Morgan Stanley is reportedly reducing pay for senior investment bankers and traders by an average of 20 percent to 30 percent.
The cuts affect employees executive director and above, Bloomberg quotes people with knowledge of the decision as saying.
After taking over the firm in 2010, company CEO James Gorman had promised to shrink the portion of revenue devoted to paying employees. Excluding accounting adjustments and one-time items, revenue at the Morgan Stanley’s investment banking division fell about 2 percent last year. The unit’s compensation expenses rose 3 percent, according to figures released Thursday when the firm released earnings.
Bloomberg reported: “Banks worldwide have been cutting and deferring compensation and overhauling policies for clawing back payouts to traders and investment bankers over the past two years as firms succumb to revenue and regulatory pressures in the wake of 2008’s financial crisis.”
Goldman Sachs Chief Financial Officer David Viniar said this week, for instance, that discretionary compensation at the firm declined significantly more than the firm’s annual revenue, which dropped 26 percent.
Morgan Stanley also told staff this month that it’s capping immediate cash bonuses at $125,000 as the firm defers a greater share of awards to senior executives, Bloomberg said, quoting a person briefed on the plans. That decision is expected to increase the average amount of pay deferred to about 75 percent, the person said. That’s up from an average of 60 percent in 2010 and 40 percent in 2009.