harvard underlings, the inversion shows the importance Harvard puts on market considerations and individual performance in setting the pay of key officials. And to the extent that Bok's salary is dwarfed by those of other university presidents, it largely reflects Harvard's unusual interest in keeping-even its highest-paid officials in the same ballpark as the rest of the administration.

Four years ago, just one of the University's top five wage-earners was a Med School official. But in 1981-1982--the latest year for which figures are publicly available--four were: Dean Daniel C. Tosteson '44 ($109,500), UHS director of surgery John R. Brooks '40 ($108,019), Higgins Professor of Physiology Howard Green ($85,500) and Andrus Professor of Genetics Philip Leder ($85,000) Only Dean of the Faculty Henry Rosovsky, in third place with $86,500, stood in the way of a Med School sweep. (As a "public charity," Harvard is obliged to file its top five salaries in annual tax forms.)

The sudden surge in medical officials' salaries, says director of Personnel Daniel D. Cantor, is reflective of the market. These things swing back and forth like a pendulum "If Med School administrators earned any less. Cantor says, "they'd be lower than most of the professionals reporting to them and would be tempted to leave Harvard for private practice.

O'Brien also explains Tosteson and Brooks six figure salaries--the first in the University's history by describing the men's skyrocketing market value. "At every University in the country, the dean of the medical school is probably the highest or second-highest paid person. If Harvard wants to be one of the top universities in the country you've got to compete."

And of Brooks, O'Brien says, "To get a surgeon as eminent as he is as the University's chief surgeon we consider ourselves very fortunate. If you talk to anyone who's had their gallbladder out [at a Harvard hospital]. John Brooks has probably done it."

Brooks, however, puts forth an additional reason for his hefty paycheck: he wears two hats. Not only did he net about $82,000 for his UHS job in 1981-1982, he says, but he also drew $46,000 from his newly endowed professorship of Surgery, of which he set aside $20,000 for retirement. That chair was donated by and named after former patient Frank Sawyer, who Brooks says "likes me because I've kept him alive for some time."

Yet if the market has put extra money in the pockets of medical administrators, it has also boosted the wages of non-medical specialists.

Vice President for Alumni Affairs and Development Fred L. Glimp '50, for example, surpasses Bok and the three other vice presidents with his 1981-1982 salary of $83,500. Glimp's wages not only reflected his greater experience, but also heightened demand for his skills. "If you looked at the whole development and fundraising area," O'Brien says, "you d find it's becoming an incredibly valuable part of the economy."

When professors' salaries are determined, marketplace realities take a distant backseat to a professor's age and experience in the Harvard system. But when the Corporation kicks off the annual process of setting administrative salaries each fall, it looks primarily to two very traditional factors: supply and demand.

"We're competing in a whole series of markets," emphasizes University Treasurer George Putnam '49 So the Corporation considers Boston area wages for a given position and the salaries of similar workers at comparable universities, in addition to the University's overall financial condition. Ultimately the board settles on average and maximum rates of salary increase for given positions, Putnam says. For 1982-1983, those average rates hovered between 8 and 8.5 percent, differing relatively little across positions Putnam says That rate will probably stay the same for next year's raises, officials predict.

But once the Corporation forwards its salary parameters to individual fiefdoms around the University, market considerations give way to what administrators call "equity" concerns. An official's salary can diverge up to about 3 percent from the average set by the Corporation, Putnam says. How much it does depends entirely on the judgment of one person: the individual's supervisor.

Thus Bok, for example, sets the salaries of each of the deans and vice presidents. Rosovsky fixes the pay of his deputies, such as Dean of the College John B. Fox Jr. '59 and Dean of Students Archie C. Epps III, who in turn determine what the paychecks of their aides will show. Dr. Warren E.C. Wacker, director of UHS, is responsible for the $86,000 lion's share of Brooks's six-figure salary.

And across the board, supervisors stress that they consider an official's responsibilities, salary and job history, age--and his performance. Where the Faculty downplays performance as too elusive a criterion for determining professors' salaries, supervisors agree that it is the single most important factor determining how far an administrator's salary increase will diverge from the Corporation-set average for his position.

That is, however, about all they agree on. Some officials, for instance, assess performance by meeting with an employee before reaching a firm decision. Others opt for the love-it-or-leave-it approach, informing an employee of his new salary only after setting it.

The personnel office recommends the former approach, and director Cantor says he follows that advice. So does Administrative Vice President Robert H. Scott, who describes the determination of his aides' salaries as "a give and take process. I will tell the person how well I think a person is doing a job, and he will tell me. "Vice President and General Counsel Daniel Steiner '54 follows suit, and Epps says he meets with his staff frequently enough that there are rarely salary surprises. According to UHS deputy director Sholem Postel--whose $73,890 salary in 1980-1981 was the fifth-highest in the University. Wacker also initiates salary talks with his aides.

On the other hand, Bok prefers to tell deans and vice presidents of their forthcoming wages "after the fact." O'Brien also shuns preliminary talks, preferring to use "internal benchmarks" within the University--as well as talks with knowledgeable colleagues--to settle an employee's salary. And Melissa D. Gerrity, associate dean of the Faculty for financial affairs, says that "Generally, people don't call someone into an office and say, 'This is what I'm thinking about. 'They say "This is what you're going to get'" Wage determination at Harvard, she adds, "is just like a business a salary is determined and told to the individual."

One thing is certain decisions are final, except in the cases of alleged discrimination. "Occasionally, people think they should've gotten a little more, but that's part of the complexities of the world. Unless you're really upset, you just sit there and swallow it," the $71,000-a-year O'Brien elaborates, adding with a laugh, "I mean, I think Derek should pay me twice as much, but what can I do?"

