Recruiting in China

MORGAN Stanley has given Chief Executive Officer John Mack the biggest bonus for the head of a Wall Street firm, awarding him US$40 million as the company headed for the best profit in its 71-year history.

Mack, 62, was granted shares valued at US$36.2 million, and about US$4 million in options to buy Morgan Stanley shares, Bloomberg News reported yesterday.

Seven other top executives in the company were given bonuses of more than US$57 million.

The payout for Mack, 44 percent more than Morgan Stanley awarded him last year, eclipses the US$38.3 million given in 2005 to Henry Paulson, CEO of Goldman Sachs Group Inc.

Shares in Morgan Stanley, the second-biggest United States securities firm by market value, are recording their best year for investors since 2003 after Mack put the firm on course for record earnings.

"You expect performance to be reflected in the compensation," said Laura Thatcher, an Atlanta-based partner in charge of the executive-compensation practice at law firm Alston & Bird.

"You're talking about staggeringly big companies with huge market caps and huge performance."

Shares of Morgan Stanley have gained 40 percent this year and closed yesterday at US$79.60, giving the company a market value of US$84.2 billion.

The firm may report next week that full-year profit rose 41 percent to US$6.98 billion, the average estimate in a Bloomberg survey of 10 analysts.

Mack, who's also chairman, received his entire bonus in stock and options, Morgan Stanley said. Last year, he declined a US$28 million bonus because he had worked at Morgan Stanley for only five months.

He accepted a pro-rata payout of US$11.5 million in stock and also received a US$337,534 salary.

Lehman Brothers, the fourth-biggest US securities firm, earlier this week said Chief Executive Richard Fuld received US$10.9 million in stock for 2006, down from US$14.9 million last year.

Mack, who left Morgan Stanley in 2001 when he was president, returned in June 2005 as the board's choice to revive a firm bruised by a battle with dissident shareholders.

Some of Morgan Stanley's top executives, including President Stephan Newhouse and Vikram Pandit, abandoned then-CEO Philip Purcell during the dispute and dozens of other bankers and traders quit.

Since Mack joined, Morgan Stanley has fired more than 1,000 underperforming brokers, made acquisitions to bolster the firm's energy, fixed-income and hedge fund businesses and created new incentives to keep top employees.