Filed under: Management, Industry, Citigroup Inc. (C), Merrill Lynch (MER), Morgan Stanley (MS)
The board of directors of Morgan Stanley (NYSE: MS) has sent a letter to shareholders defending John Mack, the company’s chairman and CEO, and urging rejection of one shareholder proposal to push him out of the chairman’s job. According to MarketWatch, “The endorsement came in response to a letter earlier this month from CtW Investment Group, an organization representing several unions, calling on shareholders to withhold their votes from Mack.” The letter also recommended that two Morgan Stanley directors be pushed out.
Shareholders in the investment bank are understandably red with rage. Morgan Stanley’s stock has lost almost 50% of its value over the last year and, at one point, was down nearly two-thirds. The brokerage has already fired its president, but some who have lost money don’t think that’s enough. The CEOs at Merrill Lynch (NYSE: MER) and Citigroup (NYSE: C) have already lost their jobs because their companies where so badly injured by investments in subprime mortgage instruments.
Separating the CEO and chairman jobs at banks and brokerages is probably a good idea, especially if the chairman has the role of overseeing risk management. Boards seem to have been blind to the huge chances that financial companies took when they put substantial sums into volatile securities.
Mack should count himself lucky to keep his job at all. Remaining CEO and passing the chairman’s job to someone else to encourage a balance of power make sense and should be a model for other firms. Someone has to keep an eye on the risk profile of companies that have already lost billions of dollars.
Douglas A. McIntyre is an editor at 247wallst.com.
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