Morgan Stanley's deferred cash payments raise questions
Compensation ranks as one of the biggest issues at big banks, with executives, employees and of course shareholders.
The need to manage expenses has been acute over the past few years, and more bank executives are coming around to the view that they will have to pay less going forward or risk some really serious shareholder agitation.
Conventional wisdom holds that when it comes to the biggest expense on the books, shareholders have been given short shrift for long enough. The new parsimony has to be balanced against the need to retain and attract talent.
An interesting experiment is going on at Morgan Stanley. DealBook explores the bank's move to start deferring cash compensation for up to three years. While this is common for options grants and restricted stock grants, deferred cash payments in large sums are relatively new.
The article notes that, "Morgan Stanley says the move is good corporate governance, tying their employees' interests to the firm's and giving them a bigger pool to claw back if something goes wrong. Yet, critics say it also pushes the tab for current compensation into the future, when Morgan Stanley will have to pay for the compensation of past years."
The bank doesn't think the future bill will be a problem. It intends to grow out of any problems. It also intends to manage the headcount and perhaps it will realize some "found money" from employees who leave before their deferred cash payment vests.
- here's the article
Rhetoric vs reality on Wall Street pay cuts