Morgan Stanley Offers Incentives

Morgan Stanley, the world's biggest securities firm by market value, is offering its top-paid traders and bankers millions of dollars of incentives to avoid defections to rival banks and attract new hires.

Chief Executive Officer John Mack started a program last month that allows employees who earn at least $500,000 to invest part of their annual bonus in the firm's hedge funds and leveraged buyout funds, said four people familiar with the plan.

Morgan Stanley will lend $2 for every $1 contributed to the funds, the people said.

The incentives give Mr. Mack a lure to keep his biggest moneymakers from taking jobs at Goldman Sachs or Lehman Brothers, where they can make 10% to 20% more, said Jason Kennedy of Kennedy Associates. Morgan Stanley paid Co-president Zoe Cruz about $21 million in 2005, almost 50% less than her then-counterpart at Goldman, Lloyd Blankfein.