Morgan Stanley Faces Suit Over Compensation

Morgan Stanley has been sued by a group of shareholders alleging the company overpaid employees after accepting a Treasury bailout.

The complaint, filed Thursday in New York State Supreme Court in Manhattan, said Morgan Stanley [MS] had “wasted” company assets and breached its duties to shareholders by setting aside 62% of net revenue for employee compensation.

The suit, which was filed by the Security Police and Fire Professionals of America Retirement Fund and Central Laborers’ Pension Fund, demands Morgan Stanley, its chairman, John Mack, and its chief executive officer, James Gorman, repay the company for breaching fiduciary duties. The complaint also demanded Morgan Stanley reform its pay practices.

A spokesman for Morgan Stanley declined to comment on the complaint.

Last week, Gorman vowed to reduce Morgan Stanley's compensation ratio.

The lawsuit also said the company should repay incentive payments made in 2006 and 2007 “because they were based on financial results that were later proven to have been worthless.”

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