Morgan Stanley CEO John Mack Rejects Year-End Bonus
Mack is the first major bank CEO to reject his bonus this year.
Dec. 18, 2009 — -- One of Wall Street's most powerful CEOs is rejecting his year-end bonus for the third time in a row, according to an internal memo obtained by ABC News.
Outgoing Morgan Stanley CEO John Mack asked the bank's board to withhold his bonus, citing "the extraordinary financial support governments provided to our industry," he wrote in the memo sent today to all Morgan Stanley employees.
Morgan Stanley received $10 billion in funds from the government's Troubled Asset Relief Program last year. The bank repaid the government in June.
"Given this unprecedented environment and the extraordinary financial support governments provided to our industry, as the leader of this Firm I recommended to the Compensation Committee of the Board last week that I receive no year-end bonus," Mack wrote.
Fellow Wall Street titan Goldman Sachs said earlier this month that its top 30 managers would forgo cash bonuses and instead be awarded stock that can't be sold for five years.
But Mack is the first CEO of a major bank to refuse a bonus outright.
He also refused his bonus in 2007, when most bankers did not, and again in 2008, when he earned an $800,000 salary.
As the financial crisis churned through the banking system and the country in 2008, Mack's peers at Citigroup, Bank of America, JPMorgan and Goldman also rejected their bonuses.
Mack, a 30-year-plus veteran of Morgan Stanley, announced his resignation as CEO in September. He will remain chairman of the bank's board. Morgan Stanley Co-President James P. Gorman will succeed Mack as CEO in January.
Executive compensation continues to be flashpoint of controversy from Wall Street to Main Street to Washington, D.C..
In October, Obama administration pay czar Kenneth Feinberg slashed annual salaries for the top 25 executives at seven companies deemed to have received "exceptional assistance" from the government: AIG, Bank of America, Chrysler, Chrysler Financial, Citigroup, General Motors and GMAC. The cuts resulted in an average of 90 percent reduction from 2008 compensation levels.
Earlier this month, Feinberg announced cuts affecting 2009 compensation for the 26th to 100th highest-paid employees at AIG, Citigroup, General Motors and GMAC. Feinberg limited cash salaries at the firms to $500,000, except in "exceptional cases."
The pay cuts, however, will not take effect at Citigroup and Bank of America because both banks have since announced plans to pay back the billions they received from TARP.
'A Bunch of ... Fat-Cat Bankers'
The latest cuts were announced days before President Obama said in a television interview that "I did not run for office to be helping out a bunch of, you know, fat-cat bankers on Wall Street."
Obama told CBS's "60 Minutes" that bankers didn't understand why people are angry at banks.
"You guys are drawing down $10, $20 million bonuses after America went through the worst economic year that it's gone through in decades, and you guys caused the problem. And we've got ten percent unemployment. Why do you think people might be a little frustrated?" he said.
In a statement to ABC News, a senior Treasury Department official expressed approval for Mack's decision to forgo his bonus.
"We appreciate any commitment by industry leaders to far-reaching reform of our banking rules and the design of compensation. And we welcome concrete action that acknowledges the significant role that government and taxpayers played in stabilizing the markets and the banks," the official said.
With reports from ABC News' Matthew Jaffe.