The bank is likely to defer compensation payouts to staff while also bringing their pay levels in line with their competitors, reports the Wall Street Journal.
It is possible the changes will mean that senior employees will receive only 25 per cent of their pay for this year in cash, with the rest made up of deferred stock.
A Morgan Stanley compensation committee has met several times during December for detailed discussions on the best way to go about making any changes.
One proposal is reported to include tying 20 per cent of compensation to Morgan Stanley's share price.
Another suggestion would see the 30 highest-paid members of staff at the financial institution have their pay subject to clawbacks or deferrals in the event of future losses.
An announcement on the issue is due to be made next month as current co-president James Gorman takes over as Morgan Stanley's chief executive officer.
Thomas Nides, the organization's chief administrative officer, said: "Morgan Stanley's board and management clearly understands the extraordinary environment in which we operate and, as a result, have made a series of changes to the firm's compensation practices."
Earlier this month, John Mack, chairman and chief executive at the firm, told shareholders that he was foregoing any form of bonus payout for the third consecutive year, in recognition of "this unprecedented environment and the extraordinary financial support governments provided to our industry".
Two weeks ago, Morgan Stanley announced it was to sell five of its offices in San Francisco to lender AREA Property Partners.
It had bought ten offices in the city for $2.5 billion in 2007, but prices in the property market have dropped 43 per cent since then, leading the company to divest itself of half of the buildings, reported Bloomberg.
By Gary Cooper