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Morgan Stanley

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Morgan Stanley (NYSE: [MS]) is an investment bank, retail broker, and credit card provider with headquarters in New York City's Times Square.

Contents

Overview

Morgan Stanley is a leading global financial services firm, offering a wide variety of products and services. A partial list of these products and services includes: Despite offering such a diverse array of services, Morgan Stanley is an industry leader in many areas, particularly equity and debt underwriting and investment banking. The company considers its brand name and reputation as a longtime leading financial firm among its most valuable assets.

(See [2005 Annual Report]).

History: mergers, acquisitions, and divestitures

Morgan Stanley was founded in New York on September 5, 1935, by Henry S. Morgan, and Harold Stanley of J. P. Morgan & Co. along with others from Drexel & Co. This split of the commercial and investment banks came as a result of the Glass-Steagall Act. Within its first year it achieved 24% of market share among public offerings. In 1964 Morgan Stanley created the first computer model for financial analysis. By 1971 the Mergers & Acquisitions business was established along with Sales & Trading. In 1986 Morgan Stanley Group, Inc. became publicly listed.

In 1996, Morgan Stanley acquired Van Kampen American Capital ([website]), a respected mutual fund company.

On February 5, 1997, the company merged with Dean Witter, and Discover & Co. (a.k.a. Dean Witter Reynolds) the spun-off financial services business of Sears Roebuck. The merged company was briefly known as "Morgan Stanley Dean Witter Discover & Co." until 1998 when it was known as "Morgan Stanley Dean Witter & Co." until late 2001. To foster brand recognition and marketing the Dean Witter name was dropped and the firm became "Morgan Stanley". The merger was controversial, and the firm lost some of its blue chip status with its corporate client base.

Organization

Morgan Stanley comprises four main business units:

Diversity and culture

Quick facts

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Legal proceedings

Misleading financial analysis was disclosed amongst investment banks in the United Kingdom, but the FSA Financial Services Authority, decided not to intervene. In criminal activity in the US similar to that alleged in the UK, Morgan Stanley was fined $125 million.

On July 12, 2004, Morgan Stanley settled a sex discrimination suit brought by the Equal Employment Opportunity Commission for $54 million.

On January 12, 2005, The New York Stock Exchange imposed a $19 million fine on Morgan Stanley for alleged regulatory and supervisory lapses.

On May 16, 2005, A Florida jury found that Morgan Stanley did in fact fail to give adequate information to Ronald Perelman about Sunbeam thereby defrauding him and causing damages to him of $604 million. To that $604 million was added punitive damages by the jury for a total of compensatory and punitive damages of $1.450 billion. Morgan Stanley has stated the decision will be appealed and is confident the decision will be overturned.

Morgan Stanley asserts many rulings in the trial were "unprecedented and highly prejudicial" (from a statement, see links below). It should be noted that Morgan Stanley lost an estimated $300 million on the Sunbeam collapse, calling into serious question any alleged motive on the firm's part. From a business ethics perspective, it is also questionable whether Morgan Stanley, in its analyst capacity, was responsible for or even capable of ensuring the accuracy of Sunbeam financial data, which is generally considered the responsibility of internal and external accounting faculties.

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Recent disputes (2005)

Concerned over lackluster performance, eight former senior Morgan Stanley executives sent a letter to the Board on March 3, 2005 requesting immediate replacement of Purcell as CEO. On March 29, Purcell announced that he would be replacing President Stephan Newhouse, a 26 year Morgan Stanley veteran and former Navy officer, with Zoe Cruz and Steve Crawford, two of Purcell's most recognized supporters. Three days later, the so called “Group of Eight” published a full-page advertisement in the Wall Street Journal and launched a [website] publicising their position.

On May 12, 2005, dissidents announced a plan to split Morgan Stanley into two firms: one retail (as former Dean Witter) and one institutional firm (as former Morgan Stanley), saying Purcell's plans to merge these two entities had not worked over the past eight years. (See New York Times article, May 13, 2005.)

On June 13, 2005 Purcell announced that he would retire as CEO when a successor was found, but no later than March 2006. Former President John Mack was chosen to succeed Purcell and his appointment was made official by the board of directors on June 30, 2005. Mack announced he would forgo the $25 million per year guaranteed him in his rehiring, preferring instead to be paid based on performance. Purcell's exit package was in excess of $113 million.

Morgan Stanley has been embroiled in a recent series of high-level defections, including Joe Perella, Tarek Meguid, Vikram Pandit, and John Havens. Perella and Meguid have established a boutique mergers and acquisitions advisory firm in New York while Havens has established a hedge fund with Pandit.

See also

In House

Competitors

External links

References

 

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