NEW YORK (
's new CEO, James Gorman, reiterated his pledge to control compensation at the securities firm in his first annual letter to shareholders.
Morgan Stanley's compensation costs in 2009 added up to 62% of its revenue last year, according to
The Wall Street Journal
. Most investment banks try to keep the number below 50%, and
paid its employees 35.8% of its net revenues last year, its lowest ratio ever.
Gorman, who has made similar statements in the past, wrote in the letter Monday that he is "committed to never again seeing that sort of compensation ratio." However, he said the ratio was skewed in large part due to an improvement in Morgan Stanley's debt-related credit spreads. The issue caused Morgan Stanley's revenue to fall by $5.5 billion, even though it reflected the debt market's increased confidence about the company's creditworthiness.
Despite the outsized pay, or maybe because of it, Gorman claims in his letter that Morgan Stanley is "leading the way in compensation reform," and he claims that in 2008 the company became "the first U.S. bank to institute a clawback provision."
Clawback provisions, which allow companies to recoup payments made to executives whose decisions cause problems several months or years after they are made, have gained favor among some compensation reform advocates of late, though others question their practicality.
Gorman also touts Morgan Stanley's increased use of deferred compensation in the letter, including the use of "at risk performance units" for senior executives, which only pay out if the company hits certain three-year performance targets.
Morgan Stanley shares finished Monday down a nickel at $30.93 on volume of 13.1 million. The stock is up nearly 7% year-to-date. The company plans to issue its first-quarter results before the opening bell on April 21. The current average estimate of analysts polled by
is for a profit of 58 cents a share on revenue of $7.96 billion for the March period.
Written by Dan Freed in New York