Testing the tolerance for lower bonuses at Morgan Stanley

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Morgan Stanley will pay lower bonuses this year. James Gorman has made this clear. They will reputedly be down 10-30%. Senior staff will suffer most. So will traders and back office staff.

Will Morgan Stanley bankers accept a pay cut?

On a mean basis, employees at Morgan Stanley international were worse rewarded than other US bank staff in London last year. Average compensation per head was $303k. At Goldman it was $665k. At Citigroup it was $458k.

Cuts could surely therefore fuel disgruntlement, particularly if you were hired on a guarantee in 2009 and your bonus is unfettered for the first time this year. Morgan Stanley could be a prime poaching ground in 2011. Everyone could leave.

Or maybe not.

Headhunters say a 25% to 30% reduction in bonuses is going to be normal for 2010. Plenty of people at Morgan Stanley were apparently happy with their bonuses last year and aren't burdened by resentment borne of low pay. In the London fixed income business, traders were well rewarded for 2009 even if salespeople weren't. There will not be an exodus from Morgan Stanley in 2011. People are content. Apparently.

"The top performers at Morgan Stanley were in the top quartile for pay last year," says Lee Thacker of search firm Silvermine Partners.

Medium and low performers at Morgan Stanley were paid poorly, however. For them, zeros are surely on the horizon again.