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Morgan Stanley to defer bonuses for high earners: sources

A man walks into the Morgan Stanley offices in New York January 18, 2012

SHANNON STAPLETON/REUTERS

Morgan Stanley is deferring the payout of all bonuses for the recently ended 2012 year for high-earning employees, three sources familiar with the situation said on Tuesday.

The deferral applies to all employees, except for financial advisers, who make more than $350,000 (U.S.) annually and whose bonuses are at least $50,000, one of the sources said.

The deferred bonuses will be paid out over a three-year period, meaning that employees will not receive their full bonuses for 2012 until the end of 2015. It could not be determined what the level of bonuses will be.

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The bonus details will be communicated to employees on Thursday, said the sources, who asked not to be named because the matter is not public.

Mark Lake, a Morgan Stanley spokesman, declined to comment.

One source said the change is being made to better align employee incentives with shareholders and to appease regulators.

Under the new bonus plan, which will be paid out half in cash and half in stock, high earners will receive 25 per cent of their cash bonus in May, another 25 per cent in December, another 25 per cent in December, 2014, and the final 25 per cent in December, 2015, according to two of the sources.

For the stock portion, 25 per cent of the equity award will be paid out at the end of this year, 25 per cent at the end of 2014, and the final half at the end of 2015, the sources said.

Employees who make less than $350,000 annually and whose bonuses total less than $50,000 will receive their full cash bonuses in February, one of the sources said.

The long deferral in cash payouts for high earners is unusual, but is likely what more financial services firms will do, given the public and regulatory scrutiny around compensation in the financial services industry, said Joe Sorrentino, managing director of Steven Hall & Partners, a New York-based executive compensation firm.

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"This makes it really challenging for any high-paying employees who have realistic opportunities elsewhere to leave," Mr. Sorrentino said. "Many investors should be pleased by this, but employees might not be."

Last week, Daniel Loeb, who runs hedge fund firm Third Point LLC, criticized board compensation at Morgan Stanley in a letter to clients.

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