Morgan Stanley has inserted language into its advertising contracts with key media organizations: If you write “objectionable” stories, don’t run our ads for a minimum of 48 hours, according to the May 16 issue of Advertising Age.
Advertising Age says that Morgan is not the only company to have such a caveat. Anyway, editors in general try to keep advertisers who are the subject of a story—good or bad—away from the actual story pages. Still, the ad sales departments of most newspapers and magazines have no idea what the content will be, so pulling an ad is often hard to do before publication.
Specifically, Morgan Stanley’s ad agency must be notified, and if that call can’t be made before the publication goes to press, all Morgan Stanley ads need to be canceled for at least 48 hours afterwards, executives familiar with the contracts told Advertising Age. A spokeswoman for Morgan Stanley’s ad agency Starcom Worldwide emphasized that the company is not trying to control editorial content. “The clause doesn't say they will pull their advertising,” she said. “They'll only pull it if you aren't able to contact the agency to discuss. The clause is designed to encourage dialogue when possible." She points out that Morgan doesn't pull away the advertising business, it just postpones it.
Wall Street Journal Publisher Karen Elliott House said in response to the news that she had “no direct knowledge of this request,” but that pulling ads in response to editorial content simply “would not be a feasible practice” for the paper. “The advertising department which places insertion orders has no knowledge of what stories are running in the next morning’s newspaper. Indeed, given the market-moving nature of many of the stories in the Journal, our reporters and editors are constrained by Journal policy from talking about them until they are published,” she said.
Is Morgan Stanley trying to silence its critics? A firm spokeswoman strenuously denied the implication, calling it unfair since the clause is routine in the advertising world, and that its agency suggested adding the clause. But Morgan critics seized on the news of the clause, since the firm has been the subject of almost daily news reports since March, due to a campaign to oust CEO Philip Purcell by eight dissident shareholders, all former Morgan employees. Several high-profile executives and managing directors have defected in the interim, and the company has announced plans to spin off its Discover credit-card business. The Wall Street Journal and The New York Times have covered the brouhaha closely.
Morgan is no ad lightweight: The Wall Street Journal took in $10.5 million from Morgan last year, Advertising Age quotes from a report by TNS Media Intelligence. “BusinessWeek and Time and Newsweek all notched over $2 million” in ad sales from Morgan,” the report says.
In a recent presentation to shareholders, Purcell lamented that the press attention was hurting morale and distracting management. But that attention is unlikely to let up any time soon. Though they are no longer calling for his head, the dissidents continue to wage war against Purcell. They are lately demanding that the firm spin off its investment bank, leaving Purcell in charge of the brokerage, asset management and Discover card units. In the meantime, key people continue to leave the firm. Last week, Morgan Stanley lost five broker managers in Europe.
Registered Rep., in April 2004, detailed Purcell’s woes—not for the above reasons but for Purcell’s pioneering of a business model concept that turns out to have been one big conflict of interest: Selling proprietary funds via its own distribution network by compensating branch managers and brokers more than independent third-party funds. “One man’s synergy may be another’s conflict of interest,” the story stated. “After suffering through a cruel bear market, Morgan Stanley has come under regulatory scrutiny and legal fire for practices in several key businesses in the past two years, including mutual fund sales. Its in-house fund strategy is starting to look like a liability,” the story concluded. The story was titled, "Trouble In The House That Purcell Built."
In the May 2005 issue, Rep. asks if the stock, way off its 52-week highs, may be a buy. See " The Purcell Discount."
Among publications that reportedly received the directive from Morgan Stanley, according to Advertising Age, were USA Today, The Financial Times, The Economist, Business Week, The New York Times and Fortune. None of these publications were available to comment by press time.