The Clock's Ticking For Morgan Stanley CEO

James Gorman Pic

James Gorman, Chairman and CEO of Morgan Stanley, will have less time to boost the bank’s stock price if he wants to reap big profits from his annual bonus.

Bloomberg reports that options awarded to Gorman and five other top executives for 2012 will expire in five years, Morgan Stanley disclosed in regulatory filings last month.

About 75% of executive options granted by companies in the Standard & Poor’s 500 Index have 10-year terms, according to Aaron Boyd, director of research at Equilar Inc., a compensation data firm based in Redwood City, California.

Morgan Stanley, the biggest financial brokerage, also split from Wall Street by awarding most top executives their year-end bonuses in the form of options rather than restricted stock. The bank needed to take the step after charges tied to the valuation of company debt wiped out most of the firm’s pretax income, said a person familiar with the matter who asked not to be named because the information isn’t public. The shorter-dated options present greater risks and potential rewards than restricted stock, depending on how successful Gorman is in turning Morgan Stanley around.

'In order for the option grant to have meaningful value, you have to get the stock price up', said Brian Foley, a New York-based compensation consultant. 'If you look at their trading history, it just hasn’t happened'.

Hit the link below to access the complete Bloomberg article:

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