New Morgan Stanley boss makes smart first move

December 8, 2009

– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –

James Gorman is off to a good start. In his first big decision as Morgan Stanley’s CEO-to-be, Gorman has surrounded himself with veterans of the firm rather than bring in an outsider. This should help preserve the culture and ease internal fears about Gorman’s pedigree.

His three top consiglieri have spent plenty of time in the trenches. Colm Kelleher, the chief financial officer, and Paul Taubman, the firm’s top banker, will run the all-important institutional securities business. Ruth Porat will take over as CFO after three years leading Morgan Stanley’s advice to other financial institutions. Combined, the three have 65 years of tenure at the firm, and helped it survive the crisis.

Having these respected insiders at his side will deflect some of the worries about Gorman. After all, the last former McKinsey man with a background in brokerage to lead Morgan Stanley was Philip Purcell, who was ousted in 2005. But with institutional securities and Morgan Stanley’s finances in capable hands, Gorman should be in a better position to strike a balance between the divergent priorities and cultures of trading and brokerage.

It’s not hard to see where Gorman thinks repairs are needed. Mitch Petrick, the global head of sales and trading, is being shoved aside. Morgan Stanley grew too enamored of selling complex, structured products during the boom, and got hit hard when plain vanilla became the popular post-crisis flavor.

Kelleher will now oversee 400 planned hires and put into practice his theories on measuring returns on a risk-adjusted basis. But this is just the start.

Gorman’s next job will be to lay out a clear strategy. He first has to get the integration right with the new Smith Barney retail brokerage venture — and then should have the scope to focus on getting the business humming.

Gorman also needs to articulate just how a lighter-risk, client-focused approach in investment banking will thrive — especially as rivals such as Credit Suisse have already stepped quickly into that space. Lining up the right leadership team may not exactly have been easy, but the harder part is surely yet to come.

CONTEXT NEWS

– Morgan Stanley announced that Colm Kelleher, the chief financial officer, will become co-president of institutional securities, along with Paul Taubman, global head of investment banking. Ruth Porat, global head of the financial institutions group, will become CFO.

– The moves will take effect on January 1, when James Gorman becomes chief executive and president of Morgan Stanley, replacing John Mack, as was previously announced.

Comments

Smart moves like this will help MS recover fast. Great forf them.

I said it before, and I am going to say it again: What we need in this country is vigorous economic growth. If other countries can grow at 10% a year, so can we! It is all a matter of putting in place the right policies and tax incentives.

This is the only way out of this mess that we are in. Strong growth reduces unemployment. This is a prerequisite for homeowners to have a paycheck to pay the mortgage, so that real estate stabilizes and the banking crisis abates.

It will also increase company profits and help the stock market move higher to help people’s retirement plans catch up. Why don’t we do it? Wish I knew. All the focus has been on irrelevant issues and not on this important one. Hopefully it will be addressed soon.

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Consider http://invetrics.com

Its daily DJIA index trading signal is up a respectable 77% for the year (as of December 2, 2009) and it is free of charge for individual investors.

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