A new owner of Morgan Stanley (MS), Dan Loeb's Third Point turns its activist eye onto the...

A new owner of Morgan Stanley (MS), Dan Loeb's Third Point turns its activist eye onto the bank's pay practices just as the firm is set to disclose 2012 bonuses. Those familiar with Loeb's Yahoo battle will remember Roy Bostock - he's also on Morgan's board, but not to worry, he's retiring this spring.

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  • Sensible Investor
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    The problem isn't compensation, it's business strategy. Anyone familiar with James Gorman and Greg Fleming know that MS is fixated on brokerage as a salve for terminal dysfunction of the business. In particular, MS merged with Dean Witter over a dozen years ago, promptly lost 3,000 of 9,000 brokers, brought back John Mack from exile in 2005, nearly failed in 2008, and then entered into a joint venture with Citi. The object was to stabilize earnings, with another foray into brokerage.


    The result has not been pretty. MS lacks the management depth to handle 6,000 brokers, let alone the 17,000 they now have with Smith Barney. While their competitors reach new share highs, MS may be rising, but is far below the 107 a share reached in 2000 after Dean Witter. The excuse that the firm uses is poor market conditions, even as their competitors are increasing earnings and market share.


    Thus, staff cuts and bonus shenanigans are not the answer to MS woes. The firm needs new management. Period. If the firm keeps blaming the market (which was 13,507) at last check, and still rising, then they obviously are out of touch. That is the reason that brokers need to serve both themselves and clients properly. Don't stay with a perennial losing firm that has little growth and blames others for inefficiencies. Move to Wells Fargo, or talk to Jamie Dimon, who has the intellect that MS sorely lacks, and needs to be successful.


    The hedge fund world may look at compensation, but they need to look at the source of the issue. Management. The idea that the firm diversified away from its core investment banking strength to brokerage, where there is no experience has not served clients well, shareholders are sitting on massive losses, and employees deserve more than excuses. That's not management, that's just pathetic.
    15 Jan 2013, 07:47 PM Reply Like
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