Morgan Stanley, Bank of America increase employee pay by billions
Thursday, January 21, 2010
NEW YORK -- Morgan Stanley and Bank of America revealed their 2009 compensation on Wednesday, the latest of the major Wall Street firms to disclose closely watched payouts to employees.
Morgan Stanley said it had earmarked $14.4 billion for compensation expenses, a bulk of which is year-end bonuses. That amount is 31 percent higher than last year, but it translates to a slightly lower average payout per employee, $235,193, because Morgan Stanley added thousands of brokers to its payroll through its Smith Barney joint venture with Citigroup.
Bank of America, meanwhile, said its personnel expenses for 2009 would total $31.5 billion, up from $18.4 billion in the previous year as it absorbed traders and bankers from Merrill Lynch at the start of the year. The 2009 figures also reflect the first full year former Countrywide employees have been on the payroll. The average pay per employee was up 45 percent, to roughly $111,000.
The compensation pool disclosures come after hefty payouts announced by J.P. Morgan Chase last week. On Tuesday, Citigroup released figures showing that it would pay slightly less per employee compared with 2008. As a group, the nation's largest banks and investment firms are expected to make payouts that would rival pre-crisis levels.
The numbers drew fresh fire from Washington lawmakers eager to address populist anger ahead of the November midterm elections. Rep. Peter Welch (D-Vt.), who recently introduced a bill to tax Wall Street bonuses and use the funds for small-business lending, said interest in the legislation was up Wednesday.
Morgan Stanley and Bank of America defended the pay plans, noting that a larger portion of bonuses was being meted out in deferred compensation -- which would be subject to "clawbacks."
Morgan Stanley's compensation pool represents 62 percent of its revenue, the highest in at least a decade. Typically, Wall Street firms have used about 50 percent of revenue to pay employees. On Wednesday, the company said it lost $907 million for all of 2009, compared with a loss of $731 million a year earlier.
Colm Kelleher, a Morgan Stanley executive who was chief financial officer during 2009, said in an interview that the compensation ratio was higher in part because of a brokerage joint venture it introduced this year with Citigroup. "While I do believe compensation for the industry is inflated, there's a competitive pressure," he added.
Spokesman Rob Stickler noted that Bank of America's compensation expense, as is the case with other firms, includes various items other than bonuses, such as 401(k) contributions and benefits paid to retirees.
"It only stands to be logical that the average compensation would go up at our company because we added an investment bank, a big markets operation and a big wealth-management operation from Merrill Lynch, all of which is higher-paid than the average in the consumer bank," he said.