Morgan Stanley Chief Executive James Gorman saw his compensation for 2011 drop by 25 percent from last year, according to a proxy filing with Securities and Exchange Commission.
The total 2011 compensation for Gorman, who has been Morgan Stanley's CEO since January 2010, was down 25 percent. He received 100 percent of his year-end compensation in deferred, incentive awards, which continued to have a significant portion of "at-risk" performance stock units.
Gorman's total 2012 compensation of $13.0 million includes an $800,000 salary, a $2.7 million bonus, stock awards of $5.9 million, and $3.5 million in options. In 2010, he was paid $15.2 million in compensation, including an $800,000 salary, a $3.88 million bonus, and $10.16 million in stock awards.
Morgan Stanley also cut the compensation of Chief Financial Officer Ruth Porat by 3 percent to $11.4 million. His compensation includes a salary of 750,000, a $3.2 million bonus, stock awards of $5.7 million, and $1.5 million in options.
The pay cuts come after the leading investment bank reported a 42 percent drop in 2011 profit. In the last year, MS' shares have fallen 31 percent as the company and industry has been hurt by the Eurozone crisis and slower economic growth.
In 2011, Morgan Stanley posted earnings applicable to common shareholders of $2.07 billion, or $1.23 per share, down from $3.59 billion, or $2.63 per share, in 2010. Net revenues rose 3 percent to $32.40 billion.
During 2011, global market and economic conditions were negatively impacted by the sovereign debt crisis in Europe, the U.S. federal debt ceiling, and slower economic growth than 2010. Global equity markets were volatile in 2011 as investors reacted to slowing global economic growth and the deepening sovereign debt crisis in the European region.
In the U.S., the Dow Jones Industrial Index rose 5.5 percent; however, most of the other major equity market indices ended 2011 lower compared to the beginning of the year. Losses were primarily due to investors' anxiety about the continued European sovereign debt crisis, a U.S. economy facing the prospect of a double-dip recession, and signs of slowing economies in emerging markets.
Among Morgan Stanley competitors, JPMorgan Chase & Co. (NYSE:JPM) paid $23.1 million in compensation to its CEO James Dimon in 2011, representing an 11 percent increase from $20.8 million paid in 2010. The 2011 compensation includes $1.42 million salary, $4.5 million bonus, stock awards of $12 million and options of $5 million. JPMorgan, whose shares dropped only 5 percent compared to Morgan Stanley's 31 percent in the last one year, said its 2011 profit rose 9 percent despite a 5 percent drop in revenue as it recorded lower provision for credit losses.
Meanwhile, Morgan Stanley said it needs an additional 50 million shares to maintain an appropriate mix of equity and cash awards for 2012 year-end compensation. The firm currently has 14 million shares available for stock unit grants, which it says are not sufficient for grants of 2012 year-end compensation if it has to maintain an appropriate mix of "at-risk" equity, deferred compensation and cash.
The financial services company had 69 million shares available at year-end for 2011 awards, after requesting 35 million from shareholders last year. The company is also seeking an extension to its 2002 compensation plan which is due to expire at the annual meeting in May.
Morgan Stanley's overhang as of Jan.31, 2012 was 10.5 percent, the lowest overhang at the company in six years and below its most direct competitor. Overhang is defined as the outstanding employee equity grants and equity reserved for future grants divided by common shares.
The company's burn rate for 2011 was 2.8 percent, which is below the firm's prior three-year average of 3.8 percent and trails the 2011 burn rate of its most direct rival. Burn rate refers to the shares granted from plans divided by average shares outstanding for the fiscal year.