Through a ruthless public relations campaign, eight dissidents brought about Phil Purcell’s exit from the CEO post at Morgan Stanley. Nick Kochan looks at how and why they did it and asks if this sets a precedent in corporate governance.

- Anson Beard Jnr, former chairman of Morgan Stanley Security Services Inc
- Lewis Bernard, former member of Morgan Stanley’s board of directors and its management committee, and a managing director for administration
- Richard Debs, an advisory director of Morgan Stanley and a member of its international advisory board. He was the founding president of Morgan Stanley International
- Joseph Fogg, a former head of Morgan Stanley’s worldwide investment banking operations
- S Parker Gilbert, a former chairman of Morgan Stanley Group, Inc
- Robert Scott, president and chief operating officer of Morgan Stanley until December 2003. He remains advisory director of the company
- Frederick Whittemore, a former chairman of Morgan Stanley mutual funds
- John Wilson, a former co-head of the investment banking division
An extraordinary corporate governance and press campaign that could set a precedent for other shareholder actions against unpopular boards and executives brought about the removal of Morgan Stanley’s former CEO Phil Purcell.

A source close to the campaign described its basis. “We are championing the shareholders. If you have an entrenched board standing behind a leader like Purcell, it’s hard for shareholders to effect change. Putting letters in the paper was not the reason that Purcell had to resign. We were only mirroring shareholder and employee dissatisfaction.”
The first spark
The campaign has its origins in the pathos of a memorial service for Dick Fisher, a former chairman of the bank. Those attending the service shared the view that Mr Fisher’s legacy was being threatened by Mr Purcell’s lack of leadership. So eight of the most important names (see above) resolved to take a lead and write a letter to the board demanding his removal. Among them was Bob Scott, a former Morgan Stanley senior executive. Those attending the service were disappointed that members of the board did not attend, although they were invited.
The eight were no mean players in wealth or prestige. Their combined shareholding amounted to 1% of the Morgan Stanley equity, giving them material as well as moral clout. Each retained links with the bank they had formerly served with distinction and most were acting advisory board members.
They waged war with the present management on a number of fronts. They privately pressed the board for action to rectify the loss of prestige as a result of Mr Purcell’s lack of leadership, but they covered their stops against a backlash from the CEO and his board by hiring public relations agency Edelman. Sources close to the Group of Eight, as they were later dubbed, said this was to protect themselves and those on whose behalf they were campaigning should a letter they had written to the board demanding Mr Purcell’s departure be leaked.
Campaign hots up
The public relations campaign moved up a gear in late March this year, after Mr Purcell engineered a reshuffle at the top of the bank. Five senior executives at Morgan Stanley departed, including Joseph Perella, the legendary deal-maker and entrepreneur of the eponymous Wasserstein Perella.
The incumbent management sought to raise its defences by promoting long-standing Purcell loyalist Stephen Crawford to the rank of co-president alongside Zoe Cruz. This looked like cronyism rather than meritocracy to those lobbying against Mr Purcell. They questioned Mr Crawford’s competence, saying that he had never run one of Morgan Stanley’s key businesses.
The Group of Eight pressed for a meeting of the board to reflect shareholder and employee concerns. This was eventually granted. A subcommittee of the board listened politely to the dissident case on April 22 but did not act on it.
The campaign against Mr Purcell gained clout when the Gang of Eight brought on board Bob Greenhill, of the investment boutique Greenhill and Co. They insist that a takeover was never discussed, although they also hired a proxy lawyer in preparation for a fight at an extraordinary meeting of the company. Mr Purcell retaliated by bringing on board his own proxy lawyer, the noted Wall Street scrapper Marty Lipton, to fight his corner.
Fight spreads to website
The Eight used the launch of their website on April 4 to gain support among employees against the existing board. A remarkable public letter to the bank’s employees read, in part: “We understand that many of you feel that there is an atmosphere of intimidation and fear at the firm, in which you may feel that you cannot express your views without fear of retaliation… We will endeavour to communicate your collective views to the board of directors, without attributing them to specific individuals.”
Events inside the firm boosted the team’s efforts. When top staff departed in explicit protest against the management, they could claim the company was suffering as a result of Mr Purcell’s loss of authority. “The Morgan Stanley franchise was being weakened under the current leadership,” said one source. The resignations of Joseph Perella and John Havens, the former head of equities, were particularly damaging. The resignations went across the firm. On a single Friday, a team of nine equity derivatives traders quit Morgan Stanley for Wachovia Bank. One source said: “This was not normal attrition. These are franchise players and business leaders.”
Crisis upon crisis landed on Mr Purcell’s doorstep. When a court judgment involving Morgan Stanley and the entrepreneur Ron Perelman went against the bank, leaving it facing a $1.45bn pay-out, the Eight blamed Donald Kempf Jr, a friend of Mr Purcell’s and the company’s general counsel. The case arose from some advice Morgan Stanley had given to Mr Perelman to accept 14 million shares of Sunbeam, which became worthless when Sunbeam went bankrupt. The Group of Eight claimed that the bank had turned down Mr Perelman’s offer to settle the claim out of court for $20m. Morgan Stanley has said it will appeal against the judgment.
The departure of Mr Purcell on June 13 is understandably regarded as a triumph for the Eight but they are keeping their counsel about the choice of successor. Mr Mack clashed with some members of the group during the course of his earlier, 29-year stint at the firm, so feelings about his appointment are mixed.
Still watchful
The Eight are also watching to see if Mr Mack follows through on one of his early promises, which was to bring back the five rain-makers whom Mr Purcell removed in March. At the time of writing, none has been reappointed and the group is starting to wonder if their return was ever realistic. Someone close to the group said: “It’s a narrowing window. They are very talented people and they are being sought after by hedge funds. They won’t wait indefinitely.”
The Group of Eight continue to watch Mr Mack’s moves with interest. They say they could still act if they see a threat to Morgan Stanley’s franchise. But this now looks unlikely. What is important is that they have taken the march of corporate governance into one of Wall Street’s most hallowed boardrooms. Executive life on the Street will never be the same again.
All members of Morgan Stanley’s executive committee:
- Joseph Perella, former vice-chairman of Morgan Stanley and a member of the management committee
- John Havens, former head of worldwide institutional equities
- Vikram Pandit, former president and chief operating officer of the institutional securities and investment banking group at Morgan Stanley
- Stephan Newhouse, former co-president and chief operating officer of Morgan Stanley
- Tarek Abdel-Meguid, former head of investment banking


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