Even as Morgan Stanley's board gave another vote of confidence to embattled Chief Executive Philip Purcell yesterday, more high-level executive...
NEW YORK — Even as Morgan Stanley’s board gave another vote of confidence to embattled Chief Executive Philip Purcell yesterday, more high-level executive departures, a falling stock price and increased shareholder dissent all led to the question: Can Purcell last?
“That question will be answered by the market, because shareholder dissent will be key,” said Warren Bennis, distinguished professor of business administration at the University of Southern California. “But I do think, in the end, his days are numbered, unless something truly seismic happens,” said Bennis, whose focus is leadership and corporate governance.
Morgan Stanley officials have denied repeated requests for comment from Purcell. Yet throughout his tenure there, and Dean Witter before that, Purcell has not only survived, but thrived.
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There aren’t many other options for the investment firm despite the vehement attacks on his leadership by a group of dissident shareholders and former executives.
“Nobody’s showing up with an alternative. If someone were to come and buy the company, that would be one thing. But the dissidents don’t have any cash on the table, just attacks, and Purcell can ride that out,” said Richard Bove, a securities analyst with Punk, Ziegel & Co. “Nothing at the moment that would suggest he won’t keep his job.”
Whether Purcell survives or not, the disjointed and seemingly quixotic protest has sparked a genuine crisis at the iconic Wall Street firm.
For weeks, the dissidents have demanded Purcell’s ouster and offered former President Robert Scott as a replacement. While originally greeted with bemused skepticism by many on Wall Street, the dissidents have been meeting regularly with institutional shareholders, who have become increasingly receptive amid a dropping share price and few public words of encouragement from Morgan Stanley’s management.
While it’s unclear whether the dissidents will succeed, the situation for Purcell seems to worsen almost daily.
Yesterday, the company said Joseph Perella, 63, a star banker on Wall Street for more than two decades, will leave his job as head of Morgan Stanley’s investment-banking operations. His deputy, Tarek “Terry” Abdel-Meguid, 49, also is leaving.
Perella’s departure is more amicable than other recent top-level resignations; Purcell and Perella even traded complimentary quotes in a Morgan Stanley news release.
Nonetheless, including yesterday’s resignations, five of the 14 members of the company’s executive-management committee have quit since late March, all coming from the money-making institutional-banking division.
“It is very difficult for a man to stay in control of a company when a large number of his top managers vote against him by leaving,” Bove said. “Investors are losing confidence, the stock price is falling, and I believe customers at the highest level will start to think how much they want to trust Morgan Stanley with their business.”
Despite the crisis, the board of directors yesterday reiterated their support of Purcell and, in a letter to the dissidents, urged they stop attacking the company.
The departures have highlighted the continuing rift between former Dean Witter employees, who came with Purcell to Morgan Stanley in the 1997 merger, and longtime Morgan Stanley workers. The dissidents — all of whom have roots in the pre-merger Morgan Stanley — said Purcell has used division in the ranks to shore up his position as chairman and CEO.
Bove noted that 10 of the board’s 13 members would have to agree to fire Purcell under Morgan Stanley’s bylaws — and two of those board members are executives newly appointed by Purcell. Bove thinks Purcell can survive by simply staying put and, ideally, continuing to produce results for the company.