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Morgan Stanley has sought to pre-empt new rules capping cash pay-outs on Wall Street, deferring 60 per cent of employees’ 2010 bonuses.
The announcement came as the bank reported a higher-than-expected 88 per cent jump in fourth-quarter profits in spite of a fall in fixed income trading revenues.
Proponents of deferred pay argue the practice can help dissuade bankers and traders from taking excessive risks by chasing short-term profits.
While Morgan Stanley’s 2010 pay-outs may defer more than employees have come to expect – or would like – the move reflects the new realities of Wall Street after the financial crisis.
“It is the way things are going to be,” said Jeanne Branthover, who heads the financial services practice at Boyden Global Executive Search. “What we are really seeing in this year’s bonuses is the change that took place because of the crisis. Every firm wants to keep their cash as long as they can.”
Details on bonus deferrals have been a closely-guarded secret and have varied widely from bank to bank – one of the reasons some regulators are pushing for more specific rules.
European officials agreed 40-60 per cent of bank executives’ pay should be deferred over three to five years, and their US counterparts are now weighing the adoption of a similar ratio.
The Federal Reserve, the Securities & Exchange Commission, the Federal Deposit Insurance Corporation and other US agencies are close to finalising their own rules. Last year’s Dodd-Frank financial reform legislation gave US regulators until April to set new rules.
Morgan Stanley paid out $16bn in salaries, bonuses and benefits in 2010, or about 51 per cent of revenue. These costs totalled $14.4bn, or 62 per cent of revenue, a year earlier.
The bank’s announcement was the first time it had revealed what portion of its total bonus pool will be deferred. Previously, only top executives’ deferrals were disclosed. People close to the situation said Morgan Stanley’s staff will hear about the size and composition of their bonuses on Thursday.
Morgan Stanley did not disclose the precise form 2010’s deferred pay-outs would take. In 2009, the bank gave out restricted options that vest after three years and cash that is held by Morgan Stanley for a similar period and is subject to “clawbacks” if the employee underperforms.
Large financial institutions typically defer 20-60 per cent of year-end bonuses, depending on the size of the pay-out.
Morgan Stanley’s plan to defer 60 per cent, “seems high, but it could be the norm,” Ms Branthover said. “We’ll see.
Looks like green turds for Marco, the hand model living in LIC upper east. Hey did ya bank the $15k tax credit? Get yourself a nice 4% mortgage. Excellent! Mission accomplished Bernie.
What is the bonus made off? Bank stocks?
hahahahah..just stay on the west side princess
Made up of coop shares
I believe that all the Euro banks are already there due to the new rules.
I don't think the re bullz not in banking understand the complete and utter shock this is to the hotshot I banker on the street. The dream, well not so much a dream more like a 50/50 shot was the chance that a new and coming bank (Santander, TD, SocGen, Deutsche) would buy out an entire group to bulk up whatever area was hot. Like mbs, technology banking, or derivatives.
This 60 deferred creates a new 'calculus' in the minds of almost all bankers. The fact this new 'reg' is global in nature is even worse. FLMAOzzzzz.
No need to bid against the 24 inch dick 25 yr model humping phantom banker. Flmaozzzzzz
'No need to bid against the 24 inch dick 25 yr model humping phantom banker. Flmaozzzzzz'
What a relief...that dude has been kicking my ass (sorry, azz) for 25 years.
A friend who works at GS said that some left work early in tears after receiving little to no bonus...
I'm expecting some ugly numbers myself next week, but the leaving in tears bit is hard to understand. If you haven't figured out that you are supposed to live only on your base salary (and saving to boot) at this point, then you don't deserve a bonus. That was mean, but seriously. People in finance live so far outside their means its ridiculous.
I hate to inform all of you but the bonus money is already hitting the streets.
I know quite a few in retail who are experiencing the Jan. bonus bump which has been absent since Jan. 2008. The trickle begins. Those walking out of GS with no bonus work very close to the door.
my third cousins sisters brother just saw a bunch of ibankers from gs and ms in the tenefly, nj costco loading up on cases of meow mix. heard there was a bidding war for the last few cases. another report from teaneck has teary eyed gs employees looking to trade interests in their unvested shares for firewood and cooking oil.
TripleP, bonuses are part of people's compensation on Wall Street. Wall Street prosperity isn't up because base salaries are up if total comp is down.
Thanks, lornek, but I work on Wall Street. And I never claimed prosperity was up simply b/c I have a higher base than 2 years ago. I think it will be years before we can reach pre-crisis comp levels.
But I have limited sympathy for my colleagues and peers at other banks who are in denial that most of our bonus comp will be deferred and highly variable for years to come. Most of my peers in finance live lifestyles that cannot be sustained on base salary comp alone. And in my view, we had a few years to adjust to the new regime.
Didn't ask for sympathy.
Surely your colleagues have savings though, and deferred comp is still an asset even if you want to be conservative about it and apply a hefty haircut assuming downside risk.
The thing the bulls keep forgeting to mention is... even if salaries were up the same amount bonuses are down.... that would actually in of itself be BAD news for RE... in that there is less of a bump to pull us out of the doldroms.
If prices dropped like a rock in Q4 like they did, and that was WITH the higher salaries... that is not a healthy sign for prices.