Morgan Stanley Execs Fight for Dismissal of Shareholder Suit Over Pay

Morgan Stanley lawyers have argued that shareholders had not shown legal standing to seek damages at trial and are seeking to dismiss their lawsuit, partly on grounds that the allegations were too vague.

(September 17, 2010) — Morgan Stanley Chairman John Mack and CEO James Gorman have sought to defeat a shareholder lawsuit filed by two pension over “unconscionable” compensation the company paid to employees.

The case highlights anger and dissatisfaction among shareholders who seek to recover billions in compensation, alleging that they suffered harm from the conduct of executives and directors during the financial crisis.

“The problem of the conduct is that it puts the interests of employees, senior executives of Morgan Stanley, before the interests of Morgan Stanley investors,” Jay Eisenhofer, a lawyer for the Security Police and Fire Professionals of America Retirement Fund, argued in court, Reuters reported. He added that there was “no relationship” between pay and profitability at Morgan Stanley, and that compensation was awarded without regard to profitability at the company.

Among the shareholders that filed the lawsuit are the $814.5 million Central Laborers’ Pension Fund, Jacksonville, Ill., and the $5.8 million Security Police and Fire Professionals of America Retirement Fund, Roseville, Mich. According to the lawsuit, the company’s board “abdicated their responsibility” to manage compensation plans in the interests of the company and shareholders. While shareholder value dropped to less than $30 per share from a high of $90 per share, Morgan Stanley reportedly paid a total of $45 billion in compensation for 2006, 2007 and 2009.

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In addition to Morgan Stanley, Goldman Sachs Group Inc, which paid out $16.2 billion in compensation in 2009, has also been the target of lawsuits over its pay practices.

The Morgan Stanley case is Security Police and Fire Professionals of America Retirement Fund v John Mack, James Gorman et al, New York State Supreme Court, New York County.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

New York-based Columbia's endowment rose 17% in the past year, outperforming major stock-market indexes as well as some other elite universities in the most recent fiscal year.

(September 17, 2010) — Columbia University’s investments has increased 17% as of June 30, surpassing recent gains made by Harvard University as well as the returns of a broad range of institutions for the second consecutive year.

New York-based Columbia’s endowment, valued at about $6.5 billion after gifts and spending, rose an average of 7.9% annually in the past five years, compared with a 4.7% gain at Harvard and a 3.1% increase for institutions tracked by Wilshire Associates. While Columbia does not disclose how it allocates its money among various asset classes, the university reported that its endowment gains generate approximately 13% of the university’s budget.

“Over the past five years Columbia’s investment return had been among the top quartile in its peer group,” the university wrote in a statement. University President Lee Bollinger credited the school’s financial success to a dedicated committee, crediting Vice President for Investments Nirmal Narvekar and Senior Executive Vice President Robert Kasdin. “The committee is made up of extraordinary investors,” Bollinger said.

The good news for Columbia comes as schools are just beginning to release their investment performances, with closely watched Yale and Princeton yet to release their figures. Last week, Harvard University’s endowment reported an 11% increase in return. And Investure, which manages $6.5 billion for six schools and four foundations — including Barnard, Smith, Middlebury, Trinity, Dickinson and the University of Tulsa — posted returns of 15.2 to 17.7%.

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The recent gains posted by Columbia and Harvard reflect a turnaround from their respective losses of 16% and 27% the prior year, when universities around the country were hit by the worst financial crisis since the Great Depression. In January of this year, a study by the National Association College and University Business Officers (NACUBO) and the Commonfund Institute that showed the average university endowment loss was 19% in fiscal 2009, with findings based on responses from more than 500 colleges and universities, their supporting foundations, and community colleges.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742