PURCHASE, N.Y. (AP) -- Morgan Stanley's John Mack was in an enviable position -- a financial company CEO chairing a peaceful annual meeting.
The investment bank's meeting was a far cry from the contentious affair being held the same day in Charlotte, N.C. by Bank of America Corp. At Morgan Stanley's subdued gathering north of New York City, which ended with applause, shareholders re-elected the company's entire board of directors, including Mack, who is also chairman.
Morgan Stanley's shareholders also followed the company's recommendation in voting down proposals to split the roles of chairman and chief executive and to allow stockholders to call special meetings. Amid the ongoing crisis across the banking industry, some companies over the past year have opted to separate their top jobs and have two executives fill them.
Morgan Stanley's meeting was almost certain to unfold with fewer bumps than Bank of America's. The Morgan Stanley gathering carried only two shareholder proposals compared with 11 at Bank of America. And ballots at BofA's meeting took so long to count the company couldn't immediately announce the results of a proposal to strip Chief Executive Ken Lewis of his chairman's title.
Morgan Stanley last week reported a wider-than-expected loss of $578 million for the first quarter. Like many other banks, it has struggled with mounting losses on investments and mortgages.
Mack told reporters the company is not looking to make any major acquisitions. He said the Morgan Stanley is instead focused on implementing a venture with Citigroup Inc. in which Morgan Stanley will control a 51-percent stake in the brokerage Smith Barney. The company hopes to complete the transaction by the third quarter, which starts in July.
"Our hands are full with Smith Barney," Mack said. "That's our No. 1 focus."
The bank this month slashed its dividend 81 percent to 5 cents from 27 cents. A shareholder asked company officials how Morgan Stanley could reduce the payout to such a degree and still pay bonuses. The company paid an average of $143,000 per employee in bonuses last year.
Mack, who hasn't taken a bonus for two years, said the decision wasn't easy but he also said it was necessary for the company to preserve cash and retain employees. He said the board discussed the dividend cut for six months.
Morgan Stanley cut costs by 33 percent in the first quarter from a year earlier.
"We also thought long and hard about shareholders and what was the right thing to do," he said. "This decision was taken over a long period of time. It was not something that was easy or simple."
Mack said recruiting new employees for the bank, which has taken $10 billion in U.S. government loans, has become more difficult in part because of limits on pay. "Recruiting has slowed down dramatically," Mack said.
He said the company had lost some workers to competitors like hedge funds that aren't operating with the restrictions that come with government money. Mack said about 1,200 workers from Smith Barney have left.
Morgan Stanley is one of hundreds of banks that received loans from the government last fall as part of its $700 billion financial rescue plan. Along with those loans, banks have been forced to place limits on how much they can pay top employees.
Mack contends that Wall Street firms should avoid rewarding employees who make big gambles that look good at the end of a quarter but that might unravel soon after. "Across the United States, I think compensation is going to change. It has to be more long-term focused," Mack added.
Shares of Morgan Stanley rose $1.99, or 9.4 percent, to $23.07.
by the associated press
The investment bank's meeting was a far cry from the contentious affair being held the same day in Charlotte, N.C. by Bank of America Corp. At Morgan Stanley's subdued gathering north of New York City, which ended with applause, shareholders re-elected the company's entire board of directors, including Mack, who is also chairman.
Morgan Stanley's shareholders also followed the company's recommendation in voting down proposals to split the roles of chairman and chief executive and to allow stockholders to call special meetings. Amid the ongoing crisis across the banking industry, some companies over the past year have opted to separate their top jobs and have two executives fill them.
Morgan Stanley's meeting was almost certain to unfold with fewer bumps than Bank of America's. The Morgan Stanley gathering carried only two shareholder proposals compared with 11 at Bank of America. And ballots at BofA's meeting took so long to count the company couldn't immediately announce the results of a proposal to strip Chief Executive Ken Lewis of his chairman's title.
Morgan Stanley last week reported a wider-than-expected loss of $578 million for the first quarter. Like many other banks, it has struggled with mounting losses on investments and mortgages.
Mack told reporters the company is not looking to make any major acquisitions. He said the Morgan Stanley is instead focused on implementing a venture with Citigroup Inc. in which Morgan Stanley will control a 51-percent stake in the brokerage Smith Barney. The company hopes to complete the transaction by the third quarter, which starts in July.
"Our hands are full with Smith Barney," Mack said. "That's our No. 1 focus."
The bank this month slashed its dividend 81 percent to 5 cents from 27 cents. A shareholder asked company officials how Morgan Stanley could reduce the payout to such a degree and still pay bonuses. The company paid an average of $143,000 per employee in bonuses last year.
Mack, who hasn't taken a bonus for two years, said the decision wasn't easy but he also said it was necessary for the company to preserve cash and retain employees. He said the board discussed the dividend cut for six months.
Morgan Stanley cut costs by 33 percent in the first quarter from a year earlier.
"We also thought long and hard about shareholders and what was the right thing to do," he said. "This decision was taken over a long period of time. It was not something that was easy or simple."
Mack said recruiting new employees for the bank, which has taken $10 billion in U.S. government loans, has become more difficult in part because of limits on pay. "Recruiting has slowed down dramatically," Mack said.
He said the company had lost some workers to competitors like hedge funds that aren't operating with the restrictions that come with government money. Mack said about 1,200 workers from Smith Barney have left.
Morgan Stanley is one of hundreds of banks that received loans from the government last fall as part of its $700 billion financial rescue plan. Along with those loans, banks have been forced to place limits on how much they can pay top employees.
Mack contends that Wall Street firms should avoid rewarding employees who make big gambles that look good at the end of a quarter but that might unravel soon after. "Across the United States, I think compensation is going to change. It has to be more long-term focused," Mack added.
Shares of Morgan Stanley rose $1.99, or 9.4 percent, to $23.07.
by the associated press
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