(September 17, 2010) — Morgan Stanley Chairman John Mack and CEO James Gorman have sought to defeat a shareholder lawsuit filed by two pension over “unconscionable” compensation the company paid to employees.
The case highlights anger and dissatisfaction among shareholders who seek to recover billions in compensation, alleging that they suffered harm from the conduct of executives and directors during the financial crisis.
“The problem of the conduct is that it puts the interests of employees, senior executives of Morgan Stanley, before the interests of Morgan Stanley investors,” Jay Eisenhofer, a lawyer for the Security Police and Fire Professionals of America Retirement Fund, argued in court, Reuters reported. He added that there was “no relationship” between pay and profitability at Morgan Stanley, and that compensation was awarded without regard to profitability at the company.
Among the shareholders that filed the lawsuit are the $814.5 million Central Laborers’ Pension Fund, Jacksonville, Ill., and the $5.8 million Security Police and Fire Professionals of America Retirement Fund, Roseville, Mich. According to the lawsuit, the company’s board “abdicated their responsibility” to manage compensation plans in the interests of the company and shareholders. While shareholder value dropped to less than $30 per share from a high of $90 per share, Morgan Stanley reportedly paid a total of $45 billion in compensation for 2006, 2007 and 2009.
In addition to Morgan Stanley, Goldman Sachs Group Inc, which paid out $16.2 billion in compensation in 2009, has also been the target of lawsuits over its pay practices.
The Morgan Stanley case is Security Police and Fire Professionals of America Retirement Fund v John Mack, James Gorman et al, New York State Supreme Court, New York County.
To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742