The chief executives of Morgan Stanley and Merrill Lynch & Co are going without bonuses for a year that has seen Wall Street ravaged by staggering losses, mass layoffs and the collapse of storied firms.
Morgan Stanley’s CEO John Mack is giving up a bonus for the second straight year, while Merrill Lynch & Co said its CEO, John Thain, also asked to go without the extra compensation for the year after reports surfaced he had sought as much as US$10 million.
Mack told employees on Monday in a memo obtained by reporters that he and the firm’s two presidents, James Gorman and Walid Chammah, had informed the board’s compensation committee of their decision to forgo their bonuses, and the committee accepted.
Mack said the company was changing year-end compensation for other employees, too.
The executives, however, are still being paid. Last year, Mack earned a salary of US$800,000 as well as nearly US$400,000 in other compensation, including personal use of a corporate jet.
Compensation for the 14 members of the firm’s operating committee will be down an average of 75 percent, and down 65 percent for the 35 members of the management committee.
Morgan Stanley plans to tie compensation for all employees eligible for bonuses more closely to performance.
It will also allow for “clawbacks” — where the company could reclaim any bonus paid to an employee if his or her actions led to “the need for a restatement of results, a significant financial loss or other reputational harm,” the memo said.
The CEO compensation debate comes as global banks have lost billions of dollars amid a credit crisis that has yet to be contained.
In the last few months, major US banks have taken advantage of a US$700 billion government bailout program to help them avoid fates similar to that of investment bank Lehman Brothers Holdings Inc, which declared Chapter 11 bankruptcy in October.
Goldman Sachs CEO Lloyd Blankfein — and six of his top lieutenants — announced last month that they won’t take cash or stock bonuses for the year.
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