Morgan Stanley’s Board Backs CEO Purcell Despite Investor Pressure

Morgan Stanley’s board gave Chief Executive Philip Purcell a vote of confidence but also made it easier to remove him, the financial services company said Sunday.

A statement issued by the board after its meeting Saturday said that any “suggestions for management changes or a corporate reorganization” beyond a spinoff proposed by Purcell of the company’s Discover Card business “would not be in the best interest of shareholders.”

However, the board agreed to no longer require a supermajority vote to oust the CEO.

The panel had abruptly set up Saturday’s meeting to review concerns about Purcell. Pressure on him had grown steadily over the last month as a group of shareholders and former executives launched a campaign to have him ousted because of the company’s performance and lagging stock price.

The departure of many high-level executives -- including five of the 14 members of Morgan Stanley’s executive committee -- also called into question Purcell’s ability to lead the company. Investors have expressed fear that the crisis of confidence in Purcell will lead other Wall Street firms to cherry-pick Morgan Stanley’s top talent, further damaging the company’s long-term prospects.

The board also said Sunday that it had approved several changes to strengthen its governance policies.

Those changes include a decision to accelerate a planned move away from staggered board terms. Beginning in 2006, directors will stand for election by shareholders each year.

A lead director position also will be created, with the role expected to be filled shortly, the board said.

The company also said it would name two additional outside directors, bringing the total number of board members to 15.