Goldman Sachs, Morgan Stanley Cut CEOs' 2015 Total Pay--Update
January 22 2016 - 09:50PM
Dow Jones News
By Justin Baer
Goldman Sachs Group Inc. and Morgan Stanley cut the annual pay
for their chief executives after slumping markets dented the
Wall-Street firms' profits in 2015.
Lloyd Blankfein, Goldman Sachs's chairman and CEO, earned a
salary and bonus of $23 million for his 2015 performance, down 4%
from his $24 million award a year earlier, a person familiar with
the matter said.
Also Friday, Morgan Stanley said Chairman and CEO James Gorman
had received a pay package valued at $21 million, down $1.5
million, or 6.7%.
Both Wall Street firms faced headwinds in 2015. Goldman's shares
dropped 7% during the year, while Morgan Stanley's fell 18%.
At Goldman, profit fell 31% after the firm set aside billions to
account for legal expenses, and revenue slumped in the bank's large
debt and currency trading division.
Morgan Stanley's own trading struggles hampered the firm's
effort to achieve a 10% return on equity, a key profitability goal
for Mr. Gorman. It ended the year with an ROE of 8.5%, aided a bit
by certain accounting requirements.
The 61-year-old Mr. Blankfein received restricted shares valued
at $14.7 million, according to regulatory filings, and was paid a
salary of $2 million. Goldman also awarded him a cash bonus of
about $6.3 million, according to the person familiar with the
situation.
Mr. Gorman was awarded restricted shares valued at $4.6 million,
a slight increase from his stock bonus a year ago. His cash bonus,
along with other long-term incentive awards, will decline. Coming
off a successful 2014, Morgan Stanley gave its CEO a 25% raise.
Goldman's net income decline was its first since 2011, a year
after which Goldman also sliced Mr. Blankfein's bonus.
For 2015, Goldman paid Gary Cohn, the firm's president, $21
million in salary and bonus, down from $22 million a year
earlier.
Harvey Schwartz, finance chief at Goldman, and Michael Sherwood,
a vice chairman, each also received pay packages valued at $21
million, down $1 million from the prior year.
As Mr. Blankfein navigated the firm through a difficult year
marked by choppy markets and deepening concerns over the economy,
he was diagnosed in September with a curable form of lymphoma. He
began a series of chemotherapy treatments that ended in recent
weeks.
Last April, Goldman's board also tweaked the firm's policies on
executive pay so that a portion of past stock awards would only be
paid out in full if certain performance goals are met.
In order for Mr. Blankfein and his top lieutenants to receive
all of their restricted shares granted each year, they will need to
keep the firm's average return on equity above 11% between 2015 and
2017.
Last year, Goldman's return on equity dropped to 7.4% after the
firm set aside about $3 billion in legal reserves to settle U.S.
and state probes into its mortgage-bond business heading into the
financial crisis. Excluding those provisions, the firm's ROE would
have been 11.2%, Goldman said Wednesday.
The firm's returns--and Mr. Blankfein's pay--were far better in
the years before the financial crisis. In 2007, he earned $70
million.
Since then, a spate of new regulations has dulled banks' ability
to take risks that can produce the outsize profits they once
had.
Yet Goldman's returns remain well above those of many of its
biggest peers, and some of its businesses, including merger advice,
underwriting and stock trading, are thriving.
For 2014, Goldman paid Mr. Blankfein a $2 million salary, a cash
bonus of $7.3 million and restricted shares then valued at about
$14.7 million.
Morgan Stanley is coming off its biggest annual profit since
2006, but its debt-trading woes have weighed on both returns and
its stock price.
The firm has responded by cutting 25% of its fixed-income
traders and salespeople and overhauling the division's
leadership.
Write to Justin Baer at justin.baer@wsj.com
(END) Dow Jones Newswires
January 22, 2016 21:35 ET (02:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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