Sunday, May 24, 2009

Morgan Stanley to Boost Executive Salaries as Bonuses Decline

Morgan Stanley, the sixth-biggest U.S. bank by assets, will increase some executive salaries and double Chief Financial Officer Colm Kelleher’s pay as bonuses come under scrutiny from the Obama administration and lawmakers.

The majority of executives will get raises, according to a person briefed on the decision. Chief Executive Officer John Mack’s base salary is unchanged this year, according to a regulatory filing yesterday.

UBS AG raised banker base pay 50 percent and Bank of America Corp., which bought Merrill Lynch & Co., said in March it might boost salaries as a proportion of total compensation. Treasury Secretary Timothy Geithner is urging an overhaul of compensation practices at financial companies and said the Obama administration’s plan to realign pay with performance will be introduced by mid-June.

“I don’t think we can go back to the way it was,” Geithner said on Bloomberg Television’s “Political Capital with Al Hunt,” to be broadcast during the weekend. “We’re going to need to see very, very substantial change.”

Co-presidents James Gorman, 50, and Walid Chammah, 55, will be paid $800,000 and $750,000 respectively, New York-based Morgan Stanley said in the regulatory filing. Kelleher, 51, will make a base of $750,000, more than double his 2008 base salary of $322,903, Bloomberg data show. Mack, 64, will make $800,000 this year, unchanged from 2008. The changes became effective May 1 and don’t include bonus or catch-up payments.

Lynch, Nides

Chief Legal Officer Gary Lynch and Chief Administrative Officer Thomas Nides will each be paid a base of $750,000, the filing shows. Each received a salary of $300,000 in 2008, Bloomberg data show.

CEO Mack didn’t take a bonus for the second year in a row in 2008 and co-presidents Gorman and Chammah didn’t take one.

Morgan Stanley and UBS also have added so-called clawback provisions that set aside portions of workers’ bonuses that can be recouped in later years if an employee leaves or is found to have behaved in ways that are harmful to the company.

A new performance-based stock plan will “focus a greater portion of total compensation on long-term results rather than a one-year performance period,” according to the filing.

Morgan Stanley spokesman Mark Lake declined to comment beyond the filing.

UBS cut its bonus pool by 78 percent in January after amassing the biggest loss in Swiss corporate history in 2008. The bank came under pressure from government officials to slash variable pay after the Swiss state provided capital to UBS and helped shift hard-to-trade assets off its books.