At the risk of becoming That Guy Who Defends Horrible Things, I have to say that this story in today’s Wall Street Journal strikes me as deeply weird.
It’s about William Bryan Jennings, a Morgan Stanley banker who was arrested and charged with a hate crime last March for allegedly stabbing a Middle Eastern cab driver over a fare dispute on his way home from the bank’s holiday charity auction.
Jennings, who goes by Bryan, had all charges against him dropped earlier this year. Officially, and in the eyes of the law, he was completely innocent. But Morgan Stanley decided that wasn’t enough. The bank fired him anyway and is now trying to claw back more than $5 million in deferred bonus money that they agreed to pay him before the cab scandal occurred.
I have no doubt that Morgan Stanley was well within its legal rights to fire Jennings — he’s an at-will employee, like everyone else. But clawing back his bonus reeks of selective punishment.
Clawback provisions, also known as “compensation recovery policies,” are meant to be tools of financial recovery used in response to financial harm. Since 2002, when Sarbanes-Oxley was passed in the wake of the Enron and Worldcom scandals, clawbacks have been used to recover bonuses from employees who have made bad trades that lost billions of dollars, committed acts of fraud that hurt shareholders, and been found to have violated securities laws. They are not, and never have been, intended to allow firms to punish employees who merely embarrass their employers.
It’s hard to claim that William Bryan Jennings — whether or not he’s a jerk — did actual financial or legal harm to Morgan Stanley. His ill-fated cab ride wasn’t an abuse of firm money, it didn’t involve any kind of financial malfeasance, and he wasn’t convicted of breaking any laws.
So why is Morgan Stanley’s top brass going after his back pay?
Because Jennings created a PR crisis by getting his mugshot plastered in newspapers and on blogs for the better part of a week. And because, technically, they can. Here is the sort of weaselly explanation WSJ gives about the reasons for the clawback:
Officials at the firm believe it owes him nothing, citing “clawback” provisions that allow the company to withhold or seize pay from employees who hurt Morgan Stanley … Mr. Jennings’s firing was a reminder that embarrassing the company can cost employees as much as poor job performance. “How would my action appear as a headline in tomorrow’s newspaper?” is one of five questions Morgan Stanley employees are told in its code of conduct to “consider … before you act.”
You can see how singling Jennings’ cab ride out as an embarrassment that rises to the level of a clawback trigger could be problematic. Employees of financial firms, including Morgan Stanley, commit all kinds of actual, legal wrongdoings, many of which “hurt Morgan Stanley” but few of which result in clawbacks.
For example, Morgan Stanley hasn’t clawed back, to my knowledge, the pay of the senior banker whose conduct in the lead-up to the Facebook IPO resulted in a $5 million fine just this week. It hasn’t fired Glenn Hadden, the head of its global interest rates desk, who is being officially investigated for trade manipulation. And I highly doubt that the Morgan Stanley traders who made huge, disastrous bets in the subprime mortgage market in 2006 and 2007, creating billions of dollars in losses and requiring a massive federal bailout, were treated as harshly as Jennings.
Jennings — who is an innocent man in the law’s eyes — must sense the inconsistency, which is why he’s not taking this lying down:
Mr. Jennings could file an arbitration claim against the firm, but he hasn’t reached a decision and the two sides have held discussions about resolving the dispute in recent weeks, according to people involved in the talks.
I don’t think he “deserves” his bonus, in the sense that I don’t think any Wall Street banker truly deserves $5 million in deferred compensation.
But if Morgan Stanley is going to fire Jennings and go after his deferred compensation with a clawback, it should treat the real, financial wrongdoings by other employees just as harshly. Even if they don’t make the cover of the Post.
