Morgan Stanley missed 2009’s broad market rally and yet is poised to pay its bankers proportionately more than a far savvier Goldman Sachs , which played its cards just right and has enriched its customers, shareholders and, yes, bankers. What’s up at MS, and why does the investment bank appear to be taking from shareholders and giving to lackluster bankers? Have a look at our coverage of Morgan Stanley’s 91% drop in third-quarter earnings from a year ago: its quarterly compensation expenses were $5.0 billion, or 57.5% of revenues. At Goldman, which reported earnings last week, compensation came to 43.3% of third-quarter revenues. But Morgan earned $757 million compared with a whopping $3.19 billion for Goldman. As the French say, tout ca change … Granted, there are problems with Goldman’s fat payouts; were it not for taxpayers’ largesse – and, arguably, Goldman’s high-level government connections – it wouldn’t be quite the powerhouse it is. The NYT’s Frank Rich is among those doing their best to take it down a peg. My focus today is on Morgan Stanley and its shareholders, who should feel disgruntled at the bank’s return to payola practices at a time when it needs to be compensating those who’ve held onto its shares even as it has turned in a roundly mediocre performance. Indeed, its chief financial officer, Colm Kelleher, is spending the morning chatting to repoters and analysts about the bank’s efforts to remake its business model and talking up its M&A and IPO pipeline. We shall see if Kelleher & Co. figure out how to earn their take.
Posted by Gabriella Stern
on October 21, 2009
Compensation, Corporate Governance, Investment Banking
Compensation, Corporate Governance, Investment Banking
4 Comments to Morgan Stanley’s Excessive Payola
edOctober 21, 2009
thanks for pointing this out – it is remarkable and hopefully the firm will explain its intentions – hopefully it’s a 1 quarter blip.
TRTOctober 21, 2009
just another jealous (probably liberal) reporter who believes making money is evil… transparency is key, which is what we have. shareholders can always sell if they wish, but from the stock price today looks like they still want to buy. go figure.
Gabriella SternOctober 22, 2009
Don’t assume all reporters are liberals! G
October 21, 2009
In view of all that, financial companies complaining about mandates related to compensation of women – as in your previous post – sound a little rich.