Seeking One Tough Banker


By Emily Thornton Wanted: CEO for top-notch financial-services firm. Experience with convincing brainiac investment bankers to cooperate with regular Joe brokers preferred. Pay: $22 million a year plus platinum parachute -- in case things go wrong.

Would you like to run Morgan Stanley? In case you haven't heard, there's an opening for the top job.

Embattled CEO Philip Purcell announced on June 13 that he will be retiring. The board says it is open to suggestions -- and it has been getting plenty of them. Almost every day recruiters, bankers, and traders come up with another new name. Why not add yours?

TIME TO THINK. So far, none of the names hitting the speculative list leap out as natural fix-its. Many of those suggested would have trouble pulling off the challenge of reuniting one of Wall Street's most prestigious firms. Others are unwilling to take the risk. Obviously, this will be one tough search.

The board has already directed the outside recruiting firm that it has hired, Spencer Stuart, to ignore many potentially credible candidates who have recently left Morgan Stanley (MWD). As long as that's the case, you probably have some time to think about whether you really want the job.

What Morgan Stanley desperately needs right now is a CEO who can stop its top talent from leaving. Dozens of managing directors have walked out the door since Purcell executed a controversial management shakeup in March. That exodus is likely to continue unless the right person is found.

Morgan Stanley's investment bankers are some of the best in the world. When it comes to advising CEOs on mergers and initial public offerings -- decisions that could make or break a CEO's career -- the firm is a champion. Morgan Stanley has advised on more mergers announced worldwide so far this year than any other bank. And it has underwritten most of this year's major initial public offerings, according to Thomson Financial.

TOUGH CROWD. That means whoever takes the job has to be not just someone with experience. He or she must also be a person whom even Morgan Stanley bankers can respect: A master of masters of the universe, if you will. Through a spokesman, Morgan Stanley has declined to comment on any of the names being bandied about. But consider the candidates making the rounds on the Wall Street rumor mill:

First, the board could always choose to promote the firm's two new co-presidents -- Zoe Cruz and Stephen Crawford. That would seem the natural thing to do, since the board approved their selection as recently as March. At that time it was assumed one of them would inherit Purcell's job when he left. But after a steady stream of defections, the board must now be questioning whether either is up to the task. If the board didn't have doubts, why would it be considering other candidates?

Others have managed this tough crowd before. Former President John Mack was able to get bankers to follow him before he resigned, after a dispute with Purcell, in 2001. Former head of institutional securities Vikram Pandit was also respected, since he was considered one of the smartest guys on the planet. He left when Purcell passed him over in March for Cruz and Crawford.

MACK REDUX? Some bankers wishfully think that either Pandit or Mack may return and bring with him many of the veterans who left. That's problematic because it would require the board to admit a difficult thing: That it made a mistake. Nevertheless, on June 17 there was speculation in Morgan Stanley that the board was considering bringing Mack back.

There's really only one tribe the Morgan bankers pay attention to: Goldman Sachs (GS). That's why recruiters and bankers are racking their brains over potential members of the Goldman alumni network, ranging from Robert Rubin to John Thain to John Thornton, who might want to run their former rival.

There's just one problem: Each of these men already has a good gig. Thain runs the New York Stock Exchange. Rubin is at the top of the heap at Citigroup (C), and Thornton, who remains a senior director at Goldman, is enjoying a most excellent adventure as a professor in China.

PICK AND CHOOSE. So that leaves the wild cards: Merrill Lynch (MER) executives who lost out in power struggles, such as Herbert Allison, head of TIAA-Cref pension fund, and Jeffrey Peek, head of CIT Group (CIT).

There are also executives at firms boasting less clout in investment banking but who have built up great franchises. That list would include men like Barclays Capital chief Bob Diamond (who has the added advantage of having once worked at Morgan Stanley) and Hugh "Skip" McGee, who runs investment banking at Lehman Bros. (LEH).

Some folks are even talking about Warren Spector, one of two presidents at Bear Stearns (BSC). And then there's Lawrence Fink, the chief of Blackrock. That's an asset-management company that focuses on bonds.

ELEPHANT HIDE. But let's face it: Whether Morgan's bankers would listen to any of these guys, as accomplished as they may be, remains a big question. On June 17 another wild card popped up: Some folks started floating the name of the former CEO of Donaldson, Lufkin & Jenrette, Joe Roby. He was the architect of one of the more unsuccessful mergers in Wall Street history, between Credit Suisse First Boston (CTN.X) and DLJ.

That doesn't mean Roby isn't a great banker. But if even hsi name is being circulated, it suggests this is a wide-open field -- so wide open that by the time you've read to the end of this story, someone else's name probably will have emerged on Wall Street as a leading contender.

Thus far, anyone asked if they're interested has declined to comment, according to published reports. I guess that means if you have the hide of an elephant, the negotiating skills of hostage rescuer, and an appetite for a high-risk, high-return environment, go ahead and apply. You just may have a shot. Thornton is an associate editor for BusinessWeek in New York


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