Morgan Stanley CEO James Gorman was awarded a US$10.5 million bonus for last year, down 25 percent from the previous year, according to a source familiar with the matter.
All of Gorman’s bonus will be deferred for a period of two to three years, including a US$5.1 million restricted stock award detailed in a filing with the US Securities and Exchange Commission on Friday evening.
The lower bonuses with tighter restrictions reflect weak performance at Morgan Stanley last year, as capital markets reacted to the European sovereign debt crisis and a downgrade of the US bond rating. Clients pulled back sharply on trading and investment banking activity, hurting profits across Wall Street.
Morgan Stanley lost money in two of four quarters and had difficulty meeting profitability targets that were earlier outlined by senior management. Its return on common equity — a key measurement of profitability — was a meager 3.9 percent from continuing operations for the full year.
Morgan Stanley, like other rivals including Goldman Sachs Group Inc, responded to rough market conditions by cutting staff and salaries.
The bank capped cash bonuses at US$125,000 for employees, an unusually low amount for a workforce accustomed to multimillion dollar paydays. In the middle of last month, it announced plans to lay off 1,600 employees, which comes in addition to hundreds of underperforming financial advisers dismissed from its wealth management business earlier in the year.
Overall, Morgan Stanley paid out US$16.4 billion worth of compensation and benefits last year, which translated into US$264,996 per employee. The figures were higher than the previous year because of severance costs from recent layoffs, higher pay for financial advisers and an unusually large amount of deferred compensation from previous years that came due last year.
Gorman and other members of his operating committee have been given a 21 percent cut in bonuses collectively, all of which will be deferred, the source familiar with top-level pay said.
In Form 4 filings with the Securities and Exchange Commission on Friday, Morgan Stanley detailed US$24.5 million worth of restricted stock to nine top executives on Thursday as part of their bonus payments for last year.
Greg Fleming, the head of Morgan Stanley’s wealth management business, and Paul Taubman, an investment banker who is co-head of institutional securities, each received restricted stock worth US$3.4 million on Thursday, using the bank’s closing price of US$18.28. Colm Kelleher, the bank’s other co-head of institutional securities, who has a background in trading, received a US$2.6 million award.
Chief financial officer Ruth Porat received US$3.2 million worth of restricted stock and her deputy, Paul Wirth, received US$1.1 million. Chief operating officer Jim Rosenthal received US$2.9 million worth of restricted stock, while chief risk officer Keishi Hotsuki received US$1.8 million.
Newly promoted chief legal officer Eric Grossman was the only executive to receive an award under US$1 million, at US$975,000.