Item 8.01 Other Events
Morgan Stanley (the "Firm") today announced that the Compensation, Management
Development and Succession Committee of the Firm's Board of Directors (the
"Compensation Committee") has determined in consultation with the Firm's Board
of Directors the 2021 compensation for James P. Gorman, Chairman and Chief
Executive Officer of the Firm.
The Compensation Committee based its decision on its assessment of Mr. Gorman's
outstanding individual performance and record Firm financial performance,
including meeting or exceeding its two-year objectives announced in January of
2021, and executing on the next phase of transformational growth and shareholder
Under Mr. Gorman's leadership, for 2021:
- The Firm achieved record financial performance in terms of revenues, profits
before tax and earnings per share. Firm net revenues were approximately $60
billion with net income applicable to Morgan Stanley of approximately $15
billion, and earnings per share was $8.03.
- The Firm also reported full year ROTCE of 19.8%, efficiency ratio of 67%, and
Wealth Management pre-tax margin of 25.5%, or 26.9% excluding integration
expenses, in each case meeting or exceeding the Firm's two-year objectives.
- The market recognized the Firm's continuing transformation and growth, as
reflected in strong relative performance in total shareholder return versus
peers in 2021 and top performance over 3- & 5-year periods. During 2021, the
Morgan Stanley share price increased by 43% from $68.53 to $98.16 - a
significant increase in stock price and a premium valuation to peers - adding
~$50 billion in market value to end the year at $174 billion.
- The Firm continued to increase returns to shareholders. The quarterly dividend
was doubled to $0.70, with total dividends paid of $3.8 billion, and the Firm
repurchased $11 billion in shares, up from $1 billion in 2020.
- The Firm continued to press the advantage of its strategic transformation to
drive significant growth:
o Institutional Securities continued to increase its pre-tax margin and wallet
share in each of its businesses, and revenues were a record $30 billion, with
strong revenues across Advisory, Underwriting, and Equity, notwithstanding
losses related to a single client event in the first quarter.
o Wealth Management had leading businesses in each of its channels with nearly 15
million unique client relationships, $438 billion of net new assets and $4.9
trillion of total client assets, and $346 billion of deposits, each a
significant increase from prior years.
o Investment Management reported full year net revenues above $6 billion driven
by strong asset management revenues on record assets under management of $1.6
trillion and $114.5 billion of net flows.
o The Firm continued to successfully integrate its E*TRADE and Eaton Vance
acquisitions, which have significantly increased the scale and breadth of the
Firm's Wealth and Investment Management franchises as combined client assets
now stand at $6.5 trillion.
- The Firm continued to focus on the health and wellbeing of its employees with
enhancements to employee wellness offerings, including enhanced parental leave
policies, paid leave benefits for family care, and financial wellness programs
through MS at Work.
- The Firm continued its commitment to diversity and inclusion. In conjunction
with the Institute for Inclusion, chaired by Mr. Gorman, the Firm drove
workforce diversity, invested in underserved communities, enhanced engagement
with diverse-led businesses, and supported diverse communities where employees
live and work. The Firm also supported a number of organizations driving racial
equity, including a $20 million investment to create more accessible pathways
to college and career success for students from low-income backgrounds. Through
targeted professional development and recruiting programs, the Firm developed
and recruited diverse talent. The Firm also introduced representation
objectives to drive greater accountability for a diverse workforce.
The Compensation Committee set Mr. Gorman's total compensation for 2021 at $35
million, an increase from $33 million for 2020. Mr. Gorman's 2021 compensation
is comprised of four parts: a base salary of $1.5 million; a cash bonus of
$8.375 million; a deferred equity award of $5.025 million; and a
performance-vested equity award of $20.1 million that converts to shares only if
the Firm meets predetermined performance goals with respect to (a) average Firm
return on tangible common equity and (b) relative total shareholder return over
the three-year performance period. The Compensation Committee increased the
return on tangible common equity goal of the performance-vested equity award
from 15% to 16% to earn a maximum payout of 1.5 times this portion of the award,
reflecting the transformative changes to the business last year.
Consistent with previous years, 75% of Mr. Gorman's incentive compensation is
deferred over three years and is subject to cancellation, and 100% of Mr.
Gorman's deferred incentive compensation is delivered in the form of equity
awards, aligning his compensation with shareholders' interests. For 2021, the
portion of Mr. Gorman's bonus delivered in performance-vested equity was
increased to 60%.
Additional important information about the Registrant's incentive compensation
programs and governance, including an explanation of all material elements of
the compensation for Mr. Gorman and the other named executive officers, will be
presented in the Registrant's proxy statement for the 2022 annual meeting of
stockholders, expected to be filed with the Securities and Exchange Commission
in April 2022.
The information provided herein may include certain non-GAAP financial measures.
The definition of such measures or reconciliation of such metrics to the
comparable U.S. GAAP figures are included herein or in the Firm's Current Report
on Form 8-K dated January 19, 2022.
This Report on Form 8-K may contain forward-looking statements including the
attainment of certain financial and other targets, objectives, and goals.
Readers are cautioned not to place undue reliance on forward-looking statements,
which speak only as of the date on which they are made, which reflect
management's current estimates, projections, expectations, assumptions,
interpretations or beliefs and which are subject to risks and uncertainties that
may cause actual results to differ materially. For a discussion of risks and
uncertainties that may affect the future results of the Firm, please see
"Forward-Looking Statements" immediately preceding Part I, Item 1, "Competition"
and "Supervision and Regulation" in Part I, Item 1, "Risk Factors" in Part I,
Item 1A, "Legal Proceedings" in Part I, Item 3, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Part II, Item 7
and "Quantitative and Qualitative Disclosures about Market Risk" in Part II,
Item 7A in the Firm's Annual Report on Form 10-K for the year ended December 31,
2020 and other items throughout the Form 10-K, the Firm's Quarterly Reports on
Form 10-Q, the Firm's Current Reports on Form 8-K, including any amendments
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