Dive Brief:
- Morgan Stanley cut CEO James Gorman’s compensation by 10% in 2022, from $35 million to $31.5 million, the bank said Friday in a filing with the Securities and Exchange Commission.
- Morgan Stanley’s compensation committee “took into consideration that … in a challenging economic and market environment, Firm performance for 2022 was not as strong as the prior year, in which the Firm achieved record financial performance.”
- Profit at the bank fell to $11 billion in 2022 — a 27% drop, according to The Wall Street Journal — and net revenue slumped 10% to $53.7 billion. Morgan Stanley ended the year with a 15.3% return on tangible common equity — well below its goal of 20%, the Financial Times reported.
Dive Insight:
The $35 million Gorman received for 2021 put him in a tie with Goldman Sachs’ David Solomon as the highest-paid among CEOs of the six largest U.S. banks. Gorman’s pay cut means Solomon could stand alone atop the compensation leaderboard if Goldman were to pay him the same as it did in 2021. If Goldman cuts Solomon’s pay, JPMorgan Chase’s Jamie Dimon could again become the top-paid banking executive. JPMorgan indicated in a filing Thursday it paid Dimon $34.5 million for 2022.
Gorman’s pay cut shows either how tough the compensation market is, or how high Morgan Stanley set its own bar in 2021. The bank closed its $7 billion acquisition of Eaton Vance in March 2021 and, only months earlier, completed its $13 billion purchase of E*Trade.
Beyond that, Morgan Stanley’s revenue jumped 23% in 2021 to $59.8 billion, while profit rose 37% to $15 billion. The bank’s ROTCE, meanwhile, stood at 19.8% in 2021. Morgan Stanley’s performance in 2022 returned profit and ROTCE to 2020 levels almost exactly.
Gorman’s cut could also be an indicator that no one is immune from tough compensation decisions. The bank spent $23 billion on pay and benefits for employees in 2022. That’s down 6% from 2021, even though the bank’s headcount grew 10% last year, according to the Financial Times.
The bank also cut roughly 1,600 jobs in December. Giving Gorman a raise after that may have bred complaints of a double standard.
Gorman’s compensation breaks down to a $1.5 million salary, a $7.5 million cash bonus, a $4.5 million deferred equity award and $18 million in performance-vested equity. The last portion converts to shares only if the bank meets predetermined performance goals. Three-quarters of Gorman’s incentive compensation is deferred over three years and is subject to cancelation, the bank said Friday.
Morgan Stanley said it would explain “all material elements” of compensation for its top executive officers at its annual shareholder meeting in April.
Six of its the bank’s executives sold a combined $54 million in Morgan Stanley stock this week, the Financial Times reported. That included $24 million from Gorman and $13 million from the bank’s co-president, Ted Pick.
Goldman’s Solomon and JPMorgan’s Dimon are not the only CEOs within reach of the title of top-paid bank CEO. Bank of America’s Brian Moynihan, who made $32 million in 2021, could take the spot if the bank gives him a 7.5% raise.