Whether or not Bok is stingy with his deputies, few doubt that he is tough on himself come salary time. During his first few years as President, Bok recalls, he asked the Corporation not to raise his salary. "They were tough times for the University, and people had to tighten our belts."

Eventually, he says, he consented to small annual salary hikes, "under heavy pressure from some people who said that implicitly this [self-imposed salary freeze] might constrict other people's salaries." Today the president refuses to accept any salary increase greater than that accorded the Faculty, he says.

"We do not think we are paying him what he is worth," says Corporation member Hugh Calkins '45. "But people don't take the presidency of Harvard University with the goal of getting a large salary.' Bok, in fact, has a certain amount of independent wealth, as the scion of an affluent Philadelphia family.

Though Bok has currently fallen from the top five salary list for the first time since the 1976-1977 school year, he continues to enjoy the most significant perquisites of any Harvard administrator a University owned house and limousine University officials unanimously play down the significance of Bok's rarely used automotive perk. Scott calls it an "inexpensive taxi" and in fact, Bok is known for driving to work in a well worn Volkswagen.

His plush house on 33 Elmwood Ave in Cambridge, however, makes Bok one of just three University officials living rent-free in Harvard-owned homes aside from House masters according to O'Brien and Cantor. (Minister of Memorial Church Rev. Peter J. Gomes and Divinity School Dean George E. Rupp, who live at 21 Kirkland St. and 44 Francis Ave., respectively, are the others.) Many administrators say privately that Bok's home is the only reason his salary is not significantly higher--or at least above Rosovsky's.

Indeed, Bok and Rosovsky's decisions regarding University-owned property provide an interesting contrast. Appointed president in 1971, Bok turned down the traditional President's quarters at 17 Quincy St., across from Lamont Library. One administrator explains Bok's reasoning: "If you became the President of Harvard in 1971 and you had little children and you had just been through the past four years of violent student protest, would you move into a house on campus?"

As it turned out, Bok opted for 33 Elmwood, the traditional residence of the Dean of the Faculty. (The University's original charter requires its president to live in Cambridge.) The financial advantage of the University-owned home is clearly great, but as one official observes, the requirement that the President entertain in his official residence can prove a drawback, "If I had to have someone to dinner every night," he says, "I would consider it a cost."

Rosovsky, by contrast, opted to continue living in his Newton home. He entertains official guests, as it happens, in the 17 Quincy St. home of past presidents. "I'm very happy where I am." Rosovsky says. "I didn't really want to get used to a certain lifestyle and then hang on to that lifestyle just because I was used to it." Rosovsky's decision to forego a University home, like Bok's self-imposed salary freeze before it, was occasioned largely by budgetary factors: "I really did not want to do anything that would appear luxurious." Moreover, for Rosovsky's personal finances, giving up his house only to have to purchase another one a decade or so later would have been an expensive move.

Rosovsky's still-undetermined successor--the dean announced last month he will step down next summer--will have the opportunity Rosovsky passed up Midway through the current dean's tenure, the Faculty obtained a residence on Bryan St., Rosovsky says, because "I was really quite certain that my successor would want a house."

Yet if there is one presumption underlying the entire process of administrative compensation, it is that in a university setting, the salaries of officialdom can never be made a higher priority than those of Faculty. Even administrators with no Faculty experience quickly stress that Harvard's tenured Faculty is paid as well as any and better than most, and that that fact matters most of them. As Bok himself notes, in a study of administrative salaries. "We would make a decent showing, but I do not believe we would be number one, the way we are with faculty."

Bok turned down the traditional President's quarters at 17 Quincy St., opting instead to live at 33 Elmwood. Explains one administrator, "If you became the President of Harvard in 1971 and you had little children and you had just been through the past four years of violent student protest, would you move into a house on campus?"

Top Salaries, 1981-1982

1. DR. DANIEL C. TOSTESON '44, Dean of the Medical School--$100,500

2. DR. JOHN R. BROOKS '40, Director of Surgery, UHS--$106,019

3. HENRY ROSOVSKY, Dean of the Faculty--$96,500

4. DR. HOWARD GREEN, Higgins Professor of Physiology--$35,500

5. DR. PHILIP LEDER, Andrus Professor of Genetics--$35,000

1976-77

1. Dr. Robert H. Ebert Dean of the Medical School $56,250

2. Raymond Vernon Johnson Professor of International Business Management, Director of the Center for International Affairs $52,800

3. Paul M. Doty Mallinckrodt Professor of Biochemistry $51,912

4. Hale Champion Financial Vice President $51,200

5. Henry Rosovsky Dean of the Faculty $51,000

1977-78

1. Raymond Vernon $58,963

2. Derek C. Bok $57,517

3. Dr. Robert Ebert $57,500

4. Jerome A. Cohen Smith Professor of Law $57,250

5. Henry Rosovsky $57,250

1978-79

1. Dr. Daniel C. Tosteson Dean of the Medical School $87,500

2. Derek C. Bok $65,017

3. Henry Rosovsky $64,250

4. Jerome A. Cohen $61,889

5. Kenneth R. Andrews David Professor of Business Administration, Master of Leverett House $61,611

1979-80 and 1980-81

1. Dr. Daniel C. Tosteson $99,890

2. Henry Rosovsky $77,000

3. Fred L. Glimp Vice President for Alumni Affairs and Development $75,890

4. Derek C. Bok $74,449

5. Dr. Sholem Postel Deputy Director, University Health Services $73,890