Morgan Stanley Board of Directors Corporate Governance
October 20, 1995
(As Amended January 30, 2015)
The Board of Directors (the
"Board") of Morgan Stanley ("Morgan Stanley" or "the
Company") has adopted these Corporate Governance Policies to promote the
effective functioning of the Board and its committees.
COMPOSITION AND LEADERSHIP STRUCTURE
- Board Membership Criteria.
The Board seeks members who combine a broad spectrum of experience and
expertise with a reputation for integrity. Directors should have
experience in positions with a high degree of responsibility, be leaders
in the companies or institutions with which they are affiliated and be
selected based upon contributions they can make to the Board and
management and their ability to represent the interests of shareholders.
The Board will also take into account diversity of a candidate's
perspectives, background and other demographics.
- Optimum Board Size
The Board believes its optimum size is 10 to 15 members.
- Director Independence
The Board will have a majority of independent directors. The Board's
Director Independence Standards are set forth in Appendix A.
- Board Leadership Structure
The Board regularly reviews its leadership structure. The Board believes
that the Company and its shareholders are best served by maintaining the
flexibility to have any director serve as Chairman of the Board
("Chairman") based on what it is in the best interests of the
Company at a given point in time, taking into consideration, among other
things, the composition of the Board, the role of the Company's
Independent Lead Director, the Company's corporate governance practices,
the Chief Executive Officer's ("CEO") working relationship with
the Board, and challenges specific to the Company.
- Independent Lead Director
The Board believes that it is in the best interest of the Company for the
independent directors to appoint an independent director to serve as the
Independent Lead Director. It is expected that the Independent Lead
Director will serve approximately 3-5 years in order to facilitate the
rotation of the Independent Lead Director position while maintaining
experienced leadership. In considering the appropriate tenure of an
Independent Lead Director, the Board should evaluate all facts and
circumstances and may extend such tenure in accordance with good
governance practices, including (without limitation) to accommodate the
transition of a new CEO or new directors or to provide continuity to
further strategic objectives or address external factors affecting the
The Independent Lead Director shall preside at all meetings of the Board
at which the Chairman is not present, and shall have the authority to
call, and lead, Non-Management Director Sessions and Independent Director
Sessions (each as defined herein). The Independent Lead Director shall
help facilitate communication among the Chairman, the CEO and the
non-employee and independent directors, including serving as liaison
between the Chairman and the Independent directors. The Independent Lead
Director shall advise the Chairman and the CEO (if such positions are held
by separate individuals) of the Board's informational needs, shall approve
the types and forms of information sent to the Board, shall approve Board
meeting agendas and the schedule of Board meetings to assure that there is
sufficient time for discussion of all agenda items and may request
inclusion of additional agenda items. The Independent Lead Director will
be available, if requested by major shareholders, for consultation and
direct communication in accordance with the Board Communication Policy set
- Selection of New Directors.
The Nominating and Governance Committee recommends director candidates
consistent with the Board membership criteria to the Board. The Chairman
or the Nominating and Governance Committee chair extends invitations to
join the Board to new directors.
- Majority Voting
The Company's Bylaws provide for a majority vote standard for the election
of directors in an uncontested election. The Board expects that an
incumbent director who fails to receive a majority of the votes cast in an
election that is not a Contested Election (as defined in the Company's
Bylaws) and who tenders his or her resignation pursuant to the Company's
Bylaws shall not participate in any proceedings by the Board or any
committee thereof regarding whether to accept or reject such director's
resignation, or whether to take other action with respect to such
AS A DIRECTOR
- Term Limits
The Board does not favor term limits for directors, but believes that it
is important to monitor individual director performance.
- Retirement Policy
The Board believes that a director candidate should not be nominated for
election if the candidate would be 72 at the time of election.
