Morgan Stanley Under Pressure on Pay Policy

A leading institutional shareholder in Morgan Stanley has complained about the lack of transparency in the way the US bank determines executive pay. It has requested a meeting with the board to find out how it reaches its decisions.

Rich Ferlauto, head of pension and benefits policy for the American Federation of State, County and Municipal Employees, told Financial News that it was unclear how the four-man compensation committee, chaired by Charles Knight, and the rest of the board arrived at decisions on pay.

"That is something that I would really like to find out as soon as possible," he said.

The pension scheme owns more than 4% of the shares in Morgan Stanley and has 1.4 million members with combined assets of $1.5 trillion (€1.2 trillion). Ferlauto said he would be pushing for four highly independent directors to replace outgoing directors.

A senior Morgan Stanley banker said: "Frankly, the board of directors has become an embarrassment to us." Ferlauto was particularly concerned about the $32m payout handed to Stephen Crawford, who resigned as co-president last week. "The fact is that the payment seems to be in exchange for him leaving and not for doing any work. It is seemingly not based on performance," the banker said.

Philip Purcell, who was ousted as chief executive last month, was given a $44m severance payment. John Mack, who was appointed to replace Purcell, will receive at least $25m in his first full year. A request made through Morgan Stanley to speak to Knight and Miles Marsh, also a compensation committee member, was not granted.

Morgan Stanley's directors were not available for comment.