NEW YORK -- Morgan Stanley's management got a vote of confidence yesterday, as shareholders of the world's second-largest securities firm approved a new employee stock incentive plan designed to help the company compete for talent with its Wall Street rivals.
The plan was approved by 59 percent of the shareholders voting at the firm's annual meeting in Purchase, N.Y., according to a preliminary report of the auditor for elections. The 2007 Equity Incentive Compensation Plan replaces one that expired last year and will be valid for five years.
Shareholders including the California Public Employees' Retirement System and advocacy groups such as Rockville, Md.-based Institutional Shareholder Services opposed the plan, saying it costs too much money and results in an unfair transfer of shareholder value to executives.
"To successfully manage this firm, as the turnaround is successfully implemented, the management needs to pay the going rate," said Oleg Litvinenko, a research associate at Cabot Money Management, a shareholder that backed the proposal.
John J. Mack, Morgan Stanley's chairman and chief executive officer, was granted about $40 million in stock and options for 2006, the most ever awarded to a Morgan Stanley CEO. Goldman Sachs Group Inc. CEO Lloyd Blankfein was paid about half of his $53.4 million annual bonus in stock and options, with the rest granted in cash.
Asked by a shareholder yesterday why the firm hasn't increased its quarterly dividend since 2005, Mack said he preferred share repurchases.
"Given that there's a new management team in place, until we got more comfortable with our challenges, our new businesses, we prefer to return money to shareholders through stock buybacks," he said.
Mack said Morgan Stanley has designated $4 billion to $8 billion for stock repurchases. The exact amount of spending on buying shares would depend on what opportunities the firm sees in making new investments, Mack said.
"We'll be more aggressive buying back shares if we're not making too many new investments," he said.
A majority of shareholders, 58 percent, voted for a proposal to require only a simple majority vote for changing the company's bylaws. Because 80 percent was required to make that change, the proposal was defeated for the second year.
Morgan Stanley management opposed that change, saying almost all other decisions are now taken by simple majority vote and that amending bylaws should remain at a "super majority" standard.
Thirty-seven percent of shareholders voted in favor of a proposal by the American Federation of State, County and Municipal Employees Pension Plan to give shareholders an advisory vote on executive compensation levels.
"U.S. executives make twice as much as their European counterparts," said John Keene, representing the federation at the meeting. "Morgan Stanley, don't be afraid to listen to your shareholders."
Management opposed the measure, arguing that shareholders can voice their concerns and views through direct contact with the board.
Morgan Stanley's shares fell 2 cents to close at $80.28 yesterday on the New York Stock Exchange.