- Change in Director's Personal Circumstances
A director whose principal occupation or employer changes, who plans to
join the board of directors or similar governing body of another public or
private company or advisory board, or who experiences other changed
circumstances that could diminish his or her effectiveness as a Board
member or otherwise be detrimental to the Company, shall advise the
Chairman and the Corporate Secretary and offer to tender his or her
resignation to the Board. The Chairman should refer the matter to the
Nominating and Governance Committee for review with the Chairman's
recommendation. The Nominating and Governance Committee should evaluate
the facts and circumstances and recommend to the Board whether to seek and
accept the director's resignation.
- Board Resignation Policy for Directors
The Board expects the Chairman and the CEO to resign from the Board upon
retirement. There may be circumstances where the Board's policy to accept
the resignation would not apply, including to accommodate the transition
for a new Chairman or new CEO.
The Board expects that officers of the Company other than the Chairman and
the CEO who are also directors to resign immediately from the Board when
they retire or leave active Company employment and to consult the Board if
they change positions within the Company.
The Board expects that each director will provide notice of intent to
resign or resignation to the Chairman and the Corporate Secretary.
- Service on Other Boards
Directors shall not serve on the board of more than six public companies,
including the Company. A director who is invited to join the board of
directors or similar governing body of another public or private company
or an advisory board should consult with the Chairman and the Corporate
Secretary before accepting a seat on such board.
- Duties and Obligations of Directors
Directors are expected to exercise their business judgment to act in good
faith, on an informed basis and in what they reasonably believe to be the
best interests of the Company and its shareholders. The proceedings and
deliberations of the Board and its committees are confidential. The Board
expects directors will maintain the confidentiality of such proceedings
and deliberations and any information received in connection with service
as a director of the Company.
- Board Committees
The Board appoints the (i) Audit, (ii) Compensation, Management
Development and Succession, (iii) Nominating and Governance, (iv)
Operations and Technology and (v) Risk Committees. Each of these
committees shall have its own written charter setting forth, among other
things, its purpose and responsibilities. The Board also may establish and
maintain additional committees to facilitate discharging its
The Chairman should regularly consult with committee chairs to obtain
their insights and to optimize committee performance.
- Rotation of Committee Assignments
The Board generally favors the periodic rotation of committee assignments
and committee chair positions, but also recognizes that at times it may
not be in the best interest of the Company to change a committee
assignment or chair position, such as when a director has special
knowledge or experience. It is expected that committee chairs will serve
approximately 3-5 years on average in order to facilitate rotation of
committee chairs while preserving experienced leadership.
- Development of Agendas and Meeting Schedules
The Chairman, in consultation with directors, should establish the agendas
and schedules for Board meetings. The Independent Lead Director shall
approve Board meeting agendas and the schedule of Board meetings and may
request inclusion of additional agenda items.
The committee chairs, in consultation with the Chairman, should establish
the committee agendas and schedules for committee meetings. Each standing
committee should meet as provided for in its respective charter during the
year and, as necessary, receive reports from Company personnel on
developments affecting the committee's work. Committee meetings shall
include any participants the committee deems appropriate and shall be of
sufficient duration and scheduled at such times as the committee deems
appropriate to discharge properly its responsibilities.
- Distribution of Materials for Board and Committee
The Board believes it is critical for directors to have materials on
topics to be discussed sufficiently in advance of the meeting date and for
directors to be kept abreast of developments between Board and committee
meetings. The Company regularly informs directors of Company and
competitive developments and currently distributes, approximately a week
in advance, written materials for use at regularly scheduled Board and
- Attendance of Directors at Board and Committee Meetings
The Board expects directors will attend the meetings of the Board and the
committees on which they serve and to review in advance materials
distributed before the meeting.
- Attendance of Directors at the Annual Meeting of
The Board expects that directors will attend the annual meeting of
- Board Access to Non-Directors
Directors have complete and open access to senior members of management
and other employees of the Company.
