(Bloomberg) -- Morgan Stanley leaders got performance-based stock awards Monday that have more than doubled in value since they were granted three years ago -- the biggest payout yet under a bonus program adopted after the financial crisis.
Chief Executive Officer James Gorman's receipt of 113,510 shares, disclosed in a filing, is about 6% more than what the board originally targeted, after the firm beat a goal for shareholder returns and missed one for profitability. Gorman's shares were valued at $4.1 million on Monday, up from $1.94 million when they were awarded as part of a 2011 bonus.
Morgan Stanley's stock produced a total return of 165% in the three years ended in 2014, surpassing the 101% in the Standard & Poor's 500 Financials Index. Gorman helped boost the valuation by shrinking the fixed-income trading business and improving margins in the brokerage unit.
The board began granting stock specifically tied to performance targets as part of 2009 compensation, with half the awards' delivery tied to return on equity, a measure of profitability, and the other half pegged to the stock's return. Executives could get a fraction of their stated award if they missed a goal, or a multiple if they exceeded.
The bank's managers got nothing from the program's first awards after missing both minimums, with Gorman losing a grant originally worth $2.9 million. Last year, when the 2010 awards came due, the firm delivered 63% of the original amount. In that case, the bankers got no bonus linked to profitability, and 1.25 times their award tied to the stock's return.
This time the executives benefited from changes made to the portion of the 2011 bonus linked to profitability. While the target was 10%, the minimum level needed to get a partial payout was lowered to 6% from 7.5%. The bank also added a clause in a filing that described the program, excluding items such as legal settlements that involved behavior before 2011.
While Morgan Stanley's reported return on equity, excluding accounting charges, averaged 4.8% over the past three years, the firm paid executives as if it were 7%. Morgan Stanley has had more than $5 billion in legal costs during that period.
To be sure, the bank also capped the maximum number of shares bankers could get from a surge in the stock's price, limiting payouts to 1.5 times the original amount in the 2011 awards, down from 2 times the previous years.
Greg Fleming, who oversees Morgan Stanley's wealth and asset management divisions, got shares worth $3.6 million, while Colm Kelleher, who leads the investment banking and trading division, received $3.59 million. Chief Financial Officer Ruth Porat got $3.39 million.
More than 45% of the shares for each executive were withheld to cover taxes, according to filings. Gorman designated 8,525 shares as a gift, according to a filing that didn't indicate the recipient.
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