Goldman Sachs, Morgan Stanley to Revise Language on Clawbacks

Goldman Sachs Group Inc. and Morgan Stanley will rewrite their so-called clawback policies to make it clear they will reclaim pay from supervisors as well as from employees who take excessive risk or engage in improper conduct.

Memos from both firms confirming the planned changes, responding to a December shareholder request from New York City pension funds, were posted to the Securities and Exchange Commission’s website. The New York-based companies said regulators are drafting clawback rules, which may satisfy the city’s request for disclosure of how much pay the banks take back. Dow Jones Newswires reported on the changes earlier today.

“These two firms have set the standard for clawback policies in the banking industry,” New York City Comptroller John C. Liu, who oversaw $113 billion in pension funds as of Nov. 30, said in a statement today. “We appreciate the dialogue we’ve had on this issue and will continue to call for them to disclose the amount of clawbacks if forthcoming regulation does not require it.”

Liu filed shareholder requests with Goldman Sachs, Morgan Stanley (MS) and New York-based JPMorgan Chase & Co. seeking tougher clawbacks after each paid more than $100 million over 18 months to settle charges of improper conduct tied to mortgage-backed securities. Spokesmen at Goldman Sachs and Morgan Stanley, the fifth- and sixth-biggest U.S. banks by assets, declined to comment. JPMorgan’s Joe Evangelisti didn’t immediately respond to a request for comment. The company is the biggest U.S. bank by assets.

Michael Garland, the New York City comptroller’s executive director for corporate governance, withdrew the shareholder proposals made to Goldman Sachs and Morgan Stanley after they agreed to change the language in their policies, according to memos posted on the SEC’s website.

Liu hired Garland to the new position in September 2010. Garland had served as director of value strategies for the CtW Investment Group, which he co-founded within Change to Win, a federation of unions that represented 5.5 million U.S. workers.

To contact the reporters on this story: Christine Harper in New York at charper@bloomberg.net Michael J. Moore in New York at mmoore55@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

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