Philip Purcell

Washington, June 13: A fire lit in the corridors of the world’s largest securities firm by two executives of Indian origin two and a half months ago has finally consumed its CEO.

Morgan Stanley’s embattled chairman and chief executive officer Philip Purcell announced today that he was stepping down because it is “the best thing I can do” after the campaign by former Morgan Stanley executives Vikram Pandit, Guru Ramakrishnan and others to oust him.

“It has become clear that in light of the continuing personal attacks on me and the unprecedented level of negative attention our firm ? and each of you ? has had to endure, that this is the best thing I can do for you, our clients and our shareholders,” Purcell wrote in a farewell letter to employees.

The dissident executives who fought Purcell have only won a battle, not the war. Charles Knight, who heads the compensation, management development and succession committee on Morgan Stanley’s board, has been tasked with the search for a new CEO.

Knight said he won’t consider anyone who played a leading role in the dissent against Purcell to be the new CEO.

The dissidents have been campaigning not only for Purcell’s ouster, but also for the firm to be split into an investment bank ? which will retain the Morgan Stanley name ? and a separate company to run its brokerage, asset-management and credit card units.

They took out full-page newspaper advertisements in newspapers detailing their case. Morgan Stanley and Dean Witter, Discover and Co. merged in 1997 and Purcell, who came from Dean Witter, became its CEO in 2002.

A year later, his annual remuneration package was $12.12 million. He had promised to run the merged firm by “consensus” but it never really worked and divisions between executives of the two merged units continued to escalate.

Pandit, who was president of international securities, Ramakrishnan, global head of institutional equity trading, and other prominent dissidents came from the pre-merger Morgan Stanley side.

In March this year, the row came into the open when Purcell promoted two of his supporters as co-presidents, prompting resignations by Pandit, Ramakrishnan, Stephen Newhouse, the global president, and several others.

Although the board solidly backed Purcell, the firm continued to haemorrhage: the latest wave of departures was on June 10 when the company lost 10 brokers.

Meanwhile, Morgan Stanley said fiscal second-quarter earnings were projected to fall by as much 20 per cent. Purcell lamented in his farewell letter that although his leadership of Morgan Stanley was on the right track, “a simple reality check tells us that people are spending more time reading about the acrimony and not enough time reading about the outstanding work that is being accomplished by our firm.”

Investors had unloaded Morgan Stanley shares as the turmoil intensified, but bidding for the stock rose by $1.37 at $51.25 once news of Purcell’s departure was out.