The Board believes that attendance of key executive officers augments the
meeting process. The Company's Chief Risk Officer, Chief Financial Officer
and Chief Legal Officer regularly attend all scheduled Board meetings, at
the invitation of the Board, and respond to questions posed by directors
relating to their areas of expertise. The CEO also invites key employees
to attend Board sessions at which the CEO believes they can meaningfully
contribute to Board discussion. Such persons do not attend Executive
Sessions, Non-Management Director Sessions or Independent Director
Sessions (each as defined herein), either of the Board or any committee
thereof, unless requested.
The Board also believes that the heads of the Company's operating units
and other officers can assist the Board with its deliberations and provide
critical insights and analysis, including when the Board receives
presentations on the business plan for the upcoming year. Attendance of
such officers allows the most knowledgeable and accountable executives to
communicate directly with the Board. It also provides the Board direct
access to individuals critical to the Company's succession planning.
- Executive Sessions of Directors
"Executive Sessions" are sessions of the Board that only include
directors. "Non-Management Director Sessions" are sessions of
the Board that include only non-management directors. "Independent
Director Sessions" are sessions that include only independent
Non-management directors shall meet in Non-Management Director Sessions on
a regular basis and may meet in Executive Sessions at the discretion of
the non-management directors. If any non-management directors are not
independent, then the independent directors shall schedule an Independent
Director Session at least once per year. The Independent Lead Director has
the authority to call, and shall lead, Non-Management Director Sessions
and Independent Director Sessions.
- Director Access to Independent Advisors
The Board, the Independent Lead Director and its committees shall have the
right at any time to retain independent financial, legal or other advisors
and the Company shall provide appropriate funding.
- Board Compensation
The Nominating and Governance Committee recommends director compensation
and benefits to the Board. In discharging this duty, the Nominating and
Governance Committee shall be guided by three goals: compensation should
fairly pay directors for work required in a company of the Company's size
and scope; compensation should align directors' interests with the
long-term interests of shareholders; and the structure of the compensation
should be easy for shareholders to understand. The Board believes that
total compensation should include a significant equity component because
it believes that this more closely aligns the long-term interests of
directors with those of shareholders and provides a continuing incentive
for directors to foster the Company's success.
- Strategy and Business Plans
The Board oversees the Company's strategy and annual business plans and
regularly reviews with management the Company's financial performance,
strategy and business plans.
- Culture, Values and Conduct
The Board oversees the Company’s practices and procedures relating to
culture, values and conduct and receives reports on the Company’s culture,
values and conduct.
- Management Development and Succession Planning
The Compensation, Management Development and Succession Committee oversees
plans for management development and succession.
The Company's senior executives serving on the Operating Committee
complete a succession plan for their areas of responsibility that is
reviewed with the CEO. The CEO provides input on each succession plan and
discusses the plans with the Compensation, Management Development and
Succession Committee. The CEO reviews with the Compensation, Management
Development and Succession Committee succession planning for his successor
at least annually. The Compensation, Management Development and Succession
Committee periodically reviews with the Board succession plans for the CEO
and senior executives as determined by the Compensation, Management
Development and Succession Committee. Succession planning includes
policies and principles for CEO selection and performance review, as well
as policies regarding succession in the event of an emergency or the
retirement of the CEO.
- Formal Evaluations of the Chief Executive Officer
The Board establishes subjective and objective performance criteria at the
beginning of each year for use in formal evaluations of the CEO. The
Compensation, Management Development and Succession Committee conducts the
evaluation of the CEO in the context of its review of the Company's performance
in meeting its priorities for purposes of awarding compensation. The
Compensation, Management Development and Succession Committee chair
reports to the Board on the evaluation in a Non-Management Director
- Evaluation of Board, Independent Lead Director and
The Nominating and Governance Committee oversees and approves the process
and guidelines for the annual evaluation of the performance and
effectiveness of the Board, the Independent Lead Director and each of the
(i) Audit, (ii) Compensation, Management Development and Succession, (iii)
Nominating and Governance, (iv) Operations and Technology, and (v) Risk
Committees, including self-evaluations by each of these committees and the
Board. The evaluation process may include Board member interviews, written
guidelines or such other means as the Nominating and Governance Committee
determines appropriate and may encompass such factors as duties and
responsibilities, Board and committee structure, culture, process and
execution or such other factors as determined appropriate. The Nominating
and Governance Committee will ensure that results of such evaluations,
including any suggestions to enhance the performance and effectiveness of
the Independent Lead Director, the Board and its committees, are
communicated to and discussed with the full Board, the Independent Lead
Director and each committee, as appropriate.
