Published January 24, 2013
Morgan Stanley Chief Executive Officer James Gorman received lower compensation for 2012 after a difficult year for the bank in which profits declined.
Gorman received $6 million in total compensation for 2012, including $800,000 in salary, $2.6 million in deferred cash and $2.6 million in stock options, a person familiar with the matter said on Thursday. He did not receive a cash bonus.
Gorman made $8.56 million for 2011, when counting salary, deferred cash and restricted stock grants.
Morgan Stanley's board also plans to award Gorman an undetermined amount of long-term incentive pay for 2012, the source said. But he will still make less than the $10.5 million total he made in 2011, when counting $1.9 million in long-term incentive pay, the source said.
Gorman isn't the only Wall Street chief taking a pay cut. JPMorgan Chase & Co last week slashed CEO Jamie Dimon's bonus by half after the bank lost more than $6 billion on its disastrous "London Whale" trade.
Goldman Sachs Group Inc CEO Lloyd Blankfein, however, received a more than 50 percent increase in restricted shares as part of his bonus for 2012, according to filings last week.
Morgan Stanley on Thursday disclosed stock and option awards for top executives in filings with the U.S. Securities and Exchange Commission. The rest of the executives' pay will be disclosed later in the company's annual proxy filing.
Among the executives, Chief Financial Officer Ruth Porat received 99,834 shares of restricted stock, worth $2.29 million on Tuesday, the day the shares were granted.
Gorman received stock options, which give the holder the right to buy stock at a certain price, instead of restricted stock grants for corporate tax reasons, the source said. Granting options was a way to maintain deductibility, which is allowed under IRS rules, the source said.
Porat was able to receive restricted stock because CFO compensation was not subject to the same tax deduction limits, the source said. The Obama administration is considering Porat for a position as Treasury deputy secretary, a source familiar with the matter told Reuters last week.
Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware, said he was surprised to see the use of stock options to pay Gorman because restricted shares are considered to be more in line with shareholder interests.
Restricted stock goes up and down with the value of a company's stock, while stock options can vary from being worth a lot to becoming worthless, he said. Restricted shares "are not a trip to Las Vegas," he said. "It's an ownership stake."
STILL REINVENTING ITSELF
Morgan Stanley is still reinventing itself after the financial crisis. Its multi-billion dollar investment in Citigroup's Smith Barney retail brokerage is only just starting to generate the kinds of profit margins the bank had hoped for. And its fixed-income trading business is lagging peers', weighing on Morgan Stanley's overall profitability.
For all of 2012, the bank reported a loss for shareholders from continuing operations of $50 million, down from a $2.1 billion profit in 2011, when including accounting charges related to changes in the value of the bank's debt. Excluding those charges, the bank made $3.1 billion in 2012, up from a loss of $136 million in 2011.
The bank's fourth-quarter results showed progress, beating analysts' estimates by a wide margin, and leading Gorman to proclaim the bank had turned itself around.
Morgan Stanley is one of several Wall Street banks using layoffs and compensation cuts to help boost its bottom line. Across the entire company, compensation costs fell by $711 million, or 4 percent, in 2012 as Morgan Stanley cut nearly 5,000 employees from its payroll.
(Reporting by Rick Rothacker in Charlotte, N.C.; Editing by Tim Dobbyn, Bernard Orr and Bob Burgdorfer)