Morgan Stanley and practically all large investment banks (granted there are very few left) compensated most of their employees handsomely until the credit crisis (an almost once-in-a-lifetime financial storm) drained their financial wells dry. Now, it seems more an exception than the rule that those lavish perks exist -- unless you are Merrill Lynch & Co. CEO John Thain, who if he gets his wish may end up the only major investment banking chief to snag a bonus this year. Just ask Morgan Stanley's John Mack, who joins a growing list of CEOs who are forgoing their 2008 bonuses because of the atrocious performances of their respective firms.
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In fact, Mack led the charge, reportedly helping alter Morgan's compensation plan. A sampling of the new compensation plan includes all 14 members of Morgan's operating committee reducing their compensation by an average of 75% from last year, while the management committee's members' pay will be cut 65% on average, Bloomberg reported, based on a Mack issued internal memo Monday. For Mack, it will be the second year in a row he will not be receiving a bonus.
In addition to the reductions, Morgan Stanley has instituted a "clawback" clause, which gives the firm the right to take back its compensation "if the individual engages in conduct detrimental to the firm," the memo said. With the government scrutinizing every move that Morgan makes, the new compensation rules have become ever more restrictive, making one wonder how many employees may leave or steer away from Morgan for a company with a more lucrative pay scale. Time will tell, but for now fat wallets are out of style at Morgan and just surviving is what matters.
- Gerald Magpily
See Bloomberg article
See story about Thain from Dealscape
