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Morgan Stanley Exec Announced "Very Generous" Retention Award Last Week
The Huffington Post has obtained audio of a conference call last week on which the co-president of Morgan Stanley, James Gorman, tells financial advisers at his firm and Citigroup's Smith Barney that they will be receiving "very generous" retention payments, and urging them not to call them bonuses.
The two firms are about to merge.
Gorman tells the advisers:
There will be a retention award. Please do not call it a bonus. It is not a bonus. It is an award. And it recognizes the importance of keeping our team in place as we go through this integration.
Gorman continues:
I think I can hear you clapping from here in New York," Gorman joked during the call, after announcing that the payments would be linked to '08 performance. "You should be clapping because frankly that is a very generous and thoughtful decision that we have made. We spent a lot of time kicking this around. We could easily have done it from the point of closing, which is obviously going to be somewhere in the latter half of this year or around the middle of the year. But we just decided... that it was right thing to do, to give you that certainty that it would be based off '08. '09 is a very difficult year... So that degree of anxiety, which many, many of you have emailed me about... is now off the table.
Huffington Post adds:
The payments, Gorman said, will be calculated based on performance numbers from 2008 instead of 2009, when the merger is expected to be completed. That decision virtually guarantees an increase in the size of the awards. While 2008 was challenging for the firms -- Morgan Stanley's client assets in fee-based accounts dropped 25 percent in the fourth quarter, and a round of lay-offs is expected -- 2009 is expected to be substantially weaker.
As I type this, I can hear Morgan Stanley's CEO John Mack bragging to Congress about the measures his firm has taken to rein in excessive compensation.
Josh
Zachary
Not that I'm trying to defend retail brokers, since they are just one step removed from used car salespersons (and I apologize to all the used car salespersons out there), but these guys work purely off of commission. They bring assets into the firm, sell firm product, and get paid off the commission grid based on their production and the product. These are not the salary, bonus guys on the instituional side. If ever there were a group that would move (and could move) their accounts to another shop in a heartbeat, these are the guys. And yes, even in this economy, another shop would welcome a million dollar producer in a heartbeat.
February 11, 2009 11:15 AM | Reply | Permalink
Okay. And if they are doing such good jobs they should have great commissions and not need "awards" which we know are bonuses.
Let them leave and find better jobs elsewhere if that's the case otherwise stop with the damn bonuses. Its like some sort of sinking pirate ship where they hand out loot instead of trying to save the ship.
February 11, 2009 11:32 AM | Reply | Permalink
Point is that they will leave and then the Firm loses the revenue generated by the big producers. If you think that's a great business model, then please start your own business and see how far you get.
February 11, 2009 11:44 AM | Reply | Permalink
We tried your way, and this is where it led us. Let them take their "million dollar portfolios" which are now probably "thousand dollar protfolios" and go somewhere else if they don't like it. I pray this comes up in the hearing today.
February 11, 2009 12:23 PM | Reply | Permalink
We tried your way, and this is where it led us. Let them take their "million dollar portfolios" which are now probably "thousand dollar portfolios" and go somewhere else if they don't like it. I pray this comes up in the hearing today, an at least one congressperson has the balls to play the tape for all to hear.
February 11, 2009 12:25 PM | Reply | Permalink
We tried your way, and this is where it led us. Let them take their "million dollar portfolios" which are now probably "thousand dollar portfolios" and go somewhere else if they don't like it. I pray this comes up in the hearing today, an at least one congressperson has the balls to play the tape for all to hear.
February 11, 2009 12:28 PM | Reply | Permalink
Point is, if there are better places for them to work where there aren't pesky people who bailed their company out and have removed bonuses _ NOT COMMISSIONS but BONUSES, let them hit the road. Their firms are already in trouble and the only reason they aren't unemployed or working at these other firms with their clients* is because the Feds bailed them out. This is not from a business receiving government support perspective, this is from a taxpayer watching govt funds be wasted on these scumbags perspective- but you already know that.
And since you brought it up, where will they leave to?
February 11, 2009 12:40 PM | Reply | Permalink
Given the likely figures for the upcoming year, is it still reasonable to call them "producers"?
What if they produced exposure to the CDOs that ruined the firm?(Selling itself at fire sale price to Citi is pretty solid evidence that the firm was fucked.)
Would not the firm be better off with a lower-paid employee whose experience doesn't include disastrously-bad judgment driven by greed?
A. lower costs for salary and benefits - the up-front sunk costs.
B. no previous activity that damaged the firm, its clients, and the global economy.
MBAs can learn to say "Would you like fries with that" just as well as any high-school dropout. Better, I would expect.
February 11, 2009 1:51 PM | Reply | Permalink
They can pay their bonuses out of their profits. Not out of my money.
And, if they have to get me, as a taxpayer, to loan them money to keep operating, they can give me a piece of the company at market price.
THAT is reality-based, bud.
February 11, 2009 1:27 PM | Reply | Permalink
In this market, let them try and walk away. There are no alternatives for them. Where are they going to leave for?
February 11, 2009 3:51 PM | Reply | Permalink
Just call it pay and cut the crap. I'm tired of all the horse$h!t linguistic games and the culture of 'compensation' of Wall Street. Stop playing hide the salami with your goddamn paycheck and just defend it. A retention pond is full of scum and retention pay is for scumbags. Like these asshats are going to leave and find another job in this economy. Holy monkeys does this piss me off.
