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Mack's Mandatory Minimums

John Mack is Morgan Stanley's (MWD) new $25 million man.

Over the next two years, the big Wall Street firm will pay its new leader a minimum "guaranteed" compensation package of $25 million, according to a regulatory filing.

The only way Mack's minimum pay package will be less than $25 million is if the average pay packages for his Wall Street peers is less than that sum. In other words, if the CEOs of Bear Stearns (BSC), Lehman Brothers (LEH), Goldman Sachs (GS) and Merrill Lynch (MER) make less than $25 million, Morgan Stanley will make a downward adjustment in Mack's minimum pay package.

At the same time, if the average pay for Mack's rivals exceeds $25 million, Morgan Stanley will cap Mack's "guaranteed minimum total compensation" at $25 million.

On Wall Street, that's what they call price controls.

Of course, we're talking a minimum pay package here. So it's entirely possible Mack's total take-home package could be much more.

Even though it's a five-year deal, Morgan Stanley will guarantee the size of Mack's pay package only through 2006. After that, how much Mack earns will be at the total discretion of the board.

Last week, Morgan Stanley journeyed back to the future to tap Mack as chairman and CEO to replace Philip Purcell. Mack had been the firm's former president who was ousted in 2001 during a power struggle with Purcell.

In addition to the guaranteed salary, Mack also is getting 500,000 restricted stock units, which will vest and be paid in five installments. Restricted stock has become a popular way for Wall Street to reward executives.

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