iheartskins Posted June 13, 2005 Share Posted June 13, 2005 I don't know how many of you are interested in investment banks and Wall Street, but this is very big news in the Wall Street world so I thought I'd pass it along. --- Morgan Stanley's Purcell Will Step Down as CEO http://online.wsj.com/article_print/0,,SB111866063034157855,00.html Embattled Leader to Retire Once a Successor Is Named; Weaker Profit Is Forecast By ANN DAVIS Staff Reporter of THE WALL STREET JOURNAL June 14, 2005 Embattled Morgan Stanley Chief Executive Philip J. Purcell agreed to step down after a lengthy and acrimonious battle this spring weakened the leader's hold on the Wall Street firm. In an announcement yesterday morning, Mr. Purcell said he would retire as soon as a successor is named but by no later than the firm's next annual meeting in March. The company said director Charles Knight, head of the board's compensation, management-development and succession committee, would lead the search. The company also said it named a longtime director, Miles Marsh, as its lead director. "It has become clear that in light of the continuing personal attacks on me, and the unprecedented level of negative attention our firm -- and each of you -- has had to endure, that this is the best thing I can do for you, our clients and our shareholders," Mr. Purcell, 61 years old, said in a letter to employees. He added: "I feel strongly that the attacks are unjustified, but unfortunately, they show no signs of abating. A simple reality check tells us that people are spending more time reading about the acrimony and not enough time reading about the outstanding work that is being accomplished by our firm." Morgan Stanley also said it expects its fiscal-second-quarter per-share earnings to be approximately 15% to 20% below those of the year-earlier period, citing weakened market conditions that the company previously had announced. The company will report the results June 22. In a meeting with the firm's equities group that was broadcast to bankers and other employees early yesterday, Mr. Purcell and some board members stressed that the retirement decision was a joint one by the board and Mr. Purcell. Mr. Knight said Morgan Stanley wasn't considering as successors to Mr. Purcell any of the five management-committee members who resigned earlier this year. In late March, those five executives stepped down after a controversial management shake-up in which Mr. Purcell named two new co-presidents above them. Mr. Knight added in a statement released by the firm that Morgan Stanley also wasn't considering any of the eight former executives who led a campaign to oust Mr. Purcell, or John Mack, the former Morgan president who left the firm after clashing with Mr. Purcell in 2001. Mr. Marsh, who will take the lead in representing the independent, or nonexecutive, directors, told a group of Morgan Stanley employees: "Phil and the board have independently been considering the right course of action. In the last week, Phil came to us with the conclusion that he should remove himself for things to settle down. We, obviously, had been thinking about it ourselves and regretfully, had to accept his conclusion." Mr. Purcell said later in a call with analysts that he believed the board wouldn't be keen to go to the five departed management-committee members as CEO candidates because directors had already picked the co-presidents, Zoe Cruz and Stephen Crawford, "over the five that recently departed." He added: "It would be very unusual that they would consider any of those five ahead of Zoe or Steve." As for other former Morgan Stanley executives that Mr. Knight appeared to rule out, Mr. Purcell said the board already was familiar with their records and qualifications and was in a position to decide it wanted to look elsewhere. Some observers viewed the firm's decision to hold the job open and not name even a temporary CEO as a sign that Morgan Stanley may have intentionally made itself more attractive as a takeover candidate. During the call, Mr. Purcell said the firm doesn't comment on deal speculation. However, Morgan shares rose on reaction to new future leadership and deal talk. The shares were up 2.3% at $51 each in late trading on the New York Stock Exchange. Because some of Mr. Purcell's longtime allies will remain in charge, analysts said the board didn't appear to be ready to set a new path for Morgan Stanley. The new lead director, Mr. Marsh, formerly the chief executive of paper company Fort James Corp., previously served on the board of Dean Witter, Discover & Co., which Mr. Purcell led before the merger with Morgan Stanley. Mr. Marsh joined the Morgan board at Mr. Purcell's urging in 1997. "The board has failed. Half the board was handpicked by Purcell. Do we really, as investors and analysts, trust the board to pick the new CEO? Given their track records, no," said David Hendler, a financial-services analyst with CreditSights Inc. in New York. "We think most of the board has to go. The quickest, cleanest way to do that is to sell out to a financial conglomerate." It also isn't clear how leaving the top job open will affect morale; some analysts believe the continued uncertainty will work against stabilizing the firm and may not stem a tide of recent departures. In the call with analysts, Mr. Purcell said he believed the continued presence of Ms. Cruz and Mr. Crawford, the co-presidents, would be a stabilizing factor. "We've got management in place that everybody knows and respects, and none of that changes. ... I would hope and expect that people will rally around the leaders that they have and that will help stem the defections." Despite some analysts now saying the company would be a better takeover candidate if it doesn't break up any of its parts, Mr. Purcell said leadership changes won't change the company's plan to spin off its Discover credit-card operations as a public company within "three to six months" of the announcement in early April that it would do so. Chief Financial Officer David Sidwell said he would provide a further update on timing of the Discover spinoff after another board meeting around next week's earnings report. For the past 2½ months, Mr. Purcell has been the subject of a withering campaign by the group of former Morgan Stanley executives seeking his ouster, and he has come under pointed attack from institutional investors for the firm's lagging stock performance. The former Morgan Stanley executives' campaign to oust him spilled into the open in late March, on television and in newspaper ads, after he engineered the management shake-up. The eight former executives waged a public campaign calling for Mr. Purcell's ouster, and for a breakup of the firm that would effectively undo the 1997 merger of the old-line investment bank with the company he led, Dean Witter Discover. Since then, the board said repeatedly that it supported Mr. Purcell, and it tried a variety of steps to stave off the pressure, including governance overhauls, bringing in a senior lawyer as vice chairman and announcing a spinoff of the Discover credit-card operations as a public entity. Mr. Purcell also embarked on new efforts to develop relationships with investors and clients with whom he hadn't had as much contact before. Mr. Purcell even publicly declared the war with the dissidents "over" in early April, and the company consistently criticized the alumni campaign. But the pressure on the board intensified as Morgan's stock dropped during the campaign and departures of high-level executives and senior business producers continued. On Friday, a nine-member team of product specialists and traders in Morgan's equity-derivatives business resigned to join Wachovia Corp. Mr. Purcell may be due as much as $62.3 million for a "voluntary" termination, according to a Feb. 15 filing with the Securities and Exchange Commission. He has been granted equity awards of $48.1 million, $3.2 million in employee stock plans and $11 million in accrued pension entitlements, the filing said. The package projects a $1.2 million annual payment for life under the pension. Had he been fired "for cause" Mr. Purcell would have been due $27.6 million, including $13.4 million in equity, $3.2 million from employee compensation plans and $11 million in pension payments -- with an additional $1.27 million in annual payments. Link to comment Share on other sites More sharing options...
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