Two More Top Morgan Stanley Executives Quit
Joseph Perella and Terry Meguid, Morgan Stanley’s top two investment bankers, quit the world’s No. 2 securities firm Wednesday, foiling Chief Executive Philip Purcell’s efforts to stem an exodus of senior managers.
The departures will bring to five the losses from Morgan Stanley’s 14-member management committee in the last two weeks. They increase the pressure on Purcell, who is facing calls for his ouster from eight of Morgan Stanley’s former leaders and requests for an explanation from institutional investors.
“It’s a horrendous problem,” said William Calvert, who helps manage about $8 billion at Framlington Group in London. “Perella is a big name. The whole prestige of the business, the whole credibility of the business takes a knock.”
Perella, 63, a Wall Street rainmaker whose deals include America Online Inc.’s 2001 purchase of Time Warner Inc., two weeks ago accepted a promotion to vice chairman as Purcell tried to shore up support. His protege, Meguid, last year oversaw a 75% surge in Morgan Stanley’s investment-banking revenue and a rise past Goldman Sachs Group Inc. to No. 1 among worldwide merger advisors this year.
Perella and Meguid, 49, “have decided to leave the firm,” Morgan Stanley said in a statement.
Morgan Stanley named Michael Uva, 47, and Cordell Spencer, 42, co-heads of investment banking, replacing Meguid. In the statement, Purcell said Perella and Meguid would help ensure an “orderly transition.”
Purcell shook up management on March 28, replacing President Stephan Newhouse with Zoe Cruz and Stephen Crawford. Vikram Pandit, who oversaw sales and trading and investment banking, and John Havens, head of equities, left the next day. Vikram Gandhi, co-head of the financial institutions group, resigned last week to join Credit Suisse First Boston.
The eight former executives trying to oust Purcell say his mismanagement has led the stock to lag behind rivals such as Goldman. The group, led by ex-President Robert Scott, already forced Purcell to announce a possible spinoff of the firm’s Discover credit-card business.
The 10 non-executive directors on Morgan Stanley’s board wrote a one-paragraph letter to the group today, saying they have “full confidence” in Purcell and in his strategy. “It is clear to us that your ill-considered, professionally directed attacks on Morgan Stanley and our people are damaging the firm and our shareholders,” they wrote. “We ask you to desist.”
Shareholders led by the Council of Institutional Investors, which represents 140 U.S. pension plans, are seeking meetings with Purcell and the former executives to discuss the management changes and turmoil.
Shares of Morgan Stanley fell $1.62 to $53.13 on the New York Stock Exchange.
Perella this year was the Morgan Stanley banker representing May Department Stores Co. in its pending $16.6-billion sale to Federated Department Stores. He joined Morgan Stanley in 1993 and became chairman of institutional securities in 2000.
Meguid started working at Morgan Stanley in 1978. He succeeded Perella as head of investment banking in 2000.
