Chester Higgins Jr./The New York Times

Even as Wall Street prepares to hand out rich year-end bonuses, one firm, Morgan Stanley, is mapping out a plan to reduce the pay of some of its senior executives, according to people with knowledge of the plan.

The effort to rein in compensation in the management ranks — while still rewarding its top traders and bankers — is one way that Morgan Stanley is coming to grips with a quandary that has plagued it for a year.

Shaken from the financial crisis, Morgan Stanley’s board and its newly installed chief executive, James P. Gorman, decided in early 2010 that the firm needed to spend money to hire and begin to rebuild. But the firm already had bloated compensation levels. A year later, it has hired 2,000 people but has had little revenue growth.

In response to shareholder complaints about the high employee expenses, Mr. Gorman publicly vowed in February to reduce the firm’s payout.

Now, instead of layoffs, Morgan Stanley is planning to cut the pay of many top executives, typically the top earners, the people with knowledge of the plan said, in order to get its compensation levels down.

Recently, Mr. Gorman has been telling employees that the selective, short-term pain on compensation will give the firm credibility with shareholders and help the firm in the long term. Mr. Gorman has told employees that 2010 is “the year of differentiation,” these people say, speaking only on the condition of anonymity.

This means employees who did well will get paid competitively. The rest will see their compensation fall. Divisions like equities, which includes stock trading, and investment banking performed well in 2010, and those employees can expect decent bonuses, these people said. But traders in the firm’s fixed-income department, which did not have a great year, may see smaller pay packages, these people say.

“Our long-term success depends on retaining the best people, and we are committed to paying competitively,” said a Morgan Stanley spokeswoman.

Mr. Gorman came under fire from shareholders at his firm’s services conference in February for paying outsize bonuses to employees in 2009. Morgan Stanley paid out a record 62 percent of its net revenue in compensation and benefits that year. Wall Street firms typically pay 40 to 45 percent of their revenue in compensation.

Mr. Gorman told attendees the 62 percent ratio was a “historic high” that no one on his management team “will ever see again.” He indicated that it should be no higher than 50 percent.

One rival, Goldman Sachs, had a ratio of 36 percent in 2009. Two institutional shareholders sued Morgan Stanley in February, accusing the bank of overpaying employees in recent years. The lawsuit, filed in New York State Supreme Court, is pending. Morgan Stanley declined to comment.

“I am willing to give him some more time, but as a shareholder I want to get something decent soon for owning this firm,” said Anton V. Schutz, manager of Burnham Financial Funds. His funds control 150,000 shares of Morgan Stanley, valued at $3.9 million. Mr. Schutz is not a party to the shareholder suit.

This year Morgan Stanley is on track to pay out $15.98 billion, or about 50.4 percent of its net revenue, in compensation and benefits. This is lower than 2009 but compares with an average ratio of 43 percent from 2003 to 2006, the year before the credit crisis took hold.

In the most recent quarter, however, as revenue tumbled amid a slowdown in trading, Morgan allocated almost 58 percent of its revenue to compensation and benefits. Excluding the British bonus tax it was forced to pay, the ratio drops to 48.8 percent.

“Everyone on the Street has a down revenue issue, but they have more of an issue because of all the hiring they have done as part of their rebuild,” said Glenn Schorr, an analyst with the Japanese bank Nomura.

Michael S. Levine, a portfolio manager at OppenheimerFunds, which holds 1.5 million Morgan Stanley shares, said the firm had a struggle on its hands.

“The stock performance between Morgan Stanley and Goldman Sachs started to diverge in September and has yet to reverse, showing that the market remains impatient with Morgan on a number of issues, including compensation,” he said.

However, he warned against reading too much into the high compensation in the third quarter. “I think management will bounce back and compensation will be more aligned with shareholder interest going forward,” he said.

At the conference in February, Mr. Gorman provided some details on his divisional compensation. He said a “well-performing wealth management business,” the division that houses a firm’s retail brokerage force, should have a compensation and benefits ratio of about 55 percent.

An underperforming division will produce a ratio of 65 percent. In 2009, this division at Morgan Stanley posted a compensation ratio of 65 percent because of weaker-than-usual performance as well as severance and restructuring costs. For the first nine months of this year, this division had a compensation ratio of 63 percent. The compensation ratio in this unit tends to be higher because many brokers are given fixed payouts not tied to market swings.

A well-performing securities business, Mr. Gorman said, should have a compensation-to-revenue ratio in the mid 30s. In 2009, Morgan’s institutional securities business posted a compensation ratio almost double that of 57 percent. In a nod to the progress Mr. Gorman has made here, this division’s compensation ratio was running at 42 percent for the nine months ended Sept. 30. Excluding the money Morgan had to pay for Britain’s bonus tax, the ratio comes in closer to 39 percent.

It is not known yet how deep the pay cuts will be. Mr. Gorman, for his part, earned $15 million in salary and bonus for his work as co-president in 2009. All but his base salary came in the form of deferred cash and stock.