Morgan Stanley Drops Pay
Consultant Amid Concern Of Conflict
DOW JONES NEWSWIRES
February 26, 2007 7:32 a.m.
By Kaja Whitehouse and Jed Horowitz
Of DOW JONES NEWSWIRES
(This article was originally published Friday)
NEW YORK (Dow Jones)--Morgan Stanley (MS) has replaced
Hewitt Associates Inc. (HEW) as its executive compensation consultant
amid pressure from shareholders concerned that overlapping consulting
ties could create conflicts of interest.
Morgan Stanley was among a group of more than 25
companies targeted by shareholders in recent months over concerns that a
consultant that advises a company's board on how to pay executives can
turn around and try to win management's approval for other consulting
work. This, shareholders say, could reduce the consultant's incentive to
provide objective advice on how these same executives are paid.
The board's compensation committee has yet to retain a
new pay consultant, the investment company said in a proxy statement
released Friday. But the committee has "decided to retain a new
independent compensation consultant that does not currently provide any
compensation consulting services to the company," starting in fiscal
2007.
The New York firm also instituted a policy that
requires the board's compensation committee to approve any consulting
work its compensation consultant might do for the company's management
if the fees exceed $25,000.
Morgan Stanley officials declined to comment beyond
what was in the proxy, a spokeswoman said. Hewitt officials didn't
immediately return a request for comment.
In October, a group of 13 institutional investors sent
a joint letter to the 25 largest Standard & Poor's 500 companies,
including Morgan Stanley, asking these companies to disclose their
business ties with consultants that also advise boards of directors on
pay.
Already, a number of firms, Exxon Mobil Corp. (XOM) and
General Electric Co. (GE), agreed to start shedding light on these
relationships in their coming proxy statements. Pfizer Inc. (PFE)
started doing this last year.
Last November, Morgan Stanley's Chief Administrative
Officer Thomas R. Nides responded to the main shareholder behind this
effort, the state of Connecticut, saying the compensation committee
would address shareholders' concerns. Connecticut Treasurer Denise L.
Nappier, who heads the state's $23 billion retirement fund, wasn't
immediately available for comment.
-By Kaja Whitehouse, Dow Jones Newswire; 201-938-2243;
kaja.whitehouse@dowjones.com
-By Jed Horowitz, Dow Jones Newswires; 201-938-4047;
jed.horowitz@dowjones.com
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