I'm sure Morgan Stanley is reconsidering the way it compensates executives, as described in today's Wall Street Journal, mostly because of the general outcry over executive pay. But I'd guess the recent Goldman Sachs initiative on this front a few weeks ago also made the issue a bit more urgent.

The Journal piece notes that the Morgan proposal doesn't go as far as Goldman's, which would pay 2009 bonuses to top executives entirely in the form of stock that can't be sold for five years (as opposed to cash) and can be clawed back if the executive turns out to have placed some lousy bets. That's true enough. On the other hand, it looks like the Morgan proposal is intended to be permanent, not just apply to this year. (At least one of the proposals Morgan is floating.) And it seems to have a reasonably strict clawback provision, too. Per the Journal: "Under one idea being considered, most of the top 30 Morgan executives would submit 65% or more of their pay to deferrals or 'clawbacks'—or the possibility of returning money in the event of future losses." (Not clear what the current arrangement is, though.)

If Morgan ends up making its reform permanent, its hard to believe Goldman can go back to the status quo ante in 2010. Which, again, is why I thought Goldman might be setting itself up a bit with its initial pass at this. Then again, maybe the political pressure for executive-pay reform is so strong that Goldman was always going to have to make some long-lasting changes. And, in the grand scheme of things, Goldman's 2009 proposal isn't that onerous even if the bank adopts it permanently.