Wall Street bonuses rise despite promises of deferral

Morgan Stanley and Bank of America results disappoint stock market

New chief executives at two of Wall Street's biggest firms promised to reform bankers' pay, with more bonus money being deferred and subject to clawbacks should trading bets go wrong.

But both James Gorman, newly installed boss at Morgan Stanley, and Brian Moynihan, at Bank of America, which owns the historic investment bank Merrill Lynch, revealed increases in bonus payments to staff for 2009.

And Morgan Stanley set aside a greater percentage of its revenues to pay staff than it has done at any time in a decade, saying that there continues to be tough competition for talented employees and it has to make up for lower revenue growth than its rivals. Its full-year earnings, released yesterday, missed expectations because of a disappointing end to the year in its equities and bond trading business.

"Year-end compensation for Morgan Stanley employees is now paid in a mix of components," Mr Gorman said, "including three-year performance stock units for senior executives, equity subject to market risk that vests over three years and deferred awards subject to clawback. That puts a significant portion of total compensation at risk and tied to long-term firm performance."

Some 62 per cent of Morgan Stanley's 2009 revenues went towards compensation, including salaries, bonuses and benefits, totalling $14.4bn. That was up 31 per cent, although the average per employee fell as a result of 15,000 new staff taken on with the acquisition of the Smith Barney stockbroking business. Morgan Stanley operates a network of small town stockbrokers and wealth managers, as well as its powerhouse investment bank, where pay accounted for 40 per cent of revenues last year, at the low end of a range typical for Wall Street in recent years.

John Mack, who relinquished the chief executive job but remains chairman, will receive no bonus in 2009, "given the unique operating environment and government support for the industry this past year", the company said. Mr Gorman will be paid no cash bonus, but may be paid a deferred bonus in company stock.

Bankers at Merrill Lynch, meanwhile, were told that they would be forced to defer a greater proportion of their pay in future, as had long been typical at Bank of America's own operations. BofA acquired Merrill at the start of last year, after sealing a deal on the tumultuous weekend in 2008 when Lehman Brothers went bankrupt. Ken Lewis was forced into retirement after a decade as chief executive because of shareholder anger at the deal.

Mr Moynihan, who took over this month, told Bloomberg News: "The amount of deferral [of pay] is going to be consistent with both companies. There will be a heavier deferral of stock, subject to clawbacks."

Adding in the highly paid Merrill Lynch employees for the first time, BofA said its overall personnel costs had increased to $31.5bn from $18.4bn – 71 per cent – while staff numbers increased from 240,000 to 283,000 – 18 per cent.

Overall, both Morgan Stanley and BofA disappointed the stock market with their results yesterday. Morgan Stanley's total net income improved from a loss of $246m in 2008 to a profit of $1.3bn last year, but was shy of analysts' forecasts. Integrating Smith Barney cost about $280m last year, and will cost a further $450m in 2010, the company said. At BofA, bad loans at its retail bank continue to be a problem. It raised its provision for credit losses to $10.1bn in the fourth quarter, from $8.5bn a year earlier.

'Irritatingly Disneyfied': fashion vlogger Zoella


Actress sees off speculation about her appearance in an amazing way

Arts and Entertainment
The last great picture - Winner 'Black and White' and overall 'Wildlife Photographer of the Year'
Carl Bernstein (left) and Bob Woodward (right) with former 'Washington Post' executive editor Ben Bradlee

The Washington Post editor helped Bob Woodward and Carl Bernstein bring down President Nixon

ebooksAn unforgettable anthology of contemporary reportage
Life and Style

Board creates magnetic field to achieve lift

There have been various incidents of social media users inadvertently flouting the law

Life and Style
Stack ‘em high?: quantity doesn’t always trump quality, as Friends of the Earth can testify
techThe proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Bourgogne wine maker Laboure-Roi vice president Thibault Garin (L) offers the company's 2013 Beaujolais Nouveau wine to the guest in the wine spa at the Hakone Yunessun spa resort facilities in Hakone town, Kanagawa prefecture, some 100-kilometre west of Tokyo
CSKA Moscow celebrate after equalising with a late penalty
footballCSKA Moscow 2 Manchester City 2: Premier League champions let two goal lead slip in Russia
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...

Trainee Recruitment Consultant Birmingham

£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

Trainee Recruitment Consultants

£20000 - £25000 per annum + OTE £Competitive: SThree: SThree Group and have be...

Helpdesk Analyst

£23000 per annum + pension and 22 days holiday: Ashdown Group: An established ...

Day In a Page

Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Ed Sheeran hits back after being labelled too boring to headline festivals

'You need me, I don’t need you'

Ed Sheeran hits back after being labelled too boring to headline festivals
How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

How to Get Away with Murder

Shonda Rhimes reinvents the legal drama
A cup of tea is every worker's right

Hard to swallow

Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
Which animals are nearly extinct?

Which animals are nearly extinct?

Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
12 best children's shoes

Perfect for leaf-kicking: 12 best children's shoes

Find footwear perfect to keep kids' feet protected this autumn
Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

Arsenal’s ray of light ready to shine again

Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

Moyes’ show of sensitivity thrown back in his face... by Ferguson

Manchester United legend tramples on successor who resisted criticising his inheritance
Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Lonely Planet’s Best in Travel 2015

UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London