Deferred Compensation Plans and Carried Interest Compensation

12 Months Ended

Dec. 31, 2021

Deferred Compensation Plans and Carried Interest Compensation

Stock-Based Compensation Plans

Certain current and former employees of the Firm participate in the Firm’s stock-based compensation plans. These plans include RSUs and PSUs, the details of which are further outlined below.

Stock-Based Compensation Expense


$ in millions	2021		2020		2019
RSUs	$	1,834	$	1,170	$	1,064

PSUs	251		142		89
Total	$	2,085	$	1,312	$	1,153

Retirement-eligible awards1	$	192	$	157	$	111

1.Total expense includes stock-based compensation anticipated to be awarded in January of the following year that does not contain a future service requirement.

Tax Benefit Related to Stock-Based Compensation Expense


$ in millions	2021		2020		2019
Tax benefit1	$	432	$	270	$	243

1.Excludes income tax consequences related to employee share-based award conversions.

Unrecognized Compensation Cost Related to Stock-Based Awards Granted


$ in millions	At December 31, 20211
To be recognized in:
2022	$	653
2023	287
Thereafter	60
Total	$	1,000

1.Amounts do not include forfeitures, future adjustments to fair value for certain awards or 2021 performance year compensation awarded in January 2022, which will begin to be amortized in 2022.

In connection with awards under its stock-based compensation plans, the Firm is authorized to issue shares of common stock held in treasury or newly issued shares.

The Firm generally uses treasury shares, if available, to deliver shares to employees or employee stock trusts and has an ongoing repurchase authorization that includes repurchases in connection with awards under its stock-based compensation plans.

Common Shares Available for Future Awards under Stock-Based Compensation Plans


in millions			At December 31, 2021
Shares			149

See Note 18 for additional information on the Firm’s Share Repurchase Program.

Restricted Stock Units

RSUs are subject to vesting over time, generally one to seven years from the date of award, contingent upon continued employment and subject to restrictions on sale, transfer or assignment until conversion to common stock. All or a portion of an award may be forfeited if employment is terminated before the end of the relevant vesting period or canceled after the relevant vesting period in certain situations. Recipients of RSUs may have voting rights, at the Firm’s discretion, and generally receive dividend equivalents if the awards vest.

Vested and Unvested RSU Activity


	2021
shares in millions	Number of Shares	Weighted Average Award Date Fair Value
RSUs at beginning of period	60	$	49.82
Awarded	29	77.28
Conversions to common stock	(20)	53.32
Forfeited	(2)	60.14
RSUs at end of period1	67	$	60.27
Aggregate intrinsic value of RSUs at end of period (dollars in millions)		$	6,547
Weighted average award date fair value
RSUs awarded in 2020		55.01
RSUs awarded in 2019		43.05

1.At December 31, 2021, the weighted average remaining term until delivery for the outstanding RSUs was approximately 1.2 years.

Unvested RSU Activity


	2021
shares in millions	Number of Shares	Weighted Average Award Date Fair Value
Unvested RSUs at beginning of period	33	$	51.27
Awarded	29	77.28
Vested	(21)	59.33
Forfeited	(2)	60.14
Unvested RSUs at end of period1	39	$	65.58

1.Unvested RSUs represent awards where recipients have yet to satisfy either the explicit vesting terms or retirement-eligible requirements.

Fair Value of RSU Activity1


$ in millions	2021		2020		2019
Conversions to common stock	$	1,539	$	1,295	$	1,497
Vested	1,647		1,289		1,292

1. Fair value of converted stock is based on the share price on conversion. Fair value of vested stock is based on the share price at date of vesting.

Performance-Based Stock Units

PSUs will vest and convert to shares of common stock only if the Firm satisfies predetermined performance and market-based conditions over a three-year performance period. The number of PSUs that will vest ranges from 0% to 150% of the target award, based on the extent to which the Firm achieves the specified performance goals. One-half of the award is earned based on the Firm’s average return on equity, excluding certain adjustments (“MS Adjusted ROE”). For all awards granted beginning in 2021, this performance measure was updated and is now based on the Firm’s average return on tangible common equity excluding certain adjustments (“MS Adjusted ROTCE”). The other half of the award will be earned based on the Firm’s total shareholder return, relative to the total shareholder return of the S&P 500 Financials Sector Index (“Relative MS TSR”). PSUs have vesting, restriction and cancellation provisions that are generally similar to those of RSUs. At December 31, 2021, approximately 3 million PSUs were outstanding.

PSU Fair Value on Award Date


	2021		2020		2019
MS Adjusted ROTCE/ROE	$	74.87	$	57.05	$	43.29
Relative MS TSR	83.70		65.31		48.28

The Relative MS TSR fair values on the award date were estimated using a Monte Carlo simulation and the following assumptions.

Monte Carlo Simulation Assumptions


	Risk-Free Interest Rate		Expected Stock Price Volatility		Correlation Coefficient
Award year
2021	0.2	%	39.0	%	0.92
2020	1.6 %		24.0 %		0.88
2019	2.6 %		26.5 %		0.89

The risk-free interest rate was determined based on the yields available on U.S. Treasury zero-coupon issues. The expected stock price volatility was determined using historical volatility. The correlation coefficient was developed based on historical price data of the Firm and the S&P 500 Financials Sector Index. The model uses an expected dividend yield equivalent to reinvesting dividends.

Deferred Cash-Based Compensation Plans

Deferred cash-based compensation plans generally provide a return to the plan participants based upon the performance of each participant’s referenced investments.

Deferred Cash-Based Compensation Expense


$ in millions	2021		2020		2019
Deferred cash-based awards	$	810	$	1,263	$	1,233
Return on referenced investments	526		856		645
Total	$	1,336	$	2,119	$	1,878

Retirement-eligible awards1	$	253	$	194	$	195

1.Total expense includes deferred cash-based compensation anticipated to be awarded in January of the following year that does not contain a future service requirement.

Carried Interest Compensation

The Firm generally recognizes compensation expense for any portion of carried interest (both realized and unrealized) that is allocated to employees.

Carried Interest Compensation Expense


$ in millions	2021		2020		2019
Expense	$	346	$	215	$	534