8/14/2019 John Mack's Year-End Message for 2009
1/3
Morgan Stanley Memorandum
For Internal Use Only Not for RedistributionDate: December 18,
2009
To: All Employees
From: John Mack
Subject: An Important Year-End Message
As I look ahead to the end of my time as CEO of Morgan Stanley,
I wanted to share with
you some thoughts about where we are and where I believe we need
to head, both as aFirm and as an industry.
I am as excited as I've ever been about the future of this great
Firm and its critical role in
the market. The progress Morgan Stanley has made in the past
year is extraordinary.
Last October, many were doubting our very survival. Fourteen
months later, we have not
only come through the crisis, we have powerful momentum and
market leadership across
many of our businesses with a number-one position in global
M&A, the largest wealth
management network in the world and a resurgence in our sales
and trading business.
There is more to be done but I couldn't be more proud of how
this Firm responded to the
market turmoil of the past year.
I also believe the scrutiny facing our industry right now
ultimately can be a positive, if it
leads to constructive changes in how firms operate, promotes
greater discipline and
transparency, and spurs sound regulatory reform. But our
industry must first
acknowledge the extraordinary events of the past year and
recognize that some old ways
of doing business cannot continue.
There is no doubt in my mind that every firm in our industry
benefited from the actions
governments took last fall to stabilize the markets. Yes, Morgan
Stanley has repaid
TARP and provided taxpayers with a solid return, but our Firm
and our industry cannot
afford to ignore the lessons from last falls market crisis.
I have talked before about the need for a more robust regulatory
framework and the
benefits of stronger Fed oversight. We still need a risk
regulator with the tools and
authority to ensure risk-taking never again jeopardizes the
entire financial system.
Regulators and investors also need a clearer picture of the
risks posed by complex
financial instruments and contracts. So, derivatives should be
centrally cleared or
reported to a central repository. And no firm should be
considered too big to fail. If a
8/14/2019 John Mack's Year-End Message for 2009
2/3
firm mismanages its risks, regulators need the authority to
unwind it in a way that
minimizes instability to the system.
Regulatory reform is critical, but firms dont need to wait for
the government to enact
change. At Morgan Stanley, we have made many changes to how we
operate, including
how we pay our people. We were the first U.S. firm to implement
a clawback provisionfor compensation, and we created a plan last
year to more closely align senior executive
compensation with long-term performance.
We operate in a competitive market for talent with intense
competition from other
global banks, as well as hedge funds, private equity firms, and
boutique advisory and
investment firms and our pay practices must reflect that. But at
Morgan Stanley, we
recognize the environment in which we are operating and the
economic challenges facing
so many countries.
Given this unprecedented environment and the extraordinary
financial support
governments provided to our industry, as the leader of this Firm
I recommended to theCompensation Committee of the Board last week
that I receive no year-end bonus.
We also are continuing to make changes this year in how we pay
our people. For
instance, we are factoring risk measures into compensation
decisions for sales and trading
teams, consistent with the recent Federal Reserve and G-20
guidelines. We are
increasing the deferral rates for all employees to further align
compensation with the
long-term success of the Firm and strengthening and clarifying
provisions for the
clawback. And we are paying our most senior executives in
performance units that will
make a portion of their year-end compensation directly
contingent on Firm performance
over the next three years.
Morgan Stanley has a responsibility as a leading global bank to
play a constructive role in
shaping the changes underway in our industry and the regulatory
framework that governs
it. We must work as partners with regulators, legislators and
others throughout the
industry to forge practical and workable solutions to the
challenges we face. Morgan
Stanley has long played such a role in the markets, and I am
confident it will continue to
do so in the months and years ahead as we look to help drive
economic growth and
sound regulatory reform.
I joined Morgan Stanley some 37 years ago, and I believe we have
never been better
positioned than we are today. And in James Gorman, we have a
proven leader who is
ideally suited to take this Firm forward; James has shown
repeatedly the ability to build
great teams and profitable, winning businesses. He understands
our clients and our
culture. He knows Morgan Stanley's business and the power of our
franchise. James has
been a key architect of our strategy over the past few years and
I have no doubt that he
will be executing it relentlessly with the support of a strong
senior management team
and all of you, the heart and soul of Morgan Stanley.
