April 30 (Reuters) - Institutional Shareholder Services

has urged investors to reject Morgan Stanley's ( MS ) proposal

to expand its equity incentive compensation plan, as the proxy

adviser escalates its pushback against Wall Street.

The investment bank had proposed adding 50 million common

shares to its equity incentive plan and extending the program by

three years. Such incentives align employee and shareholder

interests while discouraging imprudent risk taking, it said.

However, ISS said Morgan Stanley ( MS ) had granted too many shares

on average over the past three years. Some disclosures were also

incomplete, it added.

Equity incentives are a common practice at banks,

particularly for senior employees, and can account for a

significant portion of total pay.

So far this proxy season, ISS has opposed a number of

management proposals in the United States. It pushed back

against retention bonuses for Goldman Sachs' ( GS ) top two

executives and the compensation plans for BlackRock's ( BLK )

top management.

Goldman shareholders approved the pay packages last week,

while BlackRock's ( BLK ) executive compensation will be put to a

non-binding vote on May 15.

The proxy adviser, however, has recommended voting for

executive pay at Morgan Stanley ( MS ). The bank declined to comment.

ISS and Glass Lewis, the two chief proxy advisers, have

drawn multiple allegations of undue influence and lack of

transparency.

On Tuesday, a Congressional subcommittee held a hearing

entitled "Exposing the Proxy Advisory Cartel", where U.S.

Representative Ann Wagner, a Missouri Republican, said the

companies "routinely dictate" shareholder votes.

Separately, Lazard ( LAZ ) disclosed on Wednesday it had

asked ISS to conduct a thorough review of its report, in which

the proxy firm recommended a vote against the bank's executive

compensation plan.

(Reporting by Niket Nishant in Bengaluru and Tatiana Bautzer in

New York; Editing by Anil D'Silva)