Governance Problems at Morgan Stanley
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Case Details:
Case Code : CGOV004
Case Length : 20 Pages
Period : 1998 - 2005
Pub Date : 2005
Teaching Note :Not Available
Organization : Morgan Stanley
Industry : Investment Banking
Countries : US
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts
Morgan Stanley under Purcell's Leadership
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One of the very first indications of Purcell's slowness in taking strategic
decisions emerged in the late 1990s when Mack recommended a merger with Chase
Manhattan . However, Purcell was of the view that merger with JP Morgan would be
more beneficial. This division of views led to a stalemate and no decision was
taken, and Chase Manhattan ended up buying JP Morgan in 2000.
In 2004, came another instance where Purcell's prevarication proved costly for
Morgan Stanley. By the end of 2003, the financial services industry in the US
was witnessing a major consolidation phase. However, when Morgan Stanley's board
questioned Purcell about his plans, it appeared he had no clear plans for
takeover other firms...
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Purcell's Traits and Workplace Culture
The $9.9 billion merger of Morgan Stanley and Dean Witter resulted in the
formation of the largest securities firm in the world. At the time of the
merger, Morgan Stanley was the third largest underwriter of common stocks
and Dean Witter was the third largest securities retailer, whose Discover
Card was used by 39 million Americans. The firm had combined assets of $270
billion. The merger was aimed at removing barriers between banks and
investment firms. Commenting on the merger, Time wrote, "One potential
problem: whether the distinct corporate cultures of the two companies can be
blended into one seamless operation. While investment bankers tend to view
brokers with disdain, seeing them as penny salesmen trying to milk old
ladies of their life savings, brokers feel that investment bankers, with
their plush offices and luxury perks are wasteful and out of touch."...
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Legal Problems under Purcell
Purcell's tenure in Morgan Stanley was also one when several legal problems
came up. In April 2003, Morgan Stanley paid $125 million to settle claims
that stock research was affected by the conflict of interest between
investment bankers and analysts. Federal regulators alleged that research
analysts from Wall Street firms had issued biased stock ratings in order to
retain their investment banking clients. Morgan Stanley was one of the ten
Wall Street firms , which were part of this settlement... |
Excerpts Contd...>>
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