Morgan Alum’s Return Possible

The possible return of former President John J. Mack to the top spot at Morgan Stanley would give the embattled Wall Street investment bank a credibility boost and assuage the company’s top clients, but the internal divisions within the firm might not be quickly healed.

Two sources close to the situation, speaking on condition of anonymity, told the Associated Press on Monday that Mack is in discussions with Morgan Stanley’s board to return to the company he left as president in 2001 in a power struggle with current -- and now outgoing -- Chairman and Chief Executive Philip J. Purcell.

The negotiations with Mack, who went on to become CEO of Credit Suisse First Boston from 2001 to 2004, were first reported by the New York Times and the Wall Street Journal. Morgan Stanley had no comment on the reports, and a call to Mack’s office was not returned.

Mack, who was named chairman of hedge fund Pequot Capital Management Inc. on June 3, spent 29 years at Morgan Stanley and worked his way through the ranks to become president in 1993. As a proponent of mergers as a pathway to growth, Mack enthusiastically supported the purchase of Morgan Stanley by Dean Witter & Co. in 1997, which led to Purcell becoming CEO.

Mack left the company after realizing that Purcell would not share his authority or give up the CEO post anytime soon.

Mack still has a following among Morgan Stanley’s institutional bankers and high-profile deal makers that would make him a good candidate for the job, analysts said. However, board member Charles Knight, who is heading up the search, has already said Mack would not be considered for the job.

“Having someone with a lot of respect in there would certainly help Morgan Stanley move forward,” said Richard Bove, an analyst with Punk, Ziegel & Co.

Bove warned, however, that like many Wall Street executives, Mack is known for quick decisions and a take-no-prisoners approach to business -- the nickname “Mack the Knife” was not attached to him simply for the novelty of the song.

Yet Mack also was known for running a strict meritocracy and rewarding talent. That could be useful in taking over for Purcell, who was accused of not doing enough to retain talent after some of Morgan Stanley’s top executives -- including five of the 14 members of the firm’s executive committee -- left the company in March and April.

The exodus began after Stephen Crawford and Zoe Cruz, perceived to be Purcell loyalists, were made co-presidents and appointed to the company’s board.

Purcell was lauded for his vision of combining Dean Witter and Morgan Stanley, but roundly criticized for a lack of people skills and an inability to sell his vision to employees.