Morgan Stanley investors criticise shake-up

NEW YORK - A group of disgruntled former Morgan Stanley executives and shareholders, who earlier this month urged dramatic changes at the firm, on Tuesday said a series of announced management changes are not enough to address under-performance.

"This 'restructuring' is not responsive to the concerns expressed in our letter and, we believe, is not in the best interest of Morgan Stanley shareholders," the dissenters said in a statement.

The former Morgan Stanley executives who remain shareholders, in their letter dated March 3 expressed concern "about the under-performance of Morgan Stanley in recent times, which is directly attributable to a failure of leadership at the top."

The group said it has retained Robert Greenhill, founder of Morgan's mergers practice and now chairman of Greenhill & Co., as its financial adviser.

The group has pushed for talks with Morgan Stanley's board.

"We hope that constructive discussion between ourselves and the board can result in mutual commitment to a plan which can allow the Firm to regain its position as the premier financial services firm," the group said in the letter.

Morgan Stanley officials did not return phone calls seeking comment.

Morgan Stanley Chairman and Chief Executive Phil Purcell has come under pressure over the past year as investors and analysts criticize poor performance at the firm's Discover credit card business and its retail brokerage unit.

Late on Monday, the New York-based investment bank shook up its management ranks by naming chief administrative officer Stephen Crawford and fixed-income head Zoe Cruz as co-presidents.

The two will share responsibility for the firm's securities, brokerage and money management arms.

As part of the changes, President Stephan Newhouse was pushed aside. The promotions of Crawford and Cruz also raise questions about the future of Vikram Pandit, head of Morgan Stanley's dominant institutional securities business.

Morgan Stanley shares have lagged its rivals recently, fueling a growing chorus of dissenters pressing for asset sales and even the ouster of Purcell.

At the annual shareholders meeting, Purcell defended the company's financial supermarket strategy and assured investors that results in credit cards and brokerage would improve.

But the dissident group on Tuesday complained the board has not responded to its letter, and that the management shake-up may drive away talented executives.

The group blames Morgan Stanley weak stock price on its middle-of-the-pack returns, failure to keep pace with rivals in earnings growth and weak performance in retail brokerage and asset management over the past five years.

"It is imperative that the board act promptly to change the leadership and governance of Morgan Stanley," the group wrote.

Singatories to the letter were Anson Beard Jr., Lewis Bernard, Richard Debs, Joseph Fogg, Parker Gilbert, Robert Scott, Frederick Whittemore and John Wilson.

Shares of Morgan Stanley rose US10c, or 0.2 per cent, to US$55.58 in late morning trade on the New York Stock Exchange.

- REUTERS