Morgan Aims to Drop Compensation Ratio
NEW YORK (
) --
Morgan Stanley
(MS) - Get Report
CEO James Gorman plans to bring down the firm's compensation ratio this year by boosting revenue through "scale-driven" economics, the
Wall Street Journal
reports.
Gorman, who took over as CEO on Jan. 1, told the
Journal
that his plan wouldn't necessarily slash overall pay. However, he said the firm's compensation ratio in 2009 was a "historic high" that "nobody on my management team ... will ever see again."
Despite struggling businesses, Morgan Stanley paid out 62% of revenue as compensation in 2009 while rival
Goldman Sachs
(GS) - Get Report
, which reported record earnings, had a ratio of only 36%, the
Journal
notes.
Morgan Stanley had to pay people generously in certain businesses such as real estate to keep the units functioning, Gorman said. Morgan Stanley paid compensation and benefits of $14.4 billion on net revenue of $23 billion.
Gorman told the
Journal
that the 2009 payouts wouldn't likely be repeated and added that a more-normal 50% compensation ratio is "something that clearly should be improved upon."
According to Gorman, the brokerage business could see pay and benefits dropping to 55% from 63% following the acquisition of
Citigroup's
(C) - Get Report
Smith Barney arm. The institutional securities group will see compensation dropping to the mid-30% range from 45%, he added, the
Journal
reports.
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