Morgan Stanley has installed a lucrative new incentive compensation scheme to attract and retain top traders and bankers. Morgan Stanley...

Morgan Stanley has installed a lucrative new incentive compensation scheme to attract and retain top traders and bankers. Morgan Stanley chief executive John Mack has implemented the scheme to address concerns that the US bank’s compensation plans were falling behind those offered by rivals and leave top employees too exposed to its stock price. Under the new incentive structure, reported by Bloomberg, employees who earn at least $500,000 will be able to invest part of their annual bonus in Morgan Stanley funds of hedge funds and private equity funds. The bank will additionally lend qualified employees $2 for every $1 invested in the funds. The loans are forgivable if the investments decline to the point where employees would have no equity remaining after paying the money back. Employees can use this year’s bonuses in the scheme but there can be no withdrawals for three years. Previously employees had to hold the bank’s shares for five years.