When moolah isn’t enough: Big Mack’s Employees Incentives

They invented the Spanish Inquisition to protect the faithful from impure influences. Leave it to Morgan Stanley to come up with a better way – a gilded slammer. Yes, the world's biggest securities firm is offering its top-paid traders and bankers millions of dollars worth of incentives to avoid defections to rival banks.

CEO John Mack started a program last month that allows employees who earn at least $500,000 to invest part of their annual bonus in the firm's hedge funds and leveraged buyout funds, said four people familiar with the plan. New York-based Morgan Stanley will lend $2 for every $1 they contribute to the funds, the people said. Anyone who leaves before three years forfeits the investments and any gains.

The incentives give Mack a lure to keep his biggest moneymakers from taking jobs at Goldman Sachs Group Inc. or Lehman Brothers Holdings Inc., where they can make 10 percent to 20 percent more, said Jason Kennedy, who runs London-based recruitment firm Kennedy Associates. Morgan Stanley paid Co- President Zoe Cruz about $21 million in 2005, almost 50 percent less than her then-counterpart at Goldman, Lloyd Blankfein.

``Morgan Stanley isn't very competitive in terms of compensation versus the market,'' Kennedy said. ``They're doing this to lock in their staff.'' Not shit, Sherlock.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ay5Xk84nZCoY&refer=home”>Morgan Stanley Offers Employee Incentives[Bloomberg]