Morgan Stanley Fortifies Clawback Rules for Deferred Pay

Morgan Stanley (MS) has strengthened the conditions under which deferred compensation can be taken (or “clawed”) back from an employee who violate its policies, the company said in a proxy statement filed with the SEC on Thursday. It also cut the pay of its CEO James Gorman by 25% in 2011 to $10.5 million.

According to the document, long-term incentive compensation for certain executives is covered by the new rules. The clawback might result from an act or omission that leads to a restatement or if there is a violation of the company’s risk policies and standards.

“What's most interesting is that Morgan Stanley can claw back bonuses if employees violate risk management policies, even if the violation didn't cause any monetary loss,” said Mark Elzweig (left), an executive-search consultant in New York, in an interview with AdvisorOne. “That's a bit draconian, but certainly understandable in light of what's happened [to the industry].”

Risk management and compliance will remain “front-and-center concerns” for years to come, due to the fallout from losses tied to mortgage-related investments, Elzweig notes. “And that's not necessarily a bad thing either.”

In terms of Gorman’s 2011 compensation, he received about $5 million in restricted shares and close to $2 million in shares tied to company performance. He also was given a deferred cash bonus of $2.7 million, which can be clawed back. These payments came on top of his $800,000 salary.

“Senior people are entitled to earn big pay packages,” Elzweig said. “Having said that, this won't help morale amongst rank-and-file home office staff, who've earned minuscule or no bonuses in recent years."

In 2011, Morgan Stanley’s shares declined by about 45%.

No comments:

Post a Comment