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Morgan Stanley chief under attack

Associated Press
Published April 14, 2005

NEW YORK - Even as Morgan Stanley's board gave another vote of confidence to embattled chief executive Phil Purcell on Wednesday, 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 whose focus is leadership and corporate governance. "But I do think, in the end, his days are numbered, unless something truly seismic happens."

Morgan Stanley officials have denied requests for comment from Purcell. Yet throughout his tenure at Morgan Stanley, and Dean Witter before that, Purcell has not only survived, but thrived. And there aren't many other options for the investment firm despite the 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.

Whether Purcell ultimately survives, the disjointed and seemingly quixotic dissident protest has sparked a genuine crisis at the iconic Wall Street firm, with Purcell at the center.

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 in gaining control of the company, the situation for Purcell seems to worsen almost daily. On Wednesday, 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.

Perella's departure is more amicable than other recent top-level resignations - Purcell and Perella even traded complimentary quotes in a Morgan Stanley press release. Nonetheless, including Perella's resignation, five of the 14 members of the company's executive management committee have resigned since late March.

Despite the continuing crisis, the board of directors on Wednesday reiterated their support of Purcell and, in a letter to the dissidents, urged that they stop attacking the company.

Shares of Morgan Stanley fell $1.35, or 2.48 percent, to $53.13 on the New York Stock Exchange on Wednesday.

[Last modified April 14, 2005, 01:14:09]

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