Executive View: Smart Money Is on Purcell

At least one organization handicapping the future of Morgan Stanley CEO Philip Purcell likes his survival chances: intrade.com. The Dublin-based futures market predicts that Purcell has only a 29 percent probability of stepping down forced or otherwise before June 30. True, that's up from 14 percent a week ago, says intrade.com spokesman Mike Knesevitch, but his firm is still more sanguine about Purcell's

At least one organization handicapping the future of Morgan Stanley CEO Philip Purcell likes his survival chances: intrade.com.

The Dublin-based futures market predicts that Purcell has only a 29 percent probability of stepping down — forced or otherwise — before June 30. True, that's up from 14 percent a week ago, says intrade.com spokesman Mike Knesevitch, but his firm is still more sanguine about Purcell's future than, say, the New York-based financial press. Though trading on the Purcell issue is light — just 1,500 contracts changed hands last week worth only $16,000 — “We still think it's an accurate predictor of uncertain events,” Knesevitch says. (He notes that intrade.com successfully predicted 33 of 34 U.S. Senate races in 2004. “We missed the Alaskan race,” he admits.)

Purcell's struggle to stay at the helm of Morgan has been splashed across the front pages of the major business dailies. The minutia on the revolt against Purcell by eight shareholders who own about 1 percent of Morgan outstanding shares have made the front pages of The Wall Street Journal and The New York Times.

Though the March 2005 issue of Registered Rep. addressed why Purcell is still allowed to be in charge (after all, it was he who pioneered the questionable business model of manufacturing mutual funds and then cramming them down the throats of customers via its proprietary sales force), there is one important fact to remember: The Morgan board fully supports him.

In fact, Purcell has a vice-like grip on the firm's board. It remains loyal and entirely in his corner, no matter how many letters disgruntled former executives write.

To some, Purcell's stacking of the board is one example of his self-interested management style. Another is his 47 percent raise in 2004, despite the drastic underperformance of the company shares.

The pay package “is contrary to all of the exhortations of ethics writers, but utterly in accordance with common practice,” says Bob Monks, a veteran corporate governance activist and author of The New Global Investors: How Shareowners can Unlock Sustainable Prosperity Worldwide (Capstone, 2001).

He adds, “Frankly, there really isn't any way for shareholders to get their own people on the board. They can't remove the board, and they can't nominate directors. They're helpless.”

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