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 Contd...
Declining Shareholders' Value
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Morgan Stanley was the market leader in the investment banking industry. The
company had a market share of 10.7% in global equity and equity related
underwritings in 2004. In the global debt market, Morgan Stanley occupied the
second position with a share of 6.9%, and a share of 16.3% for global stock
offerings by US issuers.
The company's net income grew from US$ 2988 million in 2002 to $ 3787 million by
2003 and reached $ 4486 million by 2004. The earnings per share (EPS) increased
from $2.69 to $4.06 between 2002 and 2004, but it was lower than the EPS of
$4.73 in 2000 (Refer Exhibit IV for details of selected financial data)...
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Purcell And Morgan Stanley's Board
The role played by the board of directors of Morgan Stanley came under
public scrutiny with analysts questioning the credentials of the board which
seemed to concur with everything that Purcell wanted. During the late 1990s,
Purcell gained considerable power in Morgan Stanley owing to the success of
his financial supermarket model. However, instead of going out and meeting
clients, Purcell wooed the board in order to consolidate his position. In
2001, when Mack left the firm he spoke out against Purcell in the media,
saying, "Purcell isn't up to the job, and the board is ignoring Purcell's
shortcomings." After this, the board refused to speak on the issue even
after being prodded by Chairman Emeritus Fischer...
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The Challenges Ahead
Immediately after assuming responsibility, Mack started trying to bring back
the executives who left the firm. He also tried to bring back top talent
from Credit Suisse First Boston. On August 17, 2005, Zoe Cruz was
redesignated as acting President. On August 18, 2005, Mack announced that
Morgan Stanley would not be selling its Discover credit card business as
planned by Purcell but would instead be selling the aircraft leasing
business... |
Exhibits
Exhibit I: Morgan Stanley - Business Segments
Exhibit Ii: Morgan Stanley Stock Price Performance (2000 - 2005)
Exhibit Iii: Morgan Stanley and Dean Witter - Major Developments
Exhibit Iv: Morgan Stanley Selected Financial Data
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