Morgan Stanley’s compensation plan for newly minted CEO Ted Pick — and the two candidates who lost out on the top job — has drawn criticism from Glass Lewis.
The proxy adviser urged Morgan Stanley shareholders to reject the bank’s executive compensation package when it comes to a vote May 23 at the lender’s annual general meeting.
"The company paid significantly more than its peers but performed worse," Glass Lewis wrote in a report seen Monday by Reuters. "The misalignment between pay and performance alignment is indicative of a costly CEO transition."
Morgan Stanley named Pick its CEO in October after a two-year, three-way race to succeed longtime chief executive James Gorman. But in an attempt to retain the two losing candidates, Andy Saperstein and Dan Simkowitz, the bank gave expanded roles to each and a $20 million one-time staking award to all three who ran.
“We had three incredibly talented executives,” Gorman told the Financial Times in October. “We had an embarrassment of riches.”
Glass Lewis seems intent on making Gorman eat those words.
If Glass Lewis hangs its argument on the performance of Morgan Stanley’s competitors, then it depends against whom the comparison is. Morgan Stanley reported net revenue of $54.1 billion throughout 2023 — up slightly from $53.7 billion a year earlier — and net income of $9.1 billion, down from $11 billion in 2022. It also logged a return on tangible equity of 12.8%, down from 15.3% in 2022.
Those figures dwarf the bank’s primary rival, Goldman Sachs, which reported $46.3 billion in net revenue for 2023, $8.5 billion in net earnings and an ROTE of 8.1%.
Morgan Stanley would fall short, though, against JPMorgan Chase, which saw $148.8 billion in net revenue, $49.6 billion in net income and an ROTCE of 21% on the year.
As for the pay, Morgan Stanley said the equity-based awards for Pick, Saperstein and Simkowitz “are designed to reinforce the executive’s accountability for the Company’s future financial goals … over a multi-year period in a balanced manner that does not encourage imprudent risk taking, while incentivizing leadership continuity.”
The $20 million figure represents the approximate average in annual variable compensation the three executives receive, the bank said. Pick made $24 million in variable pay in 2023; Saperstein, $20.5 million; Simkowitz, $19.5 million, according to Morgan Stanley’s proxy materials.
The awards are 60% performance-based stock units and 40% restricted stock units that convert to shares in 2027.
Glass Lewis’s reservations on pay at Morgan Stanley go beyond its top three executives. The recommendation Monday also calls out Gorman’s pay package, which, at $37 million for 2023, was tops among leaders at the U.S.’s six largest banks. Gorman became executive chairman at Morgan Stanley when Pick took over as CEO.
Glass Lewis failed to convince voters to reject Goldman Sachs’ pay plan at the bank’s shareholder meeting last week. The package, which boosted CEO David Solomon’s compensation for 2023 by 24% to $31 million — despite a 24% decrease in net income at the bank on the year — received 86% support.
It wouldn’t be unheard of for shareholders to reject a bank’s executive compensation. Shareholders of JPMorgan Chase in 2022 rejected the bank’s compensation plan for its six top executives — including $52.6 million in option awards granted to CEO Jamie Dimon.
The votes, however, were nonbinding, and JPMorgan went ahead with the compensation.
