Some of you may have heard on Jan. 16 that Morgan Stanley announced a new way of distributing some of its highest-paid employees’ bonuses (see the front page of the Jan. 16 Wall Street Journal).  The bank’s plan—which would affect thousands of brokers and investment bankers, among others—would pay out 2012 bonuses greater than $50,000 in four installments over three years.

A result of the financial crisis, the deferred compensation plan is the latest idea developed to try to manage the performance of those who work on Wall Street.

At one time, the great idea in this area was stock options, which were expected to curb risky, short-term behavior by requiring employees to stay at firms until the options vested. However, experience demonstrated that managers were able to game that system.

So, the rationale behind this deferred compensation scheme is similar – that employees would refrain from risky behavior if they had to stay at the firm for three full years to collect their bonuses, which will be paid in a combination of cash and shares. As part of the plan, any employee who quits or is laid off before their bonus is paid in full, forfeits the amount.

At first glance, this looks like a really nice idea. Until, that is, Morgan Stanley discovers any perverse incentives the system may cause that aren’t obvious upfront.

Of course, there are detractors who argue that this is yet another plan that will push talent out to alternatives such as hedge funds. However, others argue that it will enable Morgan Stanley to keep employees who are fully aligned to the company’s strategy as well as those who are confident they can repeat their good past performance.

Unfortunately, it is too early to predict whether the deferred compensation plan Morgan Stanley is implementing will be an effective new tool for employee performance management or just another performance management tool employees will figure out a way to circumvent.