The Director Compensation Project: Morgan Stanley

This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation.  We are including companies from 2010’s Fortune 500 and using information found in their most recent proxy statements.  In addition to state standards and the requirements of SOX, the stock exchanges each have their own standards for independence.  While substantially the same, there are some minor differences between NYSE and NASDAQ rules that are worth noting. 

Under NYSE Rule 303A.01, all listed companies must have a majority of independent directors sitting on their boards.  Directors are not independent if they received over $120,000 in direct compensation, other than director’s fees, in any one year period over the last three years pursuant to Rule 303A.02(b)(ii).  This is a looser restriction than the equivalent NASDAQ Rule, 5605(a)(2), which includes "any compensation."  Rules 303A.06 and 5605 also require that, in addition to the general independence standards, audit committee members must comport with the requirements of  Rule 10A-3 (C.F.R. §240.10A-3).  See also IM-5605-4. Audit Committee Composition.

One can see some of the effects of these rules when looking at the director compensation table from Morgan Stanley (NYSE:MS) 2011 proxy statement.  According to the proxy statement, the company paid the directors the following amounts:

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation ($)	Total ($)
Roy J. Bostock	58,750	250,000	0	0	308,750
Erskine B. Bowles	58,750	250,000	0	0	308,750
Howard J. Davies	70,833	250,000	0	0	320,833
James H. Hance, Jr.	66,667	250,000	0	0	316,667
C. Robert Kidder	72,917	250,000	0	0	322,917
Donald T. Nicolaisen	68,333	250,000	0	0	318,333
Charles H. Noski*	-	-	0	0	-
Huthum S. Olayan	49,583	250,000	0	0	299,583
Charles E. Phillips, Jr.*	-	-	0	0	-
O. Griffith Sexton	52,500	250,000	0	0	302,500
Laura D. Tyson	55,417	250,000	0	0	305,417

* Mr. Noski resigned from the Board effective April 13, 2010, and Mr. Phillips did not stand for election at the 2010 annual meeting of shareholders on May 18, 2010.

Director Compensation.  During fiscal year 2010, Morgan Stanley held 15 Board of Directors meetings and 35 Board Committee meetings.  Each director attended at least 75% of the aggregate number of meetings of the Board of Directors and meetings of the Board Committees on which he or she served.  Each director receives an annual retainer of $75,000.  Board Committee chairs and Board Committee members receive additional annual retainers of up to $30,000 per committee.  There are four committees: Risk; Audit; Nominating and Governance; and Compensations, Management Development and Succession.  Mr. Kidder receives $50,000 in additional retainers through committee membership; Mr. Nicolaisen receives $40,000; Mr. Davies receives $35,000; Mr. Hance receives $25,000; Dr. Tyson and Messrs. Bowles and Bostock receive $20,000; Mr. Sexton receives $15,000 and Ms. Olayan receives $10,000.

Director Tenure.  Mr. Kidder is the director with the longest tenure, he has been on the board since 1993.  Mr. Owens is the newest director, he joined the board in 2011.  Several directors also sit on other boards.  Mr. Hance sits on the boards of Cousins Properties Incorporated, Duke Energy Corporation, Ford Motor Company, and Sprint Nextel Corporation; Mr. Hance has served on the boards of EnPro Industries Inc. and Rayonier Corporation in the past five years.  Mr. Bostock serves as the Non-Executive Vice Chairman of the board for Delta Air Lines, Inc. and as the Non-Executive Chairman of the board for Yahoo! Inc.  

CEO Compensation.  James Gorman, who served as Morgan Stanley’s Chief Executive Officer during the fiscal year 2010, earned $15,185,737 in total compensation.  Ruth Porat served as the Executive Vice President and Chief Financial Officer over the same time and was compensated $11,710,425.  Both Mr. Gorman and Ms. Porat started at these positions on January 1, 2010, along with Mr. Chammah who became Chief Executive Officer of Morgan Stanley International.  As of January 2011, Mr. Chammah is no longer an executive officer after changing his role to Chairman of Morgan Stanley International.  Mr. Chammah was paid $502,302 related to his modified expatriate package received for transferring to the UK and an estimated expatriate equalization payment of $622,609 related to taxes.  These payments include costs related to financial and tax planning and personal use of a car and driver.  Former Chief Operating Officer, Mr. Thomas Nides, was paid $75,104 for travel between his home in Washington D.C. and the Company’s offices in New York.  This includes airfare, car services, and housing accommodations.