Morgan Stanley named Ted Pick as its next CEO on Wednesday, ending a years-long, three-way race to succeed James Gorman atop the bank.

But, in an effort to retain Andy Saperstein and Dan Simkowitz, the other two executives in the running, the bank Wednesday gave expanded roles to each. And $20 million bonuses.

Pick, head of Morgan Stanley’s institutional securities group — which encompasses investment banking, equities, fixed income, capital markets and research — will take over as CEO on Jan. 1, at which point Gorman will become the bank’s executive chair for an unspecified time.

Saperstein, who leads Morgan Stanley’s wealth management business, will add investment management to his duties. Meanwhile, Simkowitz, who oversaw investment management, will take over Pick’s old role atop institutional securities. Saperstein and Simkowitz will serve as co-presidents of the bank.

“We had an embarrassment of riches. We had three incredibly talented executives,” Gorman told the Financial Times. 

“Everyone told me that would lead to some major tribal wars,” he told The New York Times. “That didn't happen.”

$20M bonuses

In what may be seen as a move to ensure that, Morgan Stanley gave Pick, Saperstein and Simkowitz each a $20 million, one-time equity award “designed to reinforce the executive’s accountability for the Company’s future financial goals … over a multi-year period in a balanced manner that does not encourage imprudent risk taking, while incentivizing leadership continuity,” the bank said in a filing with the Securities and Exchange Commission.

The $20 million figure is meant to represent the approximate average in annual variable compensation the three executives receive, the bank said. Pick made $22.5 million in variable pay in 2022; Saperstein, $19.5 million; Simkowitz, $17 million, according to Morgan Stanley’s proxy materials.

The awards are 60% performance-based stock units and 40% restricted stock units that convert to shares in 2027.

Pick’s rise

In Pick, Morgan Stanley chooses a 33-year veteran of the bank. He started in 1990 as an analyst, then rose equity capital markets to run that business in 2005. He moved to global equities trading in 2009 and ascended in 2015 to global head of sales and trading, where he reportedly cut fixed-income staff by 25%, yet still increased revenues.

Pick had reportedly long been seen as the front-running CEO candidate. That tracks for Morgan Stanley, which has historically prized its investment-banking business. However, during Gorman’s 14-year run as CEO, Morgan Stanley rebuilt itself on the back of a wealth management push punctuated by its 2020 acquisitions of E*Trade and Eaton Vance.

The refresh helped Morgan Stanley leapfrog archrival Goldman Sachs in market capitalization. Morgan Stanley now holds more than $6 trillion in assets under management — and Gorman teased in May that that total could reach $20 trillion under the next CEO. 

For his part, Pick told The Wall Street Journal the bank has “a leadership transition but not a change in strategy.”

That distinction could be crucial for investors, who have seen the bank’s stock tumble 17% so far this year, according to The New York Times.

“I think [Pick] has to communicate very early on that wealth management is still the driver of the long-term growth of the business,” Christian Bolu, a banking analyst at Autonomous Research, told the Financial Times. “The downside [of his ascent] is a perceived de-emphasis of wealth management within the company.”

‘Exceptional operator’

Since its 2020 acquisitions, Morgan Stanley has seen its share of bumps. The bank disclosed in May that it is in talks with the Justice Department and the SEC to resolve an investigation into its handling of block trades. Morgan Stanley also lost $911 million in the 2021 collapse of Archegos — the most of any U.S. bank.

Gorman expressed confidence Wednesday in the bank’s choice. 

"We picked [Pick] because he's had a long history of showing he's an exceptional operator,” Gorman told Reuters. “That’s part of the job of being a CEO, the other part is the resilience, the judgment, the ability to create a followership. He breeds incredible loyalty from his people.”

Gorman launched Morgan Stanley’s succession sweepstakes in 2021, with a raft of promotions that boosted the profile of the three finalists, as well as Jon Pruzan, the bank’s now-former chief operating officer who left in January to ultimately become president of the investment firm Pretium.

Gorman in May, put a timeline on his departure, saying he’d step down within 12 months.

The outgoing CEO described Pick on Wednesday as someone who “is battle-tested.”

“I have worked side by side with Ted since the financial crisis and have experienced first-hand his values, intellect, passion and commitment to our people and our clients,” Gorman told CNBC. “[He] understands complex risk and works very effectively not just in the U.S., but around the globe.”