Morgan Stanley Bonus Plan — A Quiet Downsizing?


Morgan Stanley anticipates many of its employees may choose to leave the firm following the announcement that cash bonuses above $125,000 would be deferred until next year.

The Wall Street firm has cut over 1,500 jobs in recent weeks, according to a person familiar with the matter. Tuesday, Aaron Lucchetti and Alison Tudor of the Wall Street Journal reported all cash bonuses would be capped at $125,000. Members of the management committee are not receiving any cash bonuses at all this year.

One person close to the compensation discussions at Morgan Stanley said the firm expects it will lose a “good number” of senior and midlevel employees.

“Look, the brass aren’t dumb. They know that many people will look at this and say, ‘we’re out of here if we can’t get paid,’” the person said.

Today Morgan Stanley announced the retirement of Walid Chammah, a top level Morgan Stanley executive who served on the management committee — and therefore would have been one of those whose bonus would have reduced all the way to zero. No mention of the bonus changes was made in the announcement.

One question is: Where will they go? Bonuses are expected to be down all across Wall Street. Goldman Sachs , UBS , Bank of America are all said to be slashing bonuses.

“Some of these guys are getting out of the industry altogether. Some are getting jobs for government, where they can get base salaries that are comparable. Why not go to a regulator, where you can also coach your kid’s little league games?” one Morgan Stanley employee asked.

One person at the firm speculated that the bonus news could be the firm’s way of downsizing without having to make further layoffs. If enough employees leave as a result of the low-compensation numbers, further layoffs may be unnecessary.

Morgan Stanley is scheduled to release fourth-quarter results on Thursday. The recent decision about bonuses may be a reflection the results look particularly bad. By slashing compensation expenses, Morgan Stanley can improve its bottom line.

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