Morgan Stanley’s newly appointed chief executive officer seems to have learned a lesson from the experiences of his ousted predecessor, Philip J. Purcell. John Mack announced late Friday that he would give up a pay guarantee that had been awarded to him, according to The Wall Street Journal.
His announcement followed sharp criticism last week over the pay packages that the Morgan Stanley board had awarded to Purcell and others. Purcell was entitled to about $44 million, twice his pay for 2004, subject to adjustment for 2005 results; guarantees of roughly two years’ pay were awarded to co-president Stephen Crawford, chief financial officer David Sidwell, and two other long-time Purcell allies.
Crawford, a former CFO himself, cashed in on Monday, when Morgan Stanley said he would leave the company “to pursue other interests.” He will receive $32 million — two years’ worth of salary, bonuses, and long-term compensation — as well as all of his accrued retirement benefits. His pending stock options will also vest immediately.
Mack, however, wrote in a letter to employees, “I don’t want anyone to think that I am entitled to something that others are not,” the Journal reported. Under the contract he signed June 30, Mack’s pay was linked to chief-executive compensation at four rival firms, and he was guaranteed $25 million annually for 2005 and 2006 if their average pay topped that level. That sort of arrangement isn’t unusual in the first year or so of a CEO’s tenure, said Miles Marsh, Morgan Stanley’s lead outside director, according to the Journal.
Marsh reportedly added that Purcell and Crawford’s packages were “meticulously modeled on packages that had been given to departing executives closely resembling their situations.” However, the guarantees for both the Purcell group and Mack went against the firm’s historic culture — something Mack was assigned to repair — Morgan Stanley employees and alumni said, according to the Journal.. Those guarantees also could have hindered Mack’s efforts to rehire key senior employees who quit or who were ousted earlier this year.
According to the Associated Press, Mack will try to persuade Joseph Perella to return to Morgan Stanley. Perella departed after Purcell appointed co-presidents Crawford and Zoe Cruz to the company’s board of directors, reported the AP, which suggested that Crawford’s departure on Monday might ease the way for Perella’s return.
Morgan Stanley also named Cruz as acting president. According to the AP, during Mack’s tenure as the firm’s president during the 1990s, Cruz was one of his protégés, and he is considered more likely than Crawford to stay on with the company.