Glass Lewis Says Vote Against Morgan Stanley Pay as ISS Supports

Morgan Stanley shareholders should vote against the bank’s executive-pay plan in an advisory ballot this month, shareholder-advisory firm Glass Lewis & Co. said.

Morgan Stanley paid better than peers while performing worse, Glass Lewis said yesterday in a report. ISS Proxy Services USA on April 30 advised voting for the plan at the bank’s May 14 annual meeting, saying Chief Executive Officer James Gorman’s pay cut was aligned with performance.

Gorman’s compensation fell 7 percent to $9.75 million for 2012, and was 40 percent below target based on the company’s performance, Morgan Stanley said in a March filing. Total shareholder return, including appreciation and dividends, was 28 percent in 2012, below the 36 percent median of the bank’s nine largest peers, the firm said.

Morgan Stanley gets an ‘F’ grade in tying executive compensation to performance, as Gorman’s pay was slightly above peers, Glass Lewis said yesterday. ISS said Gorman’s pay was about 40 percent below peers.

Wesley McDade, a spokesman for New York-based Morgan Stanley, declined to comment.

Gorman, 54, got no cash bonus for 2012 and 38 percent of his pay was tied to specific future performance measures, up from 18 percent for 2011, Morgan Stanley said in a March filing urging shareholders to vote for the plan. The firm’s other named officers also got no cash bonus and had at least 34 percent of their pay tied to future metrics.

Earlier Vote

Investors voted 95 percent in favor of the pay plan at last year’s shareholder meeting. Gorman took a 25 percent pay cut to $10.5 million for 2011, when Morgan Stanley dropped 44 percent. Glass Lewis and ISS supported the plan last year.

Glass Lewis used a different peer set than the company when comparing Morgan Stanley’s executive pay. Morgan Stanley defines its peers as the five largest U.S. banks and four European investment banks including Deutsche Bank AG and Barclays Plc. Glass Lewis removed the European lenders and added smaller firms including Cowen Group Inc. and Knight Capital Group Inc.

Glass Lewis also recommended shareholders vote against electing James Owens to the board. Owens, chairman of the nominating and governance committee, bears responsibility for the company providing insufficient disclosure about transactions with entities affiliated with board members, Glass Lewis said. ISS supported electing Owens.