February 11, 2009 11:57 AM | Reply | Permalink
Mr. Parker: It's a Major Award!
Swede: Shucks I wouldn't know that. It looks like a lamp.
Mr. Parker: What is a lamp, you nincompoop? It's a Major Award. I won it!
Swede: Damn, hell, you say won it?
Mr. Parker: Yeah, mind power, Swede; mind power.
February 11, 2009 11:58 AM | Reply | Permalink
Best movie ever. I pack my DVD away with the Christmas ornaments so I can savor it during the holiday season (corny, I know).
Now for applicable movie lines, how about this exchange from Wall Street:
Bud Fox: How much is enough?
Gordon Gekko: It's not a question of enough, pal. It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or made, it's simply transferred from one perception to another.
February 11, 2009 12:29 PM | Reply | Permalink
Mr. Parker: It's a Major Award!
Swede: Shucks I wouldn't know that. It looks like a lamp.
Mr. Parker: What is a lamp, you nincompoop? It's a Major Award. I won it!
Swede: Damn, hell, you say won it?
Mr. Parker: Yeah, mind power, Swede; mind power.
February 11, 2009 12:06 PM | Reply | Permalink
Just call it pay and cut the crap. I'm tired of all the horse$h!t linguistic games and the culture of 'compensation' of Wall Street. Stop playing hide the salami with your goddamn paycheck and just defend it. A retention pond is full of scum and retention pay is for scumbags. Like these asshats are going to leave and find another job in this economy. Holy monkeys does this piss me off.
February 11, 2009 12:27 PM | Reply | Permalink
Amen, Joe.
I wish somebody at Treasury had the stones to tell Citi that they can count on getting zero dollars from the government if they go through with this merger. We're seeing the same thing here that happened at Merrill Lynch where the execs empty the vault just prior to the taxpayer-funded merger (which NY Attorney General Andrew Cuomo is all over at the moment). Somebody ought to go to jail over this.
February 11, 2009 1:52 PM | Reply | Permalink
Sorry bud, but "I" don't have a way. . .I'm just part of the "reality based community" (oh yeah, that works both ways, doesn't it). If your goal is to tear it all down and start from scratch, well then Obama and the Democratic Party are not your ticket. This place is becoming more and more like "No Quarter" every day.
February 11, 2009 12:46 PM | Reply | Permalink
So you're saying that to deny them bonuses is to tear it all down and start over? What "reality" is that community you're from based in?
February 11, 2009 1:31 PM | Reply | Permalink
Sorry bud, but "I" don't have a way. . .I'm just part of the "reality based community" (oh yeah, that works both ways, doesn't it). If your goal is to tear it all down and start from scratch, well then Obama and the Democratic Party are not your ticket. This place is becoming more and more like "No Quarter" every day.
February 11, 2009 1:01 PM | Reply | Permalink
So you're saying that to deny them bonuses is to tear it all down and start over? What "reality" is that community based in?
February 11, 2009 1:34 PM | Reply | Permalink
This isn't as simple as it appears. The brokers getting the retention bonus are all making money for the company: they split commissions with the company. It's normal in the business for brokers to be recruited by other firms: they take their clients with them to the new firm. When this happens, they get a signing bonus and promise to stay for long enough that the new firm profits from the commissions. The retention is (while potentially too big) probably deemed necessary to keep a mass exodus of brokers from Morgan Stanley and Smith Barney, because of the uncertainty and burdens of the joint venture.
On a personal note, I work in one of the above named brokerages as assistant staff, get no bonus, will get no bonus, and am already afraid for my job. A big producer (broker) in my office would have left if there were no retainer. With his income gone, two or three of us in my branch would have been let go.
I'm as pissed as anybody; the execs in my company got illegitimate bonuses the last few years and my job is on the line because or it. However, this retainer is not the same, and indeed might have saved my job.
February 11, 2009 2:09 PM | Reply | Permalink
Are there that many brokerages around getting no assistance for them to flee to? If so, your argument is the compelling one.
They might be better off calling these "signing bonuses" if it becomes a bigger issue, just so the general public can see it in the proper context.
February 11, 2009 3:58 PM | Reply | Permalink
I'm just a peon and these things are kept quiet, so I don't know the details... I suspect, that any number of brokerages would be open to brokers switching firms, because they sign contracts and eventually bring money. It's a good investment if you are confident the broker will bring clients and assets. The hassle of the joint venture makes it a likely time for brokers to make a switch.
It's a bit of a systemic thing...all of the time brokerages are trying to get producers to change firms. Brokers move for many reasons: when they want a signing bonus, but also when they think the new firm's system/offerings have advantages for their clients (if your broker is changing firms, make sure the latter is the reason).
February 11, 2009 5:27 PM | Reply | Permalink
The fairest thing possible is to pay them in complex derivatives for mortgages in foreclosed homes. Or in peanut products laced with salmonella.
February 11, 2009 3:21 PM | Reply | Permalink
These so-called bonuses are really more like MacArthur Fellowships. We should call them genius grants.
February 11, 2009 6:21 PM | Reply | Permalink
Hi,
We care very much about the PORK in the bill. I think they should tell everyone what is in the bill. We work hard, and worry about how we are going to pay the bills and how we are goign to pay the Dr.'s we are just in the middle we make a little to much fall thought the cracks.
djackx
February 11, 2009 10:41 PM | Reply | Permalink