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Opinion

Abigail Hofman: Morgan Stanley's succession story

I congratulate Morgan Stanley’s board for having made a decision rather than tiptoeing around the succession story until it became the elephant in the room. But there will be challenges ahead.

Although I might have misjudged Barclays, I made the right call on Morgan Stanley. In May, I was a lonely voice insisting that the succession issue was the key question for the firm and one that John Mack needed to address. In August I wrote: “I expect Mack to relinquish his CEO role within the next 18 months, although he may remain chairman of the firm.” In early September, it was announced that Morgan Stanley’s co-president, James Gorman, would take over from Mack as chief executive in 2010. The current, highly regarded co-president, Walid Chammah, will retain a client-facing role as chairman of Morgan Stanley International. Mack will remain as chairman of the firm.


I congratulate Morgan Stanley’s board for having made a decision rather than tiptoeing around the succession story until it became the elephant in the room. But there will be challenges ahead. Gorman is the architect of the wealth management joint venture with Smith Barney. The integration of this deal, which closed in June, is probably not complete. Now Gorman will have a lot more on his to-do list. In particular, he needs to familiarize himself with the minutiae of the institutional securities division. Gorman’s background is on the private-client side, although before becoming a banker he was a partner at McKinsey and qualified as a lawyer in his native Australia. One should also remember that Gorman only joined Morgan Stanley in February 2006 from Merrill Lynch. It is a meteoric ascent from new boy on the block to top dog in three and a half years. And those years toppled many experienced bankers, including several bank chief executives. Gorman seems tough but fair. If I have any concerns, it is not about his intelligence but about his ability to make the hard decisions, especially in the institutional securities business where he may not feel as secure as on the retail side. My advice to him: hire rapidly and bring in people especially on the trading side who are loyal to you.


And talking of tough guys, can it be true as a mole murmurs that John Mack likes to see grown men cry? “Look,” an insider said, “Mack is an inspirational leader and he saved this firm last October. There are only two independent investment banks left: us and Goldmans. The man may not suffer fools easily but surely that’s his privilege?” As I wrote in August, Mack is a member of a dying breed: the imperial financial chief executive. Now Ken Lewis has announced plans to step down, and even Jamie Dimon has put a succession plan in place (see my November column for more). However, for most people who toil in finance the turmoil in the executive suite is a long way away. Divisional chiefs and chief executives often tell me about their recent townhall addresses. The very word townhall, with its implication of large and anonymous, illustrates the gulf between revenue producers and bank senior management. 


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