Morgan Stanley Raises Mack’s Salary to $2 Million May 28, 2010, 6:28 PM From: NYTimes
After holding out its pay practices as a rejoinder to Wall Street excess, Morgan Stanley disclosed late Friday afternoon that it will more than double the salary of John J. Mack, the firm’s chairman, to $2 million a year.
In a regulatory filing, Morgan Stanley said that its board had approved raising Mr. Mack’s base salary from $800,000, effective June 1.
Morgan Stanley pointed out in its filing that Mr. Mack’s salary had not risen since returning to the firm in 2005, and that he has declined year-end bonuses for the past three years.
Mr. Mack stepped down as chief executive at the end of last year, and he has been among the most vocal and high-profile critics of Wall Street pay practices in the wake of the financial crisis. He has admitted that his firm and others needed tougher regulation on several matters, including executive compensation.
Mr. Mack’s successor, James P. Gorman, received a compensation package worth about $15 million for 2009, although he served as the firm’s president at the time. Morgan Stanley reported a loss for last year as its trading operations underperformed significantly.
A firm spokesman previously told The New York Times that Mr. Gorman received the pay package in light of his work integrating the Smith Barney brokerage and because he was set to become the new chief executive.
Even as Morgan Stanley held itself up as a paragon of linking performance to pay, its compensation practices raised eyebrows among shareholders. From a previous report by The Times:
At some banks, the relationship between pay and profit is a bit tenuous. In 2005, for instance, Morgan Stanley made a pretax profit of $7.4 billion. That year, compensation at the bank averaged $212,000 for each employee. Last year, Morgan Stanley made about $857 million before taxes. But compensation averaged $235,000 for each employee.
In other words, Morgan Stanley employees collected roughly 61 cents out of every dollar the bank made in 2005, and about 94 cents of every dollar last year.
Mark Lake, a Morgan Stanley spokesman, said that 2009 compensation per employee was the lowest in at least seven years if the business then looked as it did today, and that adding thousands of Smith Barney brokers and a large accounting charge led to a higher payout ratio.
