Time to go? Phil Purcell needs to bow out gracefully from Morgan Stanley. The chairman and CEO is now making too many waves the firm. Damaging stories appear in the press regularly, top investment bankers have deserted, are deserting and will desert, and Standard & Poor’s changed its credit rating outlook on the bank from stable to negative.
In an interview in December, Mr Purcell told The Banker that he did not consider himself to be a commercial banker or an investment banker but the leader of a diversified financial company. All the more weak and inexplicable – except as an attempt to buy off opposition – was his April decision to spin off Discover Bank, the seventh-largest credit card issuer, when his enthusiasm for the business was apparent to all.
Those who argue that it is a matter of New York snobbery about mid-Westerners miss the point. Morgan Stanley’s emphasis on client relationship building from 2000 was a clear strategy. What was not clear was how Mr Purcell spending his weekends in Chicago, rather than New York, was helping on that front. It may not sound important, but New York is the financial centre of the US. Fronting major client relationships – including flying all over the world like Goldman Sachs boss Hank Paulson – and spending evenings and weekends schmoozing with major customers is an integral part of the job specification.
Mr Purcell was chairman and chief executive of Dean Witter, Discover & Co when it merged with Morgan Stanley in 1997. Many on the Morgan Stanley side of the firm, as well as analysts and outside bankers, argued that he never really appreciated the institutional securities side, despite it accounting for about 61% of pre-tax profit, and lacked the vision and profile of the heads of competing investment banks.
His supporters argue that the bank kept its place in the league tables and grew its profits; his opponents argue that the company’s performance needs to be improved. Whatever the merits or demerits of the firm’s financial performance under his tenure, the Morgan Stanley brand has been wounded by a number of incidents, ranging from mutual fund mis-selling to conflicted equity research. It looked as though it was putting those behind it. In its November 2004 presentation, it said one of its priorities for the next 24 months was to “protect/enhance reputation”. The latest altercation and its effects mean the brand is under siege again. For the good of Morgan Stanley, one of the world’s outstanding banks, Mr Purcell should consider resigning.
