Morgan Stanley Chief Executive Philip Purcell says he has the unanimous support of his board, but a growing wave of criticism from shareholders and executive departures has put him on the defensive.
It’s been a tumultuous year so far for Purcell, 61, who has endured public challenges to his leadership from former partners. Analysts and investors also continue to raise questions about the company’s mix of investment banking and retail brokerage and payment services.
Purcell on Monday pushed aside Stephan Newhouse as president and gave co-Presidents Zoe Cruz and Stephen Crawford control over all the firm’s securities businesses. That prompted former partners to go public with their call for Purcell’s ouster.
These demands, Purcell said, were discussed in three different meetings in the past few weeks.
“And in three meetings they unanimously rejected the two proposals in the letter, unanimously expressed their support for me as CEO and did not see the wisdom in putting any specific institutional securities person on the board,” he said.
Purcell, who rarely speaks to reporters, made himself available Tuesday to address concerns the organization was in turmoil following the management shake-up.
“The independent directors have made it very clear they support the management, they support me as CEO and they support Zoe and Steve in the jobs they’ve been given,” he said.
The management changes, though, have already sparked the departures of some senior, well-regarded executives. On Tuesday Vikram Pandit, president and chief operating officer of the firm’s institutional securities division, and John Havens, head of institutional equities, resigned.
The status of Newhouse remains in limbo. Meanwhile Guru Ramakrishnan, global head of equity trading, resigned on Wednesday.
Analysts said Pandit and Newhouse may have been pushed out in favor of executives more loyal to Purcell.
Fox-Pitt, Kelton analyst David Trone in a note Wednesday cautioned that if the departures continue, especially among rainmakers, it could hurt the firm. Standard & Poor’s on Wednesday reduced their outlook for Morgan Stanley’s credit rating to stable, citing “uncertainty about the management structure going forward.”
Purcell has weathered opposition before.
The former McKinsey & Co. consultant, who merged his Dean Witter, Discover & Co. with Morgan Stanley, has maintained control over the years by edging out rivals, including former presidents John Mack and Robert Scott.
But Morgan Stanley’s laggard stock market performance could generate pressure that even a sympathetic board may not be able to ignore. Over the past five years, Morgan’s shares have fallen 25 percent while Goldman Sachs climbed 15 percent and Lehman Brothers doubled.
That underperformance has helped fuel the recent wave of opposition.
Late last year hedge fund manager Scott Sipprelle, a former Morgan Stanley executive, on several occasions called for the sale of the firm’s Discover credit card and brokerage units, which he said drag on the firm’s performance.
The campaign fueled speculation that Morgan Stanley would restructure or even seek a buyer for the firm, pushing the shares higher. But Purcell has continued to defend his strategy and desire to remain independent.
“With the exception of Scott Sipprelle, I have not talked to one investor who thinks we should not be in the retail securities business or not be in the asset management business,” Purcell said in the interview.
Since receiving the former partners’ letter, top managers in every business were interviewed to sound out their views on the firm and the strategy. Purcell and the new co-presidents said they came away convinced the firm’s leaders and employees fully support the reorganization.
Purcell further denied the departures stemmed from disagreements over strategy or structure. The reorganization, under consideration for eight months, is intended to integrate banking, brokerage and money management, he said.
“I think the only point of reasonable disagreement is who one selects to run the structure,” said Purcell.
