[ by Melanie Gretchen ]

Morgan Stanley employees: the more bonus you make, the longer you have to wait for it.  Such is the case for those who made more than $350,000 a year and earned a bonus of more than $50,000 for 2012.  Will Morgan Stanley face as much backlash as Goldman did when it proposed a similar delay, before the investment bank changing its position?

How Much Delay? Amid regulator appeal for more restraint on Wall Street, the New York-based firm will defer 2012 bonuses for its highest-paid bankers for as long as 3 years.  Unfortunately for Morgan Stanley's ranks, this trend by the bank is not a new one: CEO James Gorman has worked to cut costs in 1,600 layoffs and has called compensation "way too high."  Last year, the bank deferred some bonuses for 2 years.

What Morgan Stanley employees can expect in 3 years. Going forward, deferred compensation will be split evenly between cash and stock:

• deferred cash will be given out in 25 per cent portions, with the first quarter paid at the end of May, the next quarter given at the end of this year, the next at the end of 2014, and the final slug coming in 2015
• similarly, stock will be paid with with 25% paid at the end of this year, 25% at the end of 2014 and 50% at the end of 2015

This change could satisfy 4 parties:

• regulators who want to see banker incentives aligned more closely with the longer-term fortunes of the banks
• the bank, considering deferred compensation delays the amount of expenses banks have to record on their balance sheets, since the money is not immediately paid out
• shareholders whom Morgan Stanley hopes to return money via dividends or a share buyback, subject to the Federal Reserve’s banking stress tests
• other banks which take a cue from Morgan Stanley

Who are not satisfied:

• employees
• industry members who see the trend as destructive to the industry

"I’m a big fan of James Gorman but I think what he’s doing on compensation is crazy.  They’re turning compensation from a variable cost to a fixed cost. It’s denial." -- a rival bank executive.

For further details, go to [FT, 1/15/13] and our Who's news story [Update:  Goldman Drops Plan to Delay Bonuses to U.K. Employees].