'Tis the season

As the annual bonus tree blooms again on Wall Street, firms that were used to making multimillion dollar payouts to incompetant bankers are finally making some practical changes to their compensation structures.

But it was Morgan Stanley’s claw-back announcement, which will affect some 7,000 workers, that captured the attention of employment lawyers and recruiters. It is similar to a rule introduced by UBS, the big Swiss bank, in late November, but Morgan’s is far broader in its language. Pay can be retracted from workers who engage in “conduct detrimental to the firm,” according to an internal memorandum announcing the move, or who cause “a restatement of results, a significant financial loss or other reputational harm.”

Morgan Stanley already holds on to 35 to 60 percent of high earners’ bonuses, but in the past it has held that money entirely in stock and stock options. Now a large portion will be cash, the bank said. “So if you’re a trader and you’ve had a huge year and you get paid a lot of money and then the following year it turns out you were taking outsize risk, we can go back and ding your pay from the year before,” said
Jeanmarie McFadden, a spokeswoman for Morgan Stanley.