Morgan Stanley boosts CEO salary, eyes higher returns

NEW YORK Thu Jan 31, 2013 8:16pm EST

Morgan Stanley CEO James Gorman talks on his cell phone after leaving a meeting with lawyer Davis Polk in New York January 13, 2011. REUTERS/Jessica Rinaldi

Morgan Stanley CEO James Gorman talks on his cell phone after leaving a meeting with lawyer Davis Polk in New York January 13, 2011.

Credit: Reuters/Jessica Rinaldi

NEW YORK (Reuters) - Morgan Stanley (MS.N) said it is nearly doubling Chief Executive James Gorman's salary to $1.5 million a year, to bring it more in line with other big bank chiefs.

Gorman's total pay for 2012 fell 7 percent to $9.75 million, the bank said in a regulatory filing Thursday, putting him on the lower end of the range for big banks that have reported figures so far.

But his salary for 2013 is rising from $800,000 the prior year, following a trend widely seen on Wall Street of higher base pay and lower bonuses. The shift, encouraged by new regulations, is meant to make executives less inclined to take big risks to win outsized bonuses.

Gorman's new salary amounts to about $28,846 per week, compared with $38,462 per week for Lloyd Blankfein, who is CEO of Morgan Stanley's chief Wall Street rival, Goldman Sachs Group Inc (GS.N). The five CEOs running U.S. banks larger than Morgan Stanley had base salaries last year ranging from $950,000 to $2.8 million.

Gorman faces a big task for 2013: boosting returns for a bank that has lagged peers, in large part because of high expenses in its wealth management group and relatively low revenue in its bond trading business.

Morgan Stanley's return on equity, a measure of how well the bank squeezes profit out of shareholders' money, was just 3.2 percent in the fourth quarter, far below the double-digit returns of competitors.

Earlier this month, Gorman pledged that Morgan Stanley would be able to deliver a 10-percent return on equity for shareholders, even if market conditions do not improve. After achieving that goal, Morgan Stanley will return excess capital to shareholders, he said.

The 10 percent figure is about equal to the bank's cost of capital, making it a bare minimum figure that many shareholders will stomach.

Morgan Stanley also approved a performance-based award package that makes Gorman eligible to earn $3.75 million over the next three years, if certain return targets are met. In 2009, Gorman got nothing from that package because Morgan Stanley missed its targets for return-on-equity and relative total shareholder returns over the period.

C. Robert Kidder, Morgan Stanley's independent lead director said: "The Board is confident of the strategic decisions taken by senior management and our decision to grant these forward-looking (long-term incentive program) awards reflects that confidence."

Much of Gorman's bonus is deferred. Across the bank, except for among retail brokers, high-earning employees are receiving their bonuses over three years.

Even with the bank's difficulties, its stock climbed 26 percent during 2012, and has soared another 19 percent this year, to close at $22.85 on Thursday.

The board's compensation committee also approved higher base salaries for Chief Financial Officer Ruth Porat, as well as Gregory Fleming, who is president of Morgan Stanley's global wealth management and investment management businesses, and for Colm Kelleher, who is president of institutional securities. Those three executives will take home a base pay of roughly $1 million in 2013, up from a previous level of about $750,000.

(Reporting By Lauren Tara LaCapra; editing by Dan Wilchins, Gunna Dickson)

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