- Director Orientation and Continuing Education for
The Company provides an orientation program for new directors, which
includes briefings by senior management on the Company's strategic plans,
its financial statements and its key policies and practices. The Company
will reimburse directors for reasonable costs incurred attending
educational sessions on subjects that would assist them in discharging
- Board Communication Policy
The Board believes that under ordinary circumstances, management speaks
for the Company and the Chairman speaks for the Board. Directors may, from
time to time, meet with or communicate with various constituencies that
are involved with the Company. It is expected that directors would do this
with the knowledge of management and, in most instances, at the request of
- Director Equity Ownership
Directors receiving compensation for Board service shall hold an equity
interest in the Company within sixty days after their election to the
Board. Unless they have waived compensation for Board service, when
non-management directors are first elected to the Board, and when they are
reelected, they receive an equity award of stock units, 50% payable in
shares of Morgan Stanley Common Stock after the director's retirement from
the Board, and 50% payable in shares of Morgan Stanley Common Stock on the
anniversary of grant. Non-management directors are also able to defer
Board compensation (including cash retainers) pursuant to a plan in which
they may elect to receive stock units. These opportunities and incentives
help align non-management directors' interests with shareholders'
- Consulting Agreements with Directors
The Board believes that the Company should not enter into paid consulting
arrangements with non-management directors.
- IPO Allocations
Directors and their immediate family members shall not be eligible to
receive allocations of initial public offerings underwritten by the
- Cumulative Voting
The Board strongly supports the "one share/one vote" concept and
opposes cumulative voting. It opposes the ability of a single investor or
group of investors to band together to achieve a goal, such as the
election of a director, which is not supported by a majority of the
- Repricing of Stock Options; "Reload" Options
The Board opposes repricing of incentive based options by a reduction in
the option's exercise price. The Board favors equitable adjustment of an
option's exercise price in connection with a reclassification of the
Company's stock; a change in the Company's capitalization; a stock split;
a restructuring, merger, or combination of the Company; or other similar
events in connection with which it is customary to adjust the exercise
price of an option and/or the number and kind of shares subject thereto.
The Board opposes the future grant of a stock option "reload"
feature pursuant to which, upon tendering of shares of common stock to pay
the exercise price of an underlying option, or having shares of common
stock withheld to pay taxes due upon the exercise of an option, the
optionee receives a new option to acquire the number of shares of common
stock tendered or withheld.
of "Independent" Directors.
The Board has established the
following guidelines to assist it in determining whether or not directors
qualify as "independent" pursuant to the guidelines and requirements
set forth in the New York Stock Exchange's Corporate Governance Rules. In each
case, the Board will broadly consider all relevant facts and circumstances and
shall apply the following standards (in accordance with the guidance, and
subject to the exceptions, provided by the New York Stock Exchange in its
Commentary to its Corporate Governance Rules):
- Employment and commercial relationships affecting
Current Relationships. A
director will not be independent if: (i) the director is a current partner or
current employee of Morgan Stanley's internal or external auditor; (ii) an
immediate family member of the director is a current partner of Morgan
Stanley's internal or external auditor; (iii) an immediate family member of the
director (a) is a current employee of Morgan Stanley's internal or external
auditor and (b) personally works on Morgan Stanley's audit; (iv) the director
is a current employee, or an immediate family member of the director is a
current executive officer, of an entity that has made payments to, or received
payments from, Morgan Stanley for property or services in an amount which, in
any of the last three fiscal years, exceeds the greater of $1 million or 2% of
such other company's consolidated gross revenues; or (v) the director's spouse,
parent, sibling or child is currently employed by Morgan Stanley.
Relationships within Preceding Three Years.
A director will not be independent if, within the preceding three years: (i)
the director is or was an employee of Morgan Stanley; (ii) an immediate family
member of the director is or was an executive officer of Morgan Stanley; (iii)
the director or an immediate family member of the director was a (a) partner or
employee of Morgan Stanley's internal or external auditor and (b) personally
worked on Morgan Stanley's audit within that time; (iv) the director or an
immediate family member of the director received more than $120,000 in direct
compensation in any twelve-month period from Morgan Stanley, other than (a)
director and committee fees and pension or other forms of deferred compensation
for prior service (provided such compensation is not contingent in any way on
continued service) and (b) compensation paid to an immediate family member of
the director who is an employee (other than an executive officer) of Morgan
Stanley; or (v) a present Morgan Stanley executive officer is or was on the
compensation committee of the board of directors of a company that concurrently
employed the Morgan Stanley director or an immediate family member of the
director as an executive officer.
- Relationships not deemed material for purposes of
In addition to the provisions of Section 1 above, each of which must be
fully satisfied with respect to each independent director, the Board must
affirmatively determine that the director has no material relationship
with Morgan Stanley. To assist the Board in this determination, it has
adopted the following categorical standards of relationships that are not
considered material for purposes of determining a director's independence.
Any determination of independence for a director that does not meet these
categorical standards will be based upon all relevant facts and
circumstances and the Board shall disclose the basis for such
determination in the Company's proxy statement.
A. Equity Ownership. A relationship arising solely from a
director's ownership of an equity or limited partnership interest in a
party that engages in a transaction with Morgan Stanley, so long as such
director's ownership interest does not exceed 5% of the total equity or
partnership interests in that other party.
B. Other Directorships. A relationship arising solely from a
director's position as (i) director or advisory director (or similar position)
of another company or for-profit corporation or organization or (ii)
director or trustee (or similar position) of a tax exempt organization.
C. Ordinary Course Business. A relationship arising solely from
transactions, including financial services transactions such as
underwriting, banking, lending or trading in securities, commodities or
derivatives, or from other transactions for products or services, between
Morgan Stanley and a company of which a director is an executive officer,
employee or owner of 5% or more of the equity of that company, if such
transactions are made in the ordinary course of business and on terms and
conditions and under circumstances (including, if applicable, credit or
underwriting standards) that are substantially similar to those prevailing
at the time for comparable transactions, products or services for or with
unaffiliated third parties.
D. Contributions. A relationship arising solely from a director's
status as an executive officer of a tax exempt organization, and the
contributions by Morgan Stanley (directly or through the Morgan Stanley
Foundation or any similar organization established by Morgan Stanley) to
the organization are less than the greater of $1,000,000 or 2% of the
organization's consolidated gross revenues during the organization's
preceding fiscal year (matching of employee charitable contributions are
not included in Morgan Stanley's contributions for this purpose).
E. Products and Services. A relationship arising solely from a
director utilizing products or services of Morgan Stanley in the ordinary
course of business and on substantially the same terms as those prevailing
at the time for comparable products or services provided to unaffiliated
F. Professional, Social and Religious Organizations and Educational
Institutions. A relationship arising solely from a director's
membership in the same professional, social, fraternal or religious
association or organization, or attendance at the same educational
institution, as an executive officer or director.
G. Family Members. Any relationship or transaction between an
immediate family member of a director and Morgan Stanley shall not be
deemed a material relationship or transaction that would cause the
director not to be independent if the standards in this Section 2 would
permit the relationship or transaction to occur between the director and