Despite poor results, Morgan Stanley won’t scrimp on pay

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Last week, Goldman Sachs Group recorded spectacular quarterly earnings and set aside a huge sum for employee bonuses.

Today, Morgan Stanley showed that a poorly performing Wall Street firm also will dish out the largesse.

In disappointing earnings released this morning, Morgan technically reported a small second-quarter profit of $149 million. But the big investment bank suffered a larger-than-expected per-share loss, due partly to its repayment of government bailout money.

Morgan’s loss from continuing operations of $1.37 a share was more than double the 54 cents that analysts expected. The firm’s performance has sputtered as the bank has reduced its risk-taking following the financial crisis.

The shoddy results stood in contrast to the blowout profits reported by Goldman and JPMorgan Chase & Co. last week.

But like its crosstown New York rivals, Morgan still has plans to shell out sizable compensation to employees.

Morgan, led by CEO John Mack, earmarked almost $3.9 billion -- or a whopping 72% of its $5.4 billion quarterly revenue -- for pay and benefits. Normally, Wall Street firms set aside about half of their revenue to pay employees. Goldman allocated 48% in the second-quarter.

With a larger workforce and less revenue, Morgan’s employees will take home far smaller average paychecks than will those at Goldman.

But Morgan’s willingness to go to such lengths to prop up pay suggests that Wall Street’s famously generous bonuses will remain at rarefied levels -- despite the public outrage over banking companies’ compensation practices in the wake of the financial-system meltdown.

‘It was a very good quarter to be a Morgan Stanley employee,’ analyst Brad Hintz at Sanford C. Bernstein told Bloomberg News. ‘I’m not so sure it was so good to be a Morgan Stanley shareholder.’

Morgan’s shares fell as low as $25.88 early today but were flat for the session, at $27.57, just before 10:30 a.m. PDT. They’re up 73% year to date.

-- Walter Hamilton