Morgan Stanley is reducing pay for senior investment bankers and traders by an average of 20 percent to 30 percent for 2011 as it seeks to curb mounting compensation costs, people with knowledge of the decision said.

The cuts affect employees on the executive director level and above, one of the people said, declining to be identified because the pay policy isn’t public. Some bankers were informed this week, two people said.

Chief Executive Officer James Gorman, 53, vowed after taking over in 2010 to shrink the portion of revenue devoted to paying employees after the ratio reached 62 percent the previous year. Excluding accounting adjustments and one-time items, revenue at the New York-based company’s investment-banking division fell about 2 percent last year.

The unit’s compensation expenses rose 3 percent, according to figures released today. Deferred pay awarded in previous years helped boost costs in 2011, Chief Financial Officer Ruth Porat said in an interview. Mark Lake, a spokesman for the bank, said he couldn’t comment on pay decisions.

Banks worldwide have been cutting and deferring compensation and overhauling policies for clawing back payouts to traders and investment bankers over the past two years as firms succumb to revenue and regulatory pressures in the wake of 2008’s financial crisis. Bonuses, which are awarded early in the year for the previous year’s performance, make up a large portion of total pay for Wall Street employees.

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