At Morgan Stanley, Colm Kelleher, co-president of the institutional securities business, ascended the throne of king of the investment bank and fellow co-president Paul Taubman was carried out of the building (as it were!). Since 2010, Kelleher and Taubman had performed an uneasy double act at the firm’s institutional securities unit, with Kelleher responsible for trading and sales and Taubman ruling the advisory roost. There was a fierce rivalry between the two men, who had very different personalities – Kelleher, sardonic, quick-witted, cutting and gregarious; Taubman reserved, angular, smart but bordering on condescending.
So why, after nearly three years of bickering (indeed some say open warfare) in the institutional securities business, did CEO James Gorman decide to elevate Kelleher and eliminate Taubman? A source said: "Colm is clearly the more likeable character. And maybe the Facebook disaster gave Gorman the chance he needed to initiate change." As devoted readers might remember, Morgan Stanley was the lead underwriter for the much-hyped, but poorly executed, Facebook initial public offering this May. A well-connected mole muses: "After three years, Gorman can hardly be accused of being hasty and it was time to make a choice. Think about it – could Taubman, an investment banker, really oversee a complex sales and trading operation? Whereas, if you appoint Kelleher – is investment banking that difficult to manage? Morgan Stanley has lots of talented investment bankers – although maybe fewer than a few years ago!"
Some commentators believe that having a sole head of Morgan Stanley’s institutional securities group will facilitate cross-selling of all the firm’s products. Often investment bankers don’t ask for the bond or FX business, because these products are less remunerative when compared with equity or M&A mandates.
Nevertheless, despite this recent personnel change, Morgan Stanley’s progress under Gorman has been a case of one step forward, two steps back. Profitability has been volatile, return on equity is too low, costs are too high and the wealth management business is still a work in progress. The firm’s senior management team has a tough road ahead.