Morgan Stanley reportedly reduced pay for senior investment bankers and traders by an average of 20% to 30% for 2011 (presumably referring to year-end bonuses, but maybe to 2012 base salaries).   The cuts apply to the executive director level and above.  The new pay policy has not been made public.  Some bankers were informed this week, two inside people said. CEO James Gorman, 53, vowed after taking over in 2010 to shrink the portion of revenue devoted to paying employees after the ratio soared to 62% the previous year. Excluding accounting adjustments and one-time items, revenue at the company’s investment banking division fell about 2% last year. However, the unit’s compensation expenses rose 3%, according to figures released today - although it must be noted that deferred pay awarded in previous years and paid out this year, helped boost costs in 2011 - according to CFO Ruth Porat. Banks worldwide have been cutting and deferring compensation and overhauling policies for clawing back payouts to traders and investment bankers over the past two years as firms succumb to revenue and regulatory pressures in the wake of 2008’s financial crisis. Goldman Sachs Group Inc. Chief Financial Officer David Viniar said yesterday that discretionary compensation declined “significantly more” than the firm’s annual revenue, which dropped 26%. Deferred Payouts. Bonuses, which are awarded early in the year for the previous year’s performance, make up a large portion of total pay for Wall Street employees.  Morgan Stanley, owner of the world’s largest brokerage, told staff this month that it’s capping immediate cash bonuses at $125,000 as the firm defers a greater share of awards to senior executives. That decision reportedly will increase the average amount of pay deferred to about 75%.  That’s up from an averages for 2010 adn 2009 of 60% and 40%, respectively.  Deferred cash for 2011 performance will be paid out in 2 equal installments in the final months of 2012 and 2013 - a change from the previous deferral plan that paid out 3 equal installments over an 18-month period. Average Payouts. Company-wide compensation and benefits at Morgan Stanley rose 3% to $16.4 billion, as revenue climbed at the same rate - enough to pay each of the firm’s 61,899 employees on $265,000 on average for the year.  That's more than the $254,600 set aside for each of the 62,542 employees at the end of 2010, according to figures released today. The bank doesn’t report how many people work in institutional securities. Goldman Sachs reduced its compensation and benefits expense 21% to $12.2 billion in 2011 - enough to provide $367,000 to each of its 33,300 employees;  that's down from $430,700 for each of the 35,700 workers at the end of 2010. JPMorgan Chase, the biggest and most profitable U.S. bank, reported last week that it lowered pay at its investment bank 9% in 2011, enough to pay each worker an average $341,500.

Average compensation figures are derived by dividing the overall compensation pool by the number of employees, and they don’t represent individual workers’ actual pay.

[Businessweek, 1/20/12]