Morgan Stanley Chairman and CEO Philip Purcell plans to leave the Wall Street investment bank by early next year, but he still has a lengthy and difficult agenda to complete: halting a stream of high-level resignations, reversing a new earnings disappointment and silencing the criticism that led to his own departure.
Acknowledging that calls for his ouster and the exodus of employees have hurt the venerable investment bank, Purcell said Monday he will retire as soon as a successor can be found, but no later than the company's annual shareholder meeting next March.
News of Purcell's planned retirement came three days after nine stock traders quit, the latest in a string of Morgan Stanley executives dissatisfied enough with the chairman's management style to leave. The resignations, which began in late March, led a group of dissident shareholders and former executives to publicly call for Purcell's firing and a reorganisation at Morgan Stanley.
That, Purcell said, created a 'sideshow' that distracted the company from its business goals.
"This morning's announcement was very, very simple but hard," Purcell, 61, told analysts in a conference call. "There's been way too much attention being paid to acrimony and criticism, most of it directed at me. It's not good for Morgan Stanley, and the best thing for me to do is, in fact, to retire."
Investors who had sold Morgan Stanley shares as the turmoil increased were clearly relieved Monday and bid the stock higher. Morgan Stanley rose $1 US to $50.88 on the New York Stock Exchange.
Two sources close to the company, speaking on condition of anonymity, said Purcell's departure was a joint decision by the CEO and Morgan Stanley's board of directors. They said Friday's resignations - from a division Purcell had highlighted as important to the firm's future - were the deciding factor in his leaving.
The sources also told The Associated Press that Morgan Stanley board member Charles Knight, who will head the search for Purcell's successor, told an employee meeting early Monday that popular former Morgan Stanley executive John Mack would not be considered for the job.
In addition, Knight told employees that none of the dissidents would be candidates, the sources said, nor would five former managing directors whose departures earlier this year triggered the succeeding wave of defections.
Morgan Stanley would not comment on possible replacements. The company has retained Thomas Neff of the headhunting firm Spencer Stewart to search for qualified candidates.
Because of the issues still facing the company, Purcell's successor is also unlikely to come from Morgan Stanley's top ranks, which have been populated by Purcell loyalists - a strategy that prompted the wave of departures in the first place. Co-presidents Zoe Cruz and Stephen Crawford, appointed to their posts in late March over other longtime executives, may have problems holding on to their current jobs, let alone vying for the top spot.
Simultaneously with his retirement announcement, the company also warned that its earnings would fall sharply below Wall Street's estimates. Like other Wall Street firms, Morgan Stanley said difficult market conditions in the March-May period would harm second-quarter earnings, which Morgan Stanley is scheduled to release June 22.
"This is a numbers business, and with this warning, Morgan Stanley has missed expectations three of the last four quarters," Bove said. "Ultimately, you just can't do that, no matter what else is going on." Purcell said the company's difficult quarter was not connected to its leadership and personnel issues.
While some have speculated that Purcell's departure opens the door for a possible takeover, research notes issued by a number of analysts Monday said few other companies would have the resources to buy a firm the size of Morgan Stanley.
Upon his retirement, Purcell could walk away with up to $62.3 million US in compensation, according to Morgan Stanley filings with the Securities and Exchange Commission. Of that, $48.1 million comes from Purcell's stock and stock options, with another $14.24 million in retirement accounts and pensions.
Last year, Purcell earned $22,467,606 US in total compensation, including stock option grants and stock sales, according to regulatory filings.
Bio box of Philip J. Purcell
- Name -- Philip J. Purcell.
- Age -- 61.
- Education -- BA, University of Notre Dame, 1964; MS, London School of Economics, 1965; MBA, University of Chicago Graduate School of Business, 1967.
- Experience -- Chairman and chief executive officer, Morgan Stanley, 1997-present; director, AMR Corp, 2000-present; vice chairman, the New York Stock Exchange, 1995-1996; chairman and CEO, Dean Witter Discover & Co., 1986-97; senior vice president for corporate planning and administration, Sears Roebuck and Co., 1978-86; various positions, McKinsey and Co., 1967-78.
- Family -- Married, seven sons.
