The Morgan Stanley-Smith Barney brokerage venture yesterday unveiled a $2 billion to $3 billion bonus program that includes clawbacks and other provisions designed to keep the grumbling – both inside the firm and on Capitol Hill – to a minimum.
According to two people close to the firm, the bonuses will come from money earned by the companies, not funds that Morgan Stanley or Smith Barney parent Citigroup got from Uncle Sam as part of the Troubled Asset Relief Program.
As a result, the first part of the bonuses won’t be doled out until January 2010, as the two companies are expected to close their joint venture this summer.
The second part of the bonuses will be based on growth hurdles for all but the highest-producing brokers, and they will be paid out in 2012.
What’s more, the company can claw back money on a pro rata basis if brokers who were paid a bonus jump ship within nine years of receiving it.
In total, about 6,500 out of 20,000 brokers will qualify, according to a person close to the situation.
The plan is the culmination of feverish work over the past few weeks by the venture’s CEO, Jim Gorman, who was tasked with figuring out how to keep brokers at the new company without fanning the flames of public resentment over Wall Street bonuses.
Whether it will work is another matter, however.
Bonuses have become a hot-button topic for companies that have accepted government rescue money.
And rival Wells Fargo yesterday announced it won’t be doling out retention bonuses to its newly acquired Wachovia brokerage shop, which it will call Wells Fargo AdvisorsAt the same time, financial advisers from companies like Salomon Smith Barney have threatened to jump ship if they don’t get retention bonuses of the sort Merrill Lynch advisers got when it merged with Bank of America.
Some advisers are resentful of the bonus debate as their businesses remain profitable and didn’t contribute to Wall Street’s current woes.
