Dec. 19 (Bloomberg) -- Morgan Stanley increased its bonus pool 18 percent to almost $10 billion following the firm's first-ever quarterly loss, saying employees in divisions that reported record results in 2007 deserved the awards.

Total compensation, including salaries, benefits and bonuses, climbed to $16.55 billion in 2007 from $13.99 billion last year, the New York-based firm said today in a statement. Year-end bonuses, estimated at about 60 percent of the total, will jump to $9.93 billion from $8.39 billion.

Chief Executive Officer John Mack, who received a $40 million payout in 2006, said he won't accept a bonus after the company wrote down $9.4 billion in debt securities during the quarter. Morgan Stanley, the second-biggest U.S. securities firm, boosted the percentage of revenue set aside for compensation to 59 percent from 47 percent last year to reward employees in units handling equities, investment banking and wealth management, where revenue climbed.

``We felt it was inappropriate, as our board of directors did as well, for employees who delivered sterling results and a very strong performance to suffer,'' Chief Financial Officer Colm Kelleher said in an interview today. ``If you were to normalize our business and take out this $9.4 billion charge, you would see that we had a record year across the whole enterprise.''

Morgan Stanley employed 48,256 people on Nov. 30, up 12 percent from 43,124 a year earlier. Average pay per employee climbed to $343,004 from $324,320 a year earlier, with the bonus portion increasing to an estimated $205,802 from $194,592.

Goldman's Payout

Morgan Stanley is the third Wall Street firm to report higher compensation this year. Goldman Sachs Group Inc., the biggest and most-profitable company in the industry, yesterday reported that the figure climbed 23 percent, with average pay rising to $661,490. Lehman Brothers Holdings Inc., the fourth- biggest firm, said its compensation pool increased 9.5 percent from a year earlier, with average pay dropping 0.5 percent to $332,470.

Morgan Stanley rose $2.01, or 4.2 percent, to $50.08 at 4:03 p.m. in New York Stock Exchange composite trading. The stock has declined 26 percent this year, compared with a 16 percent drop in the 12-member Amex Securities Broker/Dealer Index.

To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net.

Last Updated: December 19, 2007 16:30 EST