For Morgan Stanley chief executive Philip Purcell, 61, it came down to this: Resigning is “the best thing I can do.”
When the former CEO of Dean Witter led his firm’s $11 billion acquisition of Morgan Stanley in 1997, he promised to rule by consensus.
He could never achieve that consensus. So in March, he replaced president Stephan Newhouse. Morgan Stanley’s executives and traders reacted bitterly. More than 50 of them ran off to competing firms, taking valuable business with them. Several of the disgruntled led a campaign against Purcell, buying full- page newspaper ads to point out the sliding profits under Purcell’s watch.
“There has been way too much attention being paid to acrimony and criticism, most of it directed at me,” Purcell said in an investor call Monday.
Purcell joins a growing list of CEOs forced from their posts since the end of one of the greatest stock-market booms in history. Most CEOs feel the pressure from regulators, shareholder lawsuits, auditors, media and their boards of directors. Purcell felt it from employees.
“To see an employee-led revolt, a successful one at that, is extremely rare,” said John Challenger of Chicago based Challenger, Gray & Christmas, an outplacement firm that tracks CEO turnover.
Challenger’s firm counted 120 departing CEOs in the month of May alone. That’s more than double the 57 it counted in May 2004. Since it started counting in August 1999, Challenger has tallied 4,972 CEO departures.
At least one high-profile CEO has gotten the boot each month this year.
In January, Krispy Kreme directors ousted CEO Scott Livengood. The doughnut maker was one of the hottest initial public stock offerings of 2000. But now the SEC is investigating puffery and sugar-coating in Krispy Kreme’s books.
In February, the world got wise to Carly Fiorina, who was fired at Hewlett Packard. Fiorina was a top executive at Lucent just before it crumbled. She went on to lead H-P into a controversial merger with Compaq. Fiorina made nearly $200 million for five years of bold, but unkept, promises. She recently gave a college commencement address, saying she was “at peace” and her “soul is intact.” Too bad, thousands of jilted shareholders and laid-off employees can’t have the same spiritual experience.
In March, Boeing CEO Harry Stonecipher was ousted for having a tryst with a co-worker. The long-married executive had been brought back from retirement to help Boeing clean up its image after its previous CEO stepped down amid defense-contracting controversies. Once back to work, Stonecipher, 68, fell in love with a younger female executive. Maybe he should head Pfizer, maker of Viagra.
In April, Mark Williamson, 53, stepped down as CEO of AIM Investments. Williamson had headed Denver-based Invesco mutual funds. Just before the stock market collapsed in 2000, he built a new corporate headquarters and put Invesco’s name on the Broncos’ stadium. He then reigned over miserable performance, an exodus of investors and regulatory sanctions for improper trading of some Invesco funds. He said he quit to spend more time with his family.
In May, Merck’s longtime leader Raymond Gilmartin, 64, resigned as congressional investigators released documents showing how the company aggressively promoted Vioxx even after it knew of potentially deadly side effects. Vioxx is an effective treatment for arthritis pain if you don’t mind having a heart attack or a stroke. When Vioxx was pulled from the market in September, Merck lost billions in sales as well as its reputation.
CEOs at 179 large U.S. companies made an average of nearly $10 million in 2004, according to a survey by Pearl Meyer & Partners for The New York Times.
It takes multimillion-dollar signing bonuses to get some CEOs to take a job, and then it takes multimillion-dollar severance deals to get them to go away.
At Morgan Stanley, Purcell stands to receive more than $62 million in stock, pension and retirement benefits. Maybe resigning really is the best thing he can do.
Al Lewis’ column appears Sunday, Tuesday and Friday. Respond to Lewis at denverpostbloghouse.com/lewis, 303-820-1967, or alewis@denverpost.com.
