$40 Million BonusMorgan Stanley's Mack Gets Record

$40 Million BonusMorgan Stanley's Mack Gets Record (Update2)
By Christine Harper
Dec. 15 (Bloomberg) -- Morgan Stanley gave Chief Executive Officer John Mack the biggest bonus for the head of a Wall Street firm, awarding him $40 million as the company headed for the best profit in its 71-year history.
Mack, 62, was granted stock valued at $36.2 million as of Dec. 12, and about $4 million in options to buy Morgan Stanley shares, the company said yesterday in a filing with the U.S. Securities and Exchange Commission. The firm also granted more than $57 million in bonuses for seven other top executives.
The payout for Mack, 44 percent more than Morgan Stanley awarded him last year, eclipses the $38.3 million in total compensation Henry Paulson received in 2005 as CEO of Goldman Sachs Group Inc. Shares of Morgan Stanley, the second-biggest U.S. securities firm by market value, are having their best year since 2003 after Mack put the firm on course for record earnings.
``You expect performance to be reflected in the compensation,'' said Laura Thatcher, an Atlanta-based partner in charge of the executive-compensation practice at law firm Alston & Bird LLP. ``You're talking about staggeringly big companies with huge market caps and huge performance.''
Shares of Morgan Stanley have gained 43 percent this year, outpacing the 24 percent advance by the 12-member Amex Securities Broker/Dealer Index. The stock rose 38 cents to $79.98 in 9:57 a.m. composite trading on the New York Stock Exchange, giving the company a market value of $84.6 billion.
$50 Million for Blankfein?
Morgan Stanley may report next week that full-year profit rose 41 percent to $6.98 billion, the average estimate in a Bloomberg survey of 10 analysts.
While that would be Morgan Stanley's biggest jump in net income since 1999, it doesn't come close to Goldman's performance this year. Goldman, now led by Lloyd Blankfein, 52, said Dec. 12 that earnings for the year ended Nov. 24 surged 70 percent to a record $9.54 billion.
``The chance is high that Goldman Sachs's top executives will get more than Morgan Stanley's,'' said Jeanne Branthover, head of the financial-services group at Boyden Executive Search in New York. ``The $50 million figure being thrown around for Goldman's CEO sounds like a right guess.''
Mack, who's also Morgan Stanley's chairman, received his entire fiscal 2006 bonus in stock and options, according to the filing. Last year, Mack declined the $28 million bonus he was offered because he had worked at Morgan Stanley for only five months. He accepted a pro-rata payout of $11.5 million in stock and also received a $337,534 salary.
Morgan Stanley spokesman Mark Lake declined to comment beyond the filing.
Performance Pay
Lehman Brothers, the fourth-biggest U.S. securities firm, earlier this week said Chief Executive Richard Fuld received $10.9 million in stock for 2006. That's down from $14.9 million last year. New York-based Lehman didn't say how much more he may receive in cash.
``Wall Street banks do compete in how much they pay their people because they want to show they're better, and the best way they can differentiate themselves is through compensation,'' Boyden's Branthover said.
Mack, who left Morgan Stanley in 2001 when he was president, returned in June 2005 as the board's choice to revive a firm bruised by a 2 1/2-month battle with dissident shareholders. Some of Morgan Stanley's top executives, including President Stephan Newhouse and Vikram Pandit, abandoned then-CEO Philip Purcell during the dispute and dozens of other bankers and traders quit.
Seven More Rewarded
Since Mack joined, Morgan Stanley has fired more than 1,000 underperforming brokers, made acquisitions to bolster the firm's energy, fixed-income and hedge fund businesses and created new incentives to keep top-producing employees. Morgan Stanley has surpassed analysts' profit estimates by at least 20 percent for the past four quarters.
``He has righted the ship,'' said Ken Crawford, a money manager at St. Louis-based Argent Capital Management, which oversees about $700 million, including about 241,000 Morgan Stanley shares. ``To the degree that it's difficult for a company to move forward if it's battling itself rather than its competitors, that's a positive.''
Morgan Stanley also reported stock bonuses for the seven other top executive officers in separate filings yesterday in the U.S. Co-President Zoe Cruz, 51, received $17 million in stock and $1.92 million in options. Her counterpart, Robert Scully, 56, was awarded $11.4 million in stock and $1.28 million in options.
Chief Financial Officer David Sidwell, 53, was paid $7.98 million in stock and $890,291 in options, while Chief Legal Officer Gary Lynch, 56, a former head of enforcement at the U.S. Securities and Exchange Commission, got $7.04 million in stock and $792,800 in options.
Less Disclosure
Eileen Murray, 48, head of global operations and technology, Chief Administrative Officer Thomas Nides, 45, and Controller Paul Wirth received smaller amounts. The filings made no mention of a maximum bonus for any of the officers other than Mack.
Unlike last year, Morgan Stanley didn't disclose stock awards to the heads of its business units. Neal Shear, 54, the firm's co-head of sales and trading, received last year's largest stock bonus at $16 million.
To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net .
Last Updated: December 15, 2006 10:14 )

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How about JFK-era tax brackets? Meanwhile anyone who dares to call for decent raises for the minimum wage is piloried.