Reuters: Money: Morgan Stanley directors win pay lawsuit dismissal

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Morgan Stanley directors win pay lawsuit dismissal Mar 22nd 2012, 18:36 Tweet Share this Email Print Related News SEC, Citigroup may win appeal in fraud case Thu, Mar 15 2012 Insight: Behind the healthcare-law case: The challengers' tale Tue, Mar 13 2012 Shareholders to sue Tepco executives for $67 billion Mon, Mar 5 2012 Morgan Stanley banker charged with hate crime Fri, Mar 2 2012 Olympus risks foreign backlash with new board line-up Mon, Feb 27 2012 Analysis & Opinion In powerful Citi ruling, 2nd Circuit stresses deference to SEC Bank capital and short-term greediness People cross the street near the Morgan Stanley headquarters in New York June 11, 2010. Credit: Reuters/Lucas Jackson By Jonathan Stempel Thu Mar 22, 2012 2:36pm EDT (Reuters) - Twelve directors of Morgan Stanley have won dismissal of a shareholder lawsuit accusing them of letting the Wall Street bank overpay its employees even while accepting taxpayer-funded federal bailouts. Shareholders accused the outside directors of corporate waste and breaching their duties by setting aside 62 percent of net revenue, or $14.3 billion, for compensation in 2009. They said the amount was excessive given that Morgan Stanley had lost $907 million that year and had accepted the previous fall a $10 billion government bailout. That has since been repaid. Shareholders said incentive payments made in 2006 and 2007 should be clawed back because they were based on results goosed by excessive risk-taking and which the 2008 global financial crisis had shown to be ephemeral. A New York State appeals court panel in Manhattan said the shareholders should have demanded that the board make changes before suing. The panel said investors had not shown that the board had conflicts of interest that would have made such a demand futile. Shareholders did not show any "reason to doubt that the directors' compensation awards were the product of a valid exercise of business judgment," the five-justice panel said in an unsigned opinion. The lawsuit had been filed on behalf of the Security Police and Fire Professionals of America Retirement Fund of Roseville, Michigan, and other shareholders. It is one of many lawsuits challenging Wall Street pay practices. Thursday's decision upheld a December 2010 ruling by New York State Supreme Court Justice Shirley Kornreich. Other defendants included Morgan Stanley Chief Executive James Gorman and his predecessor, John Mack. Kornreich had not decided the merits of the claims against them. Jay Eisenhofer, a lawyer for the shareholders, and Morgan Stanley spokesman Mark Lake did not immediately respond to requests for comment. Morgan Stanley's ratio of compensation to net revenue fell to 51 percent in 2010 and 2011, a regulatory filing showed. The case is Security Police and Fire Professionals of America Retirement Fund et al v. Mack et al, New York State Supreme Court, Appellate Division, 1st Department, No. 7175A. (Reporting By Jonathan Stempel in New York) Related Quotes and News Company Price Related News Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/ Comments (0) Be the first to comment on reuters.com. Add yours using the box above.

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