Video: Bonus bonanza

updated 12/15/2006 6:28:05 PM ET 2006-12-15T23:28:05

Morgan Stanley Inc., the second-largest U.S. investment house, gave chief executive John Mack $40 million in stock and options for 2006, reflecting the largest bonus awarded to a Wall Street CEO.

Mack, 62, was awarded 461,821 stock units valued at $36.2 million on Tuesday, according to a filing with the Securities and Exchange Commission late Thursday. He also was awarded 178,945 options to buy Morgan Stanley shares, valued at about $4 million.

Morgan Stanley is expected to report its best year ever Tuesday, buoyed by a record run in the stock market and an unprecedented level of takeover activity. Goldman Sachs Group Inc., Bear Stearns Cos. and Lehman Brothers Holdings Inc. turned in record profit reports this week.

The record bonus comes 18 months since he rejoined Morgan Stanley after an internal struggle over the company's lackluster performance caused the ouster of CEO Philip Purcell. At the time, Mack pledged to investors that he would turn around the company's sagging stock price and bolster profits.

He appears to be holding up his end of the bargain. Since joining Morgan Stanley in June 2005, shares in the company have risen about 62 percent — with some 40 percent of that coming in 2006.

Analysts project the company will report earnings of $6.77 per share on $33.73 billion of revenue, according to Thomson Financial. Most on Wall Street expect Morgan Stanley will easily surpass these projections.

Mack's compensation eclipses the $38.3 million former Goldman Sachs CEO Henry Paulson received in 2005. Earlier this week, Lehman Brothers disclosed that CEO Richard Fuld received $10.9 million in stock for 2006.

Bear Stearns, Goldman Sachs and Merrill Lynch & Co. have yet to file regulatory reports detailing bonus packages for their top executives. However, on average, 2006 will go down as having some of the highest overall compensation numbers in Wall Street history.

Goldman Sachs said in its full-year earnings report that overall compensation this year was about $16.4 billion, or an average of about $622,000 per employee. Lehman said it would pay its employees an average of $335,441 this year — paying 25,936 workers a total of $7.7 billion in salary, bonuses and other benefits. At Bear Stearns, staff would receive an average of $321,740 in compensation.

Morgan Stanley also reported stock bonuses for seven of its other top executive officers, according to regulatory filings.

Among them were co-presidents Zoe Cruz, who received $17 million in stock and $1.92 million in options, and Robert Scully, awarded $11.4 million in stock and $1.28 million in options. Chief Financial Officer David Sidwell was paid $7.98 million in stock and $890,291 in options.

Shares of the company slipped 34 cents to close at $79.26.

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