| NEW YORK
NEW YORK Morgan Stanley (MS.N) shareholders are
not expected to vote out Chairman and Chief Executive John Mack
at the annual meeting on Tuesday, although investors frustrated
by the bank's costly missteps will send a protest message by
demanding a vote on executive pay.
CtW Investment Group, an adviser to several union pensions,
has for several weeks urged investors to withhold votes from
Mack and several other directors. Last week, the campaign won a
few converts -- large pension funds in California, Illinois and
Yet on the eve of the meeting, CtW executive director Bill
Patterson conceded he does not expect a majority of
shareholders to withhold votes from Mack. Rather, investors
will approve a proposal from another union group -- the
American Federation of State, County and Municipal Employees --
seeking an advisory vote on executive compensation.
"Shareholders are moving to 'Say on Pay' as the instrument
for expressing their disapproval of the board and their demand
for a stronger, more independent board," Patterson said in an
interview on Monday.
Mack took the helm amid great fanfare when he returned to
the investment bank in 2005, but he lost some goodwill last
year as Morgan Stanley reported $9.4 billion in fourth quarter
mortgage trading losses. CtW said Mack and several directors
should be held responsible for pushing the investment bank to
make bolder bets and then failing to manage that risk.
In the weeks leading up to the meeting, shareholders
received conflicting advice from other proxy firms. Glass Lewis
called for supporting Mack, but voting against six directors,
while ISS, considered the most influential proxy adviser, said
investors should reelect all directors, even as it questioned
the board's performance.
Ultimately, most fund managers concluded that a vote
against Mack and directors would send an unduly harsh message.
"The director withholds will not be large," said Patterson,
whose group lobbied union and other pension managers to cast
withhold votes. "Shareholders don't want to vote him off the
Morgan Stanley has taken a number of steps to bolster risk
management and will remove the last vestiges of super-majority
voting in place before Mack returned. Mack meanwhile also may
take the steam out of the 'say on pay' movement since he turned
down an annual bonus last year.
Patterson still contends that AFSCME submitted their 'say
on pay' proposal last fall, before the big losses were
"By January, it was clear stronger measures were
warranted," Patterson said. Going forward, "investors are
demanding stronger boards who will stand up to the CEO, but
right now they are not quite ready to turn directors out."
(Editing by Andre Grenon)