Two Wall Street firms that received at least $60 billion in government bailout funds will be rewarding their financial advisers with controversial retention payments, the terms of which one senior executive described as "very generous." [Huffington Post]
The soon-to-be-merged financial giants — Morgan Stanley and Citigroup’s Smith Barney — announced the payments during an internal conference call last week, but warned advisers against describing them in terms that would cause PR headaches.
"There will be a retention award. Please do not call it a bonus," said James Gorman, co-president of Morgan Stanley. "It is not a bonus. It is an award. And it recognizes the importance of keeping our team in place as we go through this integration."
The payments, Gorman said, will be calculated based on performance numbers from 2008 instead of 2009, when the merger is expected to be completed. That decision virtually guarantees an increase in the size of the awards. While 2008 was challenging for the firms — Morgan Stanley’s client assets in fee-based accounts dropped 25 percent in the fourth quarter, and a round of lay-offs is expected — 2009 is expected to be substantially weaker.
"I think I can hear you clapping from here in New York," Gorman joked during the call, after announcing that the payments would be linked to ’08 performance. "You should be clapping because frankly that is a very generous and thoughtful decision that we have made. We spent a lot of time kicking this around. We could easily have done it from the point of closing, which is obviously going to be somewhere in the latter half of this year or around the middle of the year. But we just decided… that it was right thing to do, to give you that certainty that it would be based off ’08. ’09 is a very difficult year… So that degree of anxiety, which many, many of you have emailed me about… is now off the table."
Gorman’s statement is captured on an audio tape. You can listen to the son of a bitch here.
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