Institutional Shareholder Services (ISS) has recommended that Morgan Stanley investors reject the bank’s proposal to expand its equity incentive compensation plan. The proxy advisory firm’s stance marks an escalation in its pushback against Wall Street compensation practices.
Morgan Stanley had proposed adding 50 million common shares to its equity incentive program and extending the plan for another three years. The bank argued that the proposed equity incentives would align the interests of employees and shareholders while helping to discourage risky behavior.
However, ISS criticized Morgan Stanley for granting too many shares on average over the past three years and pointed out incomplete disclosures related to the plan. The equity incentive plan is a standard practice at major financial institutions, particularly for senior-level employees, and often represents a significant portion of their total compensation.
ISS’s Increased Pushback Against Wall Street Compensation Plans
This proposal comes amid a broader trend of ISS challenging management compensation proposals this proxy season. Earlier this year, the proxy adviser opposed retention bonuses for Goldman Sachs’ top two executives and raised concerns about BlackRock’s executive compensation plans.
Despite its opposition to Morgan Stanley’s equity incentive proposal, ISS has recommended approving executive pay packages for the investment bank’s leadership. Morgan Stanley has not commented on the matter.
Proxy Advisers Under Scrutiny
ISS, along with Glass Lewis, has faced increasing scrutiny over its influence on shareholder votes. On Tuesday, a U.S. Congressional subcommittee held a hearing titled “Exposing the Proxy Advisory Cartel,” where Rep. Ann Wagner, a Missouri Republican, accused proxy firms of “routinely dictating” how shareholders vote on major proposals.
In related news, Lazard disclosed on Wednesday that it had requested ISS to conduct a thorough review of its report, which had recommended voting against the bank’s executive compensation plan.
