Morgan Stanley has unveiled a slate of changes to the way it pays its top executives, broadening its ability to "claw back" bonuses and more closely linking pay to the performance of the bank.
"Clawback or cancellation of awards can be triggered for circumstances ranging from substantial losses to ethical lapses and include failure to appropriately supervise or manage an employee," Morgan Stanley said in a proxy filing on Thursday. The new rules apply to all top executives, and could become a blueprint for similar clawback provisions at other large Wall Street banks.
Morgan Stanley has been tweaking the packages it gives its bankers – cutting salaries and paying more bonuses in the form of "deferred compensation," which often entails equity in the bank. Such compensation is thought by some regulators to better link bankers' pay to the results of the bank.
Even James Gorman, Morgan Stanley's chief executive, is not immune to the changes.
The CEO took home $10.5-million in 2011, 25 per cent less than the year before, "reflecting the fact that the company did not fully meet certain financial priorities for the year," the filing said Mr. Gorman's package included $5.04-million worth of restricted shares and $1.94-million of stock tied to the performance of the New York-based bank. His base salary stayed the same at $800,000 and he received a cash bonus of $2.72-million – down a third from the $3.88m bonus he received for 2010.
"Morgan Stanley has fundamentally restructured the way it pays its employees, more closely tying compensation to the Company's long-term financial performance," Mr. Gorman said in a letter to shareholders, noting the broadened clawback provisions and a redesigned "at-risk" stock program.
At-risk stock includes restricted shares and those linked to the bank's performance.
U.S. regulators have pressed for similar "clawback" reforms to the pay structures of the biggest banks as part of new Dodd-Frank regulation. But changes have yet to be finalized.
Jamie Dimon, chief executive of JPMorgan Chase, remains the highest paid bank head on Wall Street – earning $23.1-million in total compensation last year – an 11 per cent increase over 2010.