Morgan Stanley gave Chairman and Chief Executive Officer James Gorman a compensation package for 2012 that’s 30 percent less than his 2011 award, excluding a new incentive package, a person familiar with the decision said.
Gorman, 54, will get stock options valued at $2.6 million, according to a filing yesterday with the U.S. Securities and Exchange Commission. He also will receive a $2.6 million deferred cash bonus in addition to his $800,000 salary, said the person, who asked not to be identified because Gorman’s total pay hasn’t been announced. That totals $6 million, down from $8.56 million on a comparable basis for 2011.
Morgan Stanley cut 2012 costs 2 percent as revenue climbed 6.9 percent, excluding charges or gains related to changes in the price of the firm’s own debt. Still, the bank’s return on equity was 5 percent, below Gorman’s goal of 15 percent.
He’s receiving options instead of restricted shares awarded for 2011 and a new long-term incentive package separate from his year-end pay that will have a similar structure to the performance shares he got for 2010 and 2011, the person said. Even including the package, the size of which hasn’t been disclosed, his total compensation will be down from the $10.5 million he received for 2011, the person said.
Gorman’s pay trails Goldman Sachs Group Inc. CEO Lloyd C. Blankfein’s $21 million and JPMorgan Chase & Co. CEO Jamie Dimon’s $11.5 million. Morgan Stanley’s decision to separate Gorman’s award based on future performance targets from year-end pay brings it in line with New York-based Goldman Sachs, which gave Blankfein such an incentive worth $3 million in February and a $7 million award the previous year.
Morgan Stanley shares climbed 26 percent last year, after tumbling 44 percent in 2011. The stock has gained 18 percent in January, fueled by fourth-quarter results that exceeded analysts’ estimates and Gorman’s plan to double the firm’s return on equity even without an improvement in markets.
The bank is eliminating 1,700 jobs this month as Gorman pursues $1.6 billion of annual savings during the next two years. The New York-based firm is deferring all bonuses for employees who have both total pay of more than $350,000 and incentive compensation of at least $50,000, a person briefed on the matter said earlier this month.
Morgan Stanley paid many of its top executives in options because of a tax rule that limits the deductibility of compensation for certain officers, except the chief financial officer, unless the pay qualifies as “performance-based,” the person said. The rule came into effect because of the firm’s low level of pretax earnings, the person said. Morgan Stanley had $515 million of pretax profit in 2012, a figure that was reduced by $4.4 billion because of charges relating to the firm’s own debt, known as debt valuation adjustments.
CFO Ruth Porat was awarded 99,835 restricted shares worth $2.29 million based on the closing price on Jan. 22, the day they were awarded, according to a separate regulatory filing yesterday. Last year, she received restricted stock valued at $3.2 million. Paul Wirth, deputy CFO, received 92,070 restricted shares valued at $2.12 million.
Colm Kelleher, president of the investment banking and trading division, received 445,425 options valued at $2.41 million, compared with restricted shares worth $2.54 million for 2011. Greg Fleming, who runs the brokerage and asset-management businesses, received 447,888 options worth $2.43 million. Last year, he received restricted stock units worth $3.4 million.
Chief Operating Officer Jim Rosenthal and Chief Risk Officer Keishi Hotsuki received options valued at $2.03 million and $1.25 million, respectively. Chief Legal Officer Eric Grossman was awarded options worth about $1.83 million.