Morgan Stanley CEO forgoes bonus again
By Joseph A. Giannone
NEW YORK (Reuters) - Morgan Stanley (MS.N) Chief Executive John Mack told employees on Monday he would not get a bonus for a second straight year and announced compensation changes designed to more closely link pay with the bank's long-term performance.
Three weeks after Goldman Sachs Group (GS.N) and UBS AG (UBSN.VX) executives announced plans to forgo bonuses, Mack in a memo said he and co-Presidents Walid Chammah and James Gorman will not receive bonuses this year. Mack also did not receive a bonus for last year, which was wrecked by nearly $10 billion of fourth-quarter trading losses.
"Our entire bonus pool will be down dramatically this year, reflecting the difficult market conditions, stock price performance and our full-year revenues in this challenging environment," Mack said in the memo.
Later Monday, CNBC reported that Merrill Lynch MER.N CEO John Thain also asked that he not receive a 2008 bonus. A Wall Street Journal report had said he was seeking as much as $10 million for helping the giant brokerage avoid an even bigger crisis by selling to Bank of America Corp (BAC.N).
Mack said the cutbacks will affect the highest levels of management: 14 operating committee members will see bonuses reduced on average by 75 percent, while 35 members of the management committee will see bonuses down by 65 percent.
The traditional Wall Street bonus, which enriched bankers and traders by tens of millions of dollars during good times, is under attack now that times have gone bad. Lawmakers and taxpayers are railing against lavish paychecks for money-losing executives -- especially ones receiving billions in government aid.
New York Attorney General Andrew Cuomo, based on the Journal's report, had chastised Thain Monday for seeking a $10 bonus and said Morgan Stanley's moves were more appropriate.
"American taxpayers have seen their investments crater while simultaneously having to fund the Wall Street bailout with billions of their tax dollars. This gesture by Morgan Stanley is appropriate, and I hope other firms like Merrill Lynch will take it to heart," Cuomo said.
Cuomo's office is investigating Wall Street's largest banks on their compensation practices in light of the U.S. government devoting trillions of dollars of taxpayer money to support and rescue the banking industry.
Senate Majority Leader Harry Reid of Nevada also added to calls for Merrill's board to reject the reported request.
Merrill's compensation committee has not yet decided, but is leaning toward denying Thain and other executives bonuses for this year, the Wall Street Journal reported Monday.
Merrill declined to comment.
Thain said he deserves a bonus because he helped avert a much larger crisis by engineering the sale to BofA while some rivals collapsed, according to the report.
Shares of Merrill have fallen 72 percent this year, and since the deal with Bank of America was announced Sept. 15, they have dropped 34 percent.
Mack also announced some other compensation changes, including a requirement that operating committee members hold at least 75 percent of any shares acquired from the company and provisions that would let the bank claw back payments to executives if performance should suffer.
Similar in some ways to a new compensation plan announced by UBS, Morgan Stanley bonuses starting this year will be paid in three components: cash, equity with a three-year vesting period and deferred cash subject to clawbacks over a three-year period.
Morgan Stanley will also institute a plan for senior executives tying part of their pay to the firm's performance over a three-year period as measured by return on equity relative to its peers and total shareholder return.
(Reporting by Joseph A. Giannone; Editing by Gary Hill)
