Despite reporting record revenues, as well as a net income of $41bn and $9bn respectively in 2019, Morgan Stanley decided to reduce the total compensation received by chief executive James Gorman.
According to a report from Financial Times, he will receive a total compensation package of $27 million for the past year, a 7 percent reduction from his previous award, of $29 million.
A great 2019 for Morgan Stanley
The bank ended 2019 with an excellent result for the fourth quarter of the year, mostly due to its robust activity in the capital markets, as well as raising its long-term goals for return on equity.
Of course, the board’s decision comes as a big surprise, considering that Mr. Gorman revealed that the results “met all of our stated performance targets”. Even more, in a regulatory filing, his “outstanding individual performance” was acknowledged.
However, there is a clear reason behind this decision.
A person familiar with the matter revealed that the lower payment package was conceived to reflect two main aspects: the lower compensation awards at Morgan Stanley’s operating businesses, otherwise a part of their cost-control programme, as well as the consequences of cutting 1,500 jobs in December.
In terms of shares, Morgan Stanley registered a 33 percent return last year, which can be considered significantly better than the broader market. Still, it should be mentioned that the shares of Goldman Sachs, its closest competitor, rose by 40 percent. And this didn’t go well for the board, despite an overall good year.
Ever since James Gorman was appointed chief executive, back in 2019, Morgan Stanley registered a 100 percent share return, a value which is almost double, compared to Goldman Sachs.
It’s all about the bonuses
His payment package consists of $1.5 million, the base salary, a cash bonus of $6.4 million, as well as a deferred stock award of $6.4 million and a performance-based stock award, valued at around $12.7 million. This last part of the package is received after three years, but only if the bank manages to hit its targets for total shareholder returns and return of equity.
This year, a premier for the banking sector was marked, as Morgan Stanley is the first of the biggest banks on Wall Street which disclosed the compensation received in 2019 by its chief executive. Back in 2018, he was the second-highest paid leader of banks in the top six, as JPMorgan Chase’s Jamie Dimon led the top, with a total of $31 million in earnings.