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Morgan Stanley seeks to exclude the following shareholder proposal submitted on behalf of the Comptroller of the City of New York as custodian and a trustee of several pension funds from its upcoming proxy statement:

“RESOLVED, that shareholders of Morgan Stanley (the “Company”) urge the Compensation Committee (the “Committee”) of the board of directors to strengthen the Company’s compensation clawback policy, as applied to senior executives, by:

  •  Providing that failure to appropriately manage or monitor an employee who engaged in “conduct detrimental to the Company” (as determined by the Committee) or conduct constituting “cause” for termination will support recovery of compensation; and
  •   Requiring disclosure in a filing on Form 8-K of any decision by the Committee or full board on whether or not to exercise the Company’s right to recover any particular award of compensation.

These amendments should operate prospectively and be implemented in a way that does not violate any contract, compensation plan, law or regulation.

“Recovery” of compensation includes cancellation, forfeiture and recapture.

“Conduct detrimental to the Company” includes causing a significant financial loss or other reputational harm to the Company or one of its businesses.”

Morgan Stanley seeks to exclude the proposal because:

  • the proponents have submitted more than one proposal;
  • the company has already substantially implemented the Proposal;
  • the proposal is impermissibly vague and indefinite so as to be misleading in violation of Rule 14a-9; and
  • the proposal deals with matters relating to the ordinary business operations of the Company.

The Company notes that although the proposal is in the form of a single submission, it consists of multiple parts. The proposal urges, first, that the Company’s clawback policy provide that certain failures of management or monitoring will support recovery of compensation and, second, that disclosure on Form 8-K be required for any decision by the Compensation, Management Development and Succession Committee or full board of directors on whether or not to exercise the Company’s right to recover any particular award of compensation.

The Company also argues it has established clawback provisions and procedures that permit recovery in these circumstances.  Therefore the proposal has already been implemented.

Finally the Company believes the proposal is vague and indefinite.   It is unclear from the proposal whether the proponents are requesting that the Company “strengthen” its current clawback policy by (i) modifying its current policies to include a supervisory element or (ii) creating a new clawback policy separate and distinct from the clawback policies of the Company that are currently in place.

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