CEO compensation is a hot topic, especially now that the Dodd-Frank Act requires say-on-pay votes. With CEO pay and performance seemingly disconnected at the following company, the Fool invites you to judge for yourself whether this business's boss actually deserves such a hefty paycheck.
Controversies over executive compensation aren't going away anytime soon. It's hard to understand why any CEO needs to rake in millions of dollars per year, much less tens of millions. James Gorman, CEO of Morgan Stanley
According to The Wall Street Journal, Gorman's total direct compensation for 2010 was $14 million, including nearly $2 million in "performance" awards. That might be OK if Morgan's stock price was on the rise, but the company's shares have shed more than 8% annually over the past two years, on average, and more than 12% over the past five.
To be fair, Gorman has been the top dog for less than a year and a half, but for several years before that, he was co-president of the company and co-head of strategic planning. Clearly, his hand has been on the company's rudder for quite a while.
Some might contend that compared to his peers, Gorman's pay isn't so lavish. It's true that, per the Journal, JPMorgan Chase's
However, comparing pay to peers is what CEOs do when bucking for big bucks from their boards of directors. Instead, those boards should think about whether their pay structures reflect actual performance, not peer pay levels. In this respect, the folks at Governance Metrics International, which reviews and rates hundreds of CEO pay packages, have flagged Morgan Stanley as a "high concern" company. Let's check out Morgan's recent performance, and see what Governance Metrics is so worried about.
Morgan Stanley, 2006-2010
|Revenue||$31.6 billion||$23.4 billion||$24.7 billion||$28.0 billion||$34.6 billion|
In addition, the $1.08 in annual dividends that the company paid out in 2006 has fallen to $0.20 annually for the past two years.
Sure, the chart above contains several promising numbers, suggesting that the company does seem to be getting its act together. But not all revenue and earnings dollars are equal. Some of the increases in major banks' recent profits owe to their lending less, and thereby expecting fewer bad-loan losses.
Morgan Stanley's wealth management division has been growing, but it's also been losing advisors to competitors. The company may be pleasing its private investors at the expense of its investment banking customers. Morgan Stanley was one of the underwriters for LinkedIn's
However, while its investors cashed in, LinkedIn itself got none of those gains. Clearly, it could have sold those shares at a higher price and kept a lot more capital for itself. Now, other companies that might have wanted Morgan to underwrite their debuts could start looking elsewhere.
Morgan Stanley and peers such as Citigroup
And more than two years after the financial crisis, Morgan Stanley's still getting its finances back in order. Morgan just settled a lawsuit with US Bancorp over a collateralized debt obligation (CDO), with other related lawsuits, and hundreds of millions of dollars in possible losses, still pending. Right now, Morgan hardly seems successful or thriving -- but you'd never know that from the rewards that its CEO is raking in.
It's too late to vote against Gorman's lavish executive pay in Morgan Stanley's proxy materials this year. However, you can still contact the company's investor relations department to voice your displeasure at its compensation policies.
Longtime Fool contributor Selena Maranjian owns shares of American Express, and JPMorgan Chase. The Motley Fool owns shares of JPMorgan Chase and Bank of America and has also shorted Bank of America. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool is Fools writing for Fools.