Morgan Stanley Chairman John Mack and CEO James Gorman sought to defeat a shareholder lawsuit filed by two pension funds over allegedly “unconscionable” compensation the company paid to employees.
A lawyer for Messrs. Mack and Gorman and other Morgan Stanley executives named in the lawsuit asked New York State Supreme Court Justice Shirley Werner Kornreich to dismiss the complaint at a court hearing Thursday in Manhattan. Morgan Stanley directors also sought to throw out the lawsuit.
“In times of crisis, you want the most talented people to stay. You pay them to stay,” said Evan Chesler, who represents Messrs. Mack and Gorman and the executives. The court, he added, can’t second-guess company decisions over pay for its 60,000 employees.
A group of Morgan Stanley shareholders sued Morgan Stanley executives and directors earlier this year over $45 billion in employee compensation in 2006, 2007 and 2009. In the complaint, it calls the pay “unconscionable” and “staggering” given the company’s performance, including relying on government bailout money in 2009.
Jay Eisenhofer, an attorney for the shareholders, told Ms. Kornreich at the hearing that there was “no relationship” between pay and profitability at Morgan Stanley. “This was done without regard to profitability of the company,” he said.
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.
The complaint alleges shareholders suffered harm from the conduct of the executives and directors. The stockholders “seek to recover billions in compensation,” according to the lawsuit. In an interview after the hearing, Mr. Eisenhofer declined to specify the amount.