Morgan Stanley gave Colm Kelleher and Greg Fleming, the leaders of its two businesses, compensation packages of $8.6 million each for 2012, a decline of 7 percent from a year earlier.
Kelleher, president of the investment banking and trading division, received $2.41 million of deferred cash in addition to $2.41 million of options (MS:US), the New York-based firm said yesterday in a filing. Fleming, who runs the brokerage and asset- management unit, was awarded $2.43 million of deferred cash and $2.43 million of options. Both men got a $3 million long-term incentive award in addition to their salaries.
Morgan Stanley’s fixed-income trading unit lost market share in 2012 as clients shied away from trading with the bank during a credit-rating review by Moody’s Investors Service in the second quarter. The brokerage division posted a 12 percent pretax margin, below Chief Executive Officer James Gorman’s long-term goal of 20 percent.
Still, the firm’s shares jumped 26 percent last year and profitability improved, excluding accounting charges related to its own debt. Kelleher, 55, won out over rival Paul J. Taubman to lead the investment bank, and met goals for reducing risk- weighted assets in fixed-income trading a year ahead of schedule. Fleming, 50, boosted the brokerage’s profit margin in the fourth quarter above his target for the middle of 2013.
“I am proud of the work we have done to lay a strong foundation for Morgan Stanley’s future,” Gorman wrote in his annual letter to shareholders. “While we sometimes wish that markets were faster to recognize our progress, we are pleased that equity investors appear to have taken notice of our momentum.”
Gorman, 54, received a package of $9.75 million -- a 7.1 percent decrease from 2011 -- that included a $3.75 million long-term incentive disclosed in January. His salary is almost doubling this year to $1.5 million from $800,000 in 2012.
Gorman’s pay, excluding the long-term incentive, was 40 percent below his target for the year, the firm said in a presentation urging shareholders to approve the pay packages in an advisory vote. The board’s compensation committee took into account the firm’s “subpar” financial performance and its “significant strategic progress” in setting the awards, according to the presentation.
Chief Financial Officer Ruth Porat received $8 million of total compensation for 2012, compared with $8.75 million a year earlier. Porat, 55, has informed the White House that she’s no longer interested in serving as deputy secretary of the U.S. Treasury Department after being a candidate for the role, people familiar with the matter said.
Taubman, who has announced plans to leave the firm later this year, also received $8.6 million. He got the same breakdown of awards as Fleming in addition to a $750,000 salary.
The bank eliminated 1,700 jobs in January as Gorman pursues $1.6 billion of annual savings during the next two years. Morgan Stanley (MS:US) is deferring all bonuses for employees who have both total pay of more than $350,000 and incentive compensation of at least $50,000, a person briefed on the matter said in January.
“After reducing our headcount by more than 6,000 since the end of 2011, we believe our firm is sized appropriately for the operating and regulatory environment as we currently see it,” Gorman wrote in his letter. The firm had 55,358 employees after the January cuts, according to a presentation that month.
The bank disclosed that China Investment Corp. cut its stake (MS:US) in the bank by 25 million shares to 125 million shares. CIC owned 6.4 percent of Morgan Stanley as of Dec. 31, according to the filing.
To contact the reporter on this story: Michael J. Moore in New York at firstname.lastname@example.org
To contact the editor responsible for this story: David Scheer at email@example.com