The Morgan Stanley CEO salary got to a new all-time high of $35 million for the year 2021 making him the highest bank executive. The total package sees him earning above Jamie Dimon of JPMorgan Chase, whose salary was reviewed upwards of $34.5 million. This new pay is to reflect the revenue growth and profits the major bank raked in for the 2021 fiscal year. James Gorman oversaw the recovery of the New York-based bank and has once more led his team to successfully increase the bank’s fortunes in terms of the company’s revenues and profits and also improve the bank’s standing in the capital market.
Morgan Stanley did well despite the woes of 2020
The year 2020, was not good for banks especially big lenders like Morgan Stanley. Big lenders suffered more as a result of the coronavirus-induced economic struggles. Just as their revenues and profits had always been heavy, so was their loss in 2020 alone. However, the Australian-born James Gorman was able to bring his expertise to the fore to cushion the effects of the pandemic. At the start, the Morgan Stanley CEO salary was reduced by 7% in line with pay reductions across the board at the time. This was despite the 46% increase in profits the bank saw in 2019. Despite the struggles of the year, Gorman was able to achieve great success with Morgan Stanley. Revenue for the year grew to $48.2 billion despite the pandemic reflecting a 16% increase from the previous year. This led to a 22% rise in profits to $11 billion. The bank’s stock price increased by 34% pushing the bank’s market value to over $130 billion, a 30% gap above that of the closest rival at the time – Goldman Sachs. Consequently, the bank’s return on tangible common equity (ROTCE) grew from 13.4% to 15.2% just as earnings for the last quarter of the year soared by 51% to $3.4 billion resulting from a 32% rise in trading revenues and 46% increase in investment banking fees.
At the beginning of 2021, the total compensation for James Gorman stood at $33 million for the year, a 22% growth from his previous $27 million pay. This amount which made him the highest paid at the time consisted of $1.5 million in base salary, $7.875 in cash bonuses, another $7.875 million in deferred equity, and a conditional offer of $15.75 million equity that would only be converted to shares if the leadership team achieves some set objectives as directed by the boards.
The Morgan Stanley CEO salary was raised by 6% for the 2021 fiscal year
James Gorman’s performance at the helms of affairs in Morgan Stanley hasn’t gone unnoticed. The bank’s board, haven recognized his commitment and efforts, decided to raise the Morgan Stanley CEO salary by 6% bringing the total compensation to $35 million. Despite being among the “30 million crew”, the $2 million addition to Gorman’s paycheck is something worthwhile. More so, this became necessary after JPMorgan Chase raised the salary of its CEO, Jamie Dimon, to 434.5 million for the 2021 fiscal year.
The majority of the new pay structure consists (of about $25 million) in the form of long-term awards which vests into shares but are dependent on some conditions – shareholders’ return targets and return on tangible equity. According to regulatory filings by the board, the new pay consists of a base salary of $1.5 million and a cash bonus of $8. 375 million, a total deferred equity award of $5.025 million, and a stock bonus of $20.1 million.
The bank’s board based their decision for this increase on several growth indices Morgan Stanley has recorded in recent years. The board did set up a compensation committee that recommended the raise after evaluating the CEO’s exceptional performances. Morgan Stanley’s board wrote in the filing that James Gorman met and exceeded the bank’s two-year goals as announced in January 2021. The fling also stated that Gorman had already begun executing the next phase of the bank’s transformational growth agenda.
True to these words, Gorman seems to be besting his previous achievements at the bank. All key performance indicators (KPIs) in the bank’s several business areas attest to this. The bank’s profitability increased to a new high for the fourth consecutive year running. It has significantly improved in wealth management, which happens to be one of its core business areas. The net revenue for 2021 stood at $60 billion with a profit of $15 billion. The return on tangible common equity, a major metric for evaluating Gorman’s pay, rose from 15.2% in 2020 to 19.8% in 2021. Its revenues and profits in the fourth quarter of 2021 bested everyone’s imaginations. It increased by 9% as the bank made $3.7 billion in revenues for the period against $3.4 billion made last year. The bulk of this revenue came in through a share price of $2.01 per unit.
James Gorman became CEO in 2010
James Gorman’s story has been one of success since joining Morgan Stanley. Born and raised in Australia, he came to the US intending to obtain an MBA from Columbia Business School. He then joined McKinsey & Company upon graduation and rose to be a senior partner. Whilst still at McKinsey & Company, he helped develop an online marketing strategy for Merrill Lynch which he would subsequently join as a chief marketing officer in 1999. He eventually rose to head the firm’s brokerage business.
In February 2006, Gorman joined Morgan Stanley but was placed in charge of the bank’s Global Wealth Management Group (GWMG). Aside from his role as the President and Chief Operating Officer of this unit, he was also put in charge of strategic planning alongside Colm Kelleher. In this position, Gorman assisted in creating the biggest wealth management business in the world with the acquisition of Citigroup’s Smith Barney business in 2009. His unit, the worldwide leader in wealth management at the time, managed over $1.8 trillion in customers’ assets and had more than 16,000 financial advisors.
His success at the unit was the key deciding factor in his rise to the CEO position. This was announced in September 2009 but came into effect in January 2010. He also assumed the position of chairman in 2012 upon the resignation of John Mack. The Morgan Stanley CEO salary at the time he assumed office was $8.56 million which comprised of a base salary of $800,000, deferred shares, and restricted stocks. His salary has improved since then.
Gorman’s era as the CEO of Morgan Stanley has seen its transition from just a mere stock and shares trading company to a well-established bank. He has aggressively made some acquisitions which are now paying off and raking in more revenues.
The James Gorman-led team at the bank did well also in terms of acquisitions. Morgan Stanley completed the outright purchase of E*TRADE for $13 billion. A deal that saw the bank gain $360 billion in assets and 5.2 million more client accounts. This purchase was subsequently followed by the $7 billion acquisition of Eaton Vince, an investment management outfit, in October. The Eaton Vince deal was a game changer because it increased the bank’s assets under management to $1.2 trillion.
James Gorman is set to stay on for a few more years at the helm of affairs of Morgan Stanley. He is currently in his twelfth but he feels he still has much more to do but he gives himself a timeframe. He was quoted saying he won’t be resigning at the moment but would also not be staying at Morgan Stanley for more than five years from now. With this, the call to shop for a successor is a valid one. But will the successor build on the antecedents of Gorman? Well, only time can tell.