Troubled Times at Morgan Stanley: Strategic Missteps of Philip J. Purcell?
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Code : LDS0013
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Region : USA |
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Morgan Stanley under Philip J. Purcell: The Strategic Missteps? During Purcell’s tenure Morgan Stanley was named one of the 100 best companies for working mothers (2004, WorkingMothersmagazine).Many other laurels cameMorgan Stanley’s way [Annexure 1]. The firm’s share prices rose five times between 1997 and 2000 [Annexure 2]. Assets undermanagement of the firm grew from$338 billion in 1997 to $462 billion7 in 1999. That year the firm declared a return on equity of 33%and the share prices rose by 85%8 . Purcell’s ‘financial supermarket’ concept seemed to be working. The overall growth of the firmwas calculated at 256%9 in the year 2000.But thiswas during the bullmarket and after the stockmarket slump in 2000, the brokerage,moneymanagement and credit cards business failed to pick up... The Troubles Compound There seemed to be no end toMorganStanley’swoes as a number of legal disputes against the firmcame to light during Purcell’s tenure as CEO. In November 2002, Morgan Stanley was sued by French luxury retailer LMVH. The company contended thatMorgan Stanley had conducted unfair stock research that had favored LMVH’s rivals Gucci. In January 2004,Morgan Stanley was ordered to pay 30million euros ($38.5million) to LMVHby a Paris court having established that the bank had caused damage to LMVH’s reputation by issuing biased research results on LMVH.... The Challenges for the New CEO In June 2005, search for a new CEOforMorgan Stanley began under the leadership of Charles Knight (Knight), who was the head of the board’s compensation,management development and succession committee. Knight had announced as soon as Purcell resigned that theywould not consider internal or ex-Morgan Stanley executives. However, amid a lot of speculation,Mack, former president ofMorgan Stanley (1993-2001), who had left the company over a disputewith Purcell in 2001, was named the new CEO of the company on June 30th 2005.Mack had worked atMorgan Stanley for 29 years. He was known for making quick decisions and his matter-of-fact approach to work. Morgan Stanley employees also recognized himas a leader who would stick to the firm’s policy ofmeritocracy... |
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