(Image Source: The New York Times)


BY ADNAN S. KHAN


The New York Times calls it a ‘day of reckoning.’ Morgan Stanley made a stunning announcement that it is capping all bankers’ and traders’ cash bonuses for 2011 at $125,000 and cutting pay by around 20 to 30 percent. Even the bigwigs at the top are taking massive cuts.

The Wall Street Journal reports Morgan Stanley CEO James Gorman took a 25 percent pay cut compared to 2010.  He did receive $5 million in restricted stock -- though that’s a 32 percent drop from 2010, and he got no stock options for 2011.
 

In all, Gorman will receive around $11 million less than last year. So why are the top dogs at Morgan Stanley tightening their belts? The Wall Street Journal reports it’s mostly due to poor performance throughout Wall Street.
 

“Across Wall Street, total compensation is expected to be the lowest since the 2008 financial crisis, thanks to declining revenue and uncertainty over the economic, financial-market and regulatory environments. The pullback comes at a time when public sentiment against large pay packages is mounting amid protests such as the Occupy Wall Street encampment in New York.”
 

Morgan Stanley actually posted the only trading revenue increase among major U.S. banks in 2011, but it still fell short of meeting the goals Gorman set. Bloomberg reports…
 

“Profit fell 13 percent last year to $4.11 billion as the firm had a 4 percent return on equity, below Gorman’s goal of ‘mid-teens.’”


And in an article titled, ‘The Dawn of Lower Pay on Wall St.’ The New York Times asks -- will this newfound pay system stick?


“A culture in which self-worth is measured by pay isn’t going to change overnight, or even in a few years. But virtually everyone I spoke to agreed that Wall Street pay, while still lofty, will be lower for the foreseeable future, and may never return to the heady days of 2007.”