Morgan Stanley has taken a significant step in its leadership transition, awarding special bonuses of $20 million each to the incoming Chief Executive Officer, Ted Pick, and his two deputies, Andy Saperstein and Dan Simkowitz. This substantial share-based incentive was disclosed in a regulatory filing on Friday.
The announcement comes on the heels of the firm’s recent revelation that Ted Pick will be taking over from the incumbent CEO, James Gorman. In an unusual turn of events for Wall Street, both Saperstein and Simkowitz, who were in the running for the CEO position, will remain with the bank in pivotal roles. Saperstein, in his capacity as Co-President, will take on additional responsibilities overseeing the firm’s asset-management business while continuing to lead wealth management. Simkowitz will step into Pick’s former role as Co-President, spearheading the investment-banking and trading division.
Morgan Stanley’s board succession committee justified these generous awards, stating that they believe it is in the best interests of the company and its shareholders as it undergoes this major transition. The committee acknowledged the vital role each executive plays in the ongoing success of Morgan Stanley and emphasized the importance of their continued outstanding leadership in their new positions.
James Gorman, aged 65, is passing the baton to Ted Pick, 54, following a transformative tenure that has reshaped the bank’s trajectory. Pick, a seasoned veteran with three decades at Morgan Stanley, has climbed the ranks, occupying various roles including analyst, capital markets banker, and head of the equities-trading unit. For his performance in 2022, in his roles as Co-President, Head of Institutional Securities, and Co-Head of Corporate Strategy, Pick received a total compensation of $23.5 million, encompassing his base salary, cash bonus, and equity awards.
The $20 million bonuses granted to Pick, Saperstein, and Simkowitz represent, on average, their annual variable compensation, as outlined in the firm’s regulatory filing.
The structure of these awards is composed of 60% performance stock units, which are contingent on the company achieving specific financial targets from 2024 to 2026, converting into shares in 2027. The remaining 40% is in restricted stock units, scheduled to vest and become available as shares in January 2027. The performance stock units will only pay out in full if the financial targets are met.
These bonuses are being awarded amidst a heightened industry-wide scrutiny of compensation and other expenses. This comes at a time when there has been a protracted downturn in deal-making activities and growing concerns about the potential impact of a looming recession on Wall Street’s revenue streams. For Morgan Stanley, this has necessitated a reduction in its workforce, with thousands of jobs being cut. As of September 30, the firm had a workforce of 80,710 employees.
James Gorman will continue to serve as CEO until the end of the year, after which he will transition to the role of Executive Chairman, providing support and guidance during this pivotal changeover period. Ted Pick is slated to commence his role as CEO in January. This transition mirrors the approach taken in 2010 when Gorman took over as CEO, with his predecessor, John Mack, serving as Chairman for two years before Gorman assumed that title as well.
Despite the challenges faced in 2022, which saw a 10% reduction in Gorman’s pay to $31.5 million and a 17% decline in the firm’s shares, Morgan Stanley’s performance has been comparatively resilient, with the shares faring better than the KBW Bank Index, which plummeted by 29% this year.
These leadership changes and the associated financial incentives highlight Morgan Stanley’s commitment to ensuring a smooth transition and continuity in its strategic direction. The firm is poised to continue building on its legacy of innovation and success, with a refreshed executive team at the helm, ready to navigate the complexities of today’s dynamic financial landscape.