After weeks of speculation, Morgan Stanley rehired former president John Mack as chairman and chief executive to replace outgoing chief, Philip Purcell.
“The board has agreed unanimously that John Mack is uniquely qualified to become Morgan Stanley’s new chairman and CEO,” said Miles Marsh, the lead director of the board, in a statement.
Mack certainly has a challenge. The firm’s reputation has been smudged after months of negative publicity surrounding the fight by former Morgan employees to oust Purcell. The closely chronicled infighting contributed to the exits of many prominent executives, including five of 14 members of Morgan Stanley's management committee and six managing directors.
More important, Mack must decide: Is Morgan Stanley a one-stop financial supermarket? Or should he undo the 1997 merger with Dean Witter Discover and spin off the retail brokerage, as some shareholders demand? In this way, Morgan could return to its roots as an investment bank. Either way, Mack must smooth out the ruffled feathers among legacy Dean Witter and Morgan reps. Reps say that Dean Witter brokers never were integrated with the more high-end Morgan reps; indeed, the two groups of reps are treated differently to this day, reps say.
Nonetheless, Mack is optimistic: “I look forward to working shoulder-to-shoulder with my colleagues…across all the firm’s businesses. I am eager to hear and execute their ideas on how we can…continue delivering innovation for our clients, growth for our shareholders and opportunity for our employees.”
Morgan reps on the whole are also pleased with his return. “It’s definitely a positive,” says one Wilmington, Del.-based rep. “For the firm it ends a lot of uncertainty and hopefully will quell all the negative press,” he says.
Mack has resigned from his position as chairman at $6.5 billion hedge fund Pequot Capital Management, a position he’s held for less than a month. Morgan Stanley stock was at $52.47 per share at the close of Thursday’s trading—it has risen from below $50 since board discussions with Mack began.