Morgan Stanley boosts compensation perks
Morgan Stanley's top paid workers can now use annual bonuses towards investing in firm's hedge funds, private equity funds.
NEW YORK (CNNMoney.com) -- As competition heats up in the investment banking world, Morgan Stanley is offering some of its most highly-paid employees sweet financial incentives to not only attract new blood to the company but keep high-level traders and bankers from jumping ship to competitors.
Morgan Stanley (Charts) - the nation's largest investment bank - began providing employees that make at least $500,000 a year the option of investing part of their year-end bonuses into the company's hedge funds, private equity funds and real estate funds, according to a person familiar with the matter.
To sweeten the pot, the firm also agreed to lend employees $2 for every $1 contributed to the funds. Employees wouldn't be held accountable to pay back the borrowed funds if the investments resulted in a loss.
For example, under the so-called leveraged co-investment plan, if a a trader invested $300,000, the company would lend the employee $600,000. Employees must hold on to the investment for three years, but after that time, can retain any gains made on the borrowed funds as well as their original contribution.
A competitive move
Employees that participate in the leveraged co-investment plan, however, can't choose how much of their contribution will be allocated into each of the three funds, according to the person who asked to remain anonymous as the company hasn't publicly disclosed its changes to compensation incentives.
Separately, Morgan Stanley also changed its policies towards the sale of restricted stock. Employees can now cash out in three years as opposed to five years.
A Morgan Stanley representative declined to comment on the incentive initiatives, which were introduced in mid-September to employees.
The person familiar with the program said a company-wide e-mail was sent to employees announcing the new plan in mid-September. And a company Town Hall meeting also in Septemeber created some buzz about the new options.
Morgan Stanley has had a a tumultuous few years as the company struggled with of corporate in-fighting, key executive departures and weak performances from its money management, credit card and brokerage businesses. Former CEO Philip Purcell was replaced with John Mack in mid-2005.
At the time, the company lost a number of employees amid the turmoil and all eyes turned toward the new management for improvement.
In its most recent third quarter earnings report, Morgan Stanley, which also has brokerage and credit card units, said net income rose to $1.85 billion, or $1.75 a share.That's up from $144 million, or 13 cents, a year ago, when it absorbed a $1 billion charge.
The person familiar with the new incentive plan said Mack is attempting to make the company more competitive in terms of compensation perks and hopes the new plan will not only help the firm retain its current employees but will also woo more talent away from the company's competitors.