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  • Morgan Stanley Case Study - Tianxu - Zhou

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    The document summarizes the merger between Morgan Stanley and Dean Witter in 1997 and the subsequent leadership changes and issues that arose. Philip Purcell became CEO but performance deteriorated after 2000 as the cultures clashed. By 2005 Morgan Stanley was facing governance and legal problems and dozens of executives left. Critics blamed Purcell's strategic missteps and he was ousted in June 2005. John Mack then rejoined as the new CEO, but strategic problems from the Purcell era, like whether to separate or sell business units, remained unresolved. The situation raises governance issues around the role of top management in mergers and selection of new leadership after CEO resignation.

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    The document summarizes the merger between Morgan Stanley and Dean Witter in 1997 and the subsequent leadership changes and issues that arose. Philip Purcell became CEO but performance deteriorated after 2000 as the cultures clashed. By 2005 Morgan Stanley was facing governance and legal problems and dozens of executives left. Critics blamed Purcell's strategic missteps and he was ousted in June 2005. John Mack then rejoined as the new CEO, but strategic problems from the Purcell era, like whether to separate or sell business units, remained unresolved. The situation raises governance issues around the role of top management in mergers and selection of new leadership after CEO resignation.

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    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
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    105 views2 pages

    Morgan Stanley Case Study - Tianxu - Zhou

    Uploaded by

    Mark Zhou
    The document summarizes the merger between Morgan Stanley and Dean Witter in 1997 and the subsequent leadership changes and issues that arose. Philip Purcell became CEO but performance deteriorated after 2000 as the cultures clashed. By 2005 Morgan Stanley was facing governance and legal problems and dozens of executives left. Critics blamed Purcell's strategic missteps and he was ousted in June 2005. John Mack then rejoined as the new CEO, but strategic problems from the Purcell era, like whether to separate or sell business units, remained unresolved. The situation raises governance issues around the role of top management in mergers and selection of new leadership after CEO resignation.

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    Global Corporate Governance 7005-001 Tianxu Zhou Case Summary: The Board of Directors at Morgan Stanley Dean Witter

    Dean Witter Discover & Co was merged with Morgan Stanley in 1997, and Philip J. Purcell, the chairman of Dean Witter, Discover, took over as the Chief Executive Officer (CEO) of the merged entity under agreement. The aim of the merging these thriving firms was to increase revenue and successfully compete with Merrill Lynch. The merged entity had robust performance at the first several years. However, post 2000 clashes of cultures between the two firms became severe and the performance of the firm started deteriorating. By 2005, Morgan Stanley was embroiled in governance and legal problems. Dozens of executives began leaving the company. The companys business performance and financial position were greatly affected. The critics accused Purcells strategic missteps as the reason. A group of eight former executives of Morgan Stanley campaigned against Purcell leading to its ouster in June 2005.

    On June 20, 2005, John Mack, the former COO and Chairman of Morgan Stanley before the merger, rejoined as Chairman and CEO of the company. Several strategic problems remained after Purcells departure: Should the Morgan Stanley and Dean Witter divisions be separated? Should the Discover credit-card business be sold immediately?

    Several governance issues have been raised by the situation. It is very important to

    study the role of top management in the success of a merger. Election of directors for the board of directors after a merger influences the long-term development of the company, as internal power struggle changes the companys structure. The board of directors has fiduciary duty to shareholders, and has the obligation to supervise the CEO regarding the performance of dealing legal and financial issues. Another issue is about the selection of new CEO after the resignation of the former CEO. I believe that John Macks return is a temporary solution to resolve the current situation. However, he still has to consider the power allocation in the companys board. He still has to resolve the long-festering culture clash, which contributed to the downfall of Phil Purcell.

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