MS Morgan Stanley

By Justin Baer 

Morgan Stanley Chairman and Chief Executive James Gorman said market conditions that have weighed on the Wall Street firm's profit for the past three quarters remain difficult.

"Markets continue to be challenging," Mr. Gorman said during the firm's annual shareholders meeting in Purchase, N.Y.

One of the issues still worrying investors is the looming vote on whether the United Kingdom will remain in the European Union, Mr. Gorman said. The Morgan Stanley CEO argued that the so-called "Brexit" scenario of the U.K. leaving would damage the economy.

CLSA analyst Mike Mayo attended the meeting to ask the firm's management and lead director when Morgan Stanley would meet its objectives for boosting its return on equity. Mr. Mayo was making good on a note to clients earlier this month in which he said he would be there. He pressed Mr. Gorman and Morgan Stanley lead director Erskine Bowles on the firm's lagging returns and the struggles of its debt-trading business.

"Morgan Stanley has destroyed value for a decade," Mr. Mayo said.

Morgan Stanley, which posted returns of 8.5% last year and 6% in the first quarter, is aiming to lift its return on equity to 9% to 11% by 2017. Messrs. Gorman and Bowles defended the target and the strategy Mr. Gorman's team had laid out to get there.

"We think these goals are sensible and we stand by them," Mr. Gorman said.

Mr. Bowles argued the firm had been transformed in recent years to one built around a wealth-management business that should deliver more-stable results.

"The board understands, agrees to and supports the strategy," Mr. Bowles said.

Investors holding some 90% of the voting stock approved a non-binding measure on Morgan Stanley's executive-pay plans.

Glass Lewis, the proxy adviser, had recommended the firm's shareholders vote against the advisory vote. Institutional Shareholder Services Inc., another proxy adviser, recommended shareholders vote "yes" on Morgan Stanley's pay plans.

Morgan Stanley paid Mr. Gorman $21 million for his 2015 work, down 7% from the $22.5 million he received a year earlier.

Two shareholder proposals failed. One called for allowing abstentions on a proposal to count as a vote against the measure. The second, proposed by the Reserve Fund of the American Federation of Labor and Congress of Industrial Organizations, would have prohibited the company from vesting stock awards on senior executives should they resign to serve in government.

Write to Justin Baer at justin.baer@wsj.com

(END) Dow Jones Newswires

May 17, 2016 15:40 ET (19:40 GMT)

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