Morgan Stanley Chairman and CEO James Gorman may face some intense questioning Tuesday at the firm's annual meeting in Purchase, NY. The shares are down more than 19 percent since Gorman took the helm in January, 2010. And the stakes are high.
Hedge fund exec Dan Loeb took a stake in the company at the beginning of this year on the assumption that the CEO could pull off a turnaround, particularly in the firm's fixed income performance. Gorman swore he'd do it.
But the company's first quarter performance was a letdown. Morgan Stanley's fixed income trading revenue fell 42 percent from the previous year. That compares to much smaller declines at competitors. Morgan Stanley also had the biggest drop in equity revenue of the top five capital markets firms in the U.S.
First Quarter Trading Revenue (Year Over Year Change)
| Fixed Income | Equity | |
|---|---|---|
| Morgan Stanley | - 42% | -19% |
| Bank of America | - 20% | 8% |
| Goldman Sachs | -7% | -15% |
| JPMorgan Chase | -5% | -6% |
| Citigroup | -3% | -10% |
Source: Source: Company Data
At Tuesday's annual meeting, Gorman will face shareholders who want to know when they'll start to see capital returns. It's a theme CLSA analyst Mike Mayo plans to expand on at the meeting. In March, the Fed approved Morgan Stanley's capital plan, which was centered around buying the 35 percent of the Smith Barney brokerage joint venture that Morgan Stanley doesn't already own. For that reason, Gorman did not request share buybacks or dividend increases.
Unlike at JPMorgan Chase, there is no shareholder proposal to split the chairman and CEO role on the proxy, so the showdown with Gorman may come over pay. Proxy advisor Glass Lewis is urging shareholders to vote against Gorman's compensation package. The last big bank CEO to get a negative vote on his pay was Vikram Pandit at Citigroup. He didn't keep the job for long after that.
Mitsubishi owns more than 22 percent of Morgan Stanley and has two directors on the board. That should help sway the voting in Gorman's favor, and give him better support from his board than Pandit had.
_By CNBC's Margaret Popper
More on Gorman:
Morgan Stanley 'Confident' About Its New Direction: CEO