Morgan Stanley Said to Cut Bonus Deferrals for Top Bankers

Jan 17, 2014 10:39 am ET

(Updates with compensation cost figures in eighth paragraph.)

Jan. 17 (Bloomberg) -- Morgan Stanley, which deferred 100 percent of 2012 bonuses for many senior bankers, will pay some portion of awards for last year’s performance in immediate cash, according to a person briefed on the plan.

The bank will still defer at least half of bonuses for any employees who have both total pay of at least $350,000 and incentive pay of $50,000, said the person, who asked not to be named because the policy isn’t public. Mark Lake, a spokesman for New York-based Morgan Stanley, declined to comment.

Banks have increased deferred pay in the wake of the financial crisis in an attempt to tie employees’ interests to the long-term performance of the firm. Regulators criticized pay systems that awarded upfront bonuses on transactions that produced in later years.

Morgan Stanley has been among the most aggressive in deferring pay and instituting clawbacks, drawing some complaints from employees. For 2011 awards, the firm capped most immediate cash bonuses at $125,000. Last year, it deferred 100 percent of incentive awards for those who fell into the category of $350,000 total pay and $50,000 bonus.

This year, Morgan Stanley bankers in that group will have half of the first $100,000 of their bonus deferred, and the deferral rate increases with the bonus amount, the person said. The next $100,000 will be 65 percent deferred, with the following $100,000 increments deferred at 85 percent, 90 percent and 94 percent rates, the person said.

Clawback Provision

Employees who receive a bonus of more than $500,000 will get only 2 percent of the award above that amount upfront, with the remainder paid over the course of three years, the person said. The deferred payments, which have clawback and cancellation provisions, will be split evenly between stock and cash awards, the person said.

Investment banks are paying a lower percentage of revenue to their workers as they seek to boost returns. Goldman Sachs Group Inc. said yesterday it cut the portion of revenue it pays employees to 37 percent, the second-lowest level as a public firm. JPMorgan Chase & Co. set aside 30 percent of revenue in its corporate and investment bank, down from 32 percent in 2012.

Morgan Stanley, which reported full-year results today, set aside 42 percent of revenue in its investment-banking and trading division for compensation in 2013, down from 45 percent a year earlier.

Employees who got deferred equity awards over the last two years have benefited as Morgan Stanley’s stock doubled, including a 64 percent jump in 2013.

--Editors: Steven Crabill, Dan